Choice of Law and Venue

December 8, 2020

By: Colin A. Walker

Parties to a contract may choose which law governs their agreement and, if the chosen law bears some legitimate relationship to the parties or the contract, the choice is usually enforceable. This may be important in a C-Level Executive contract, especially when the executive resides far from the company’s headquarters.  However, courts often refuse to enforce such provisions when they require application of the law of a state other than the state where the executive is working and the law of the other state differs substantially from the law of the state where the executive is working. This may be mitigated if the executive spends significant time in the chosen state or if the employment agreement is signed by the employee in that state.  

A related concept, choice of venue, requires litigation (or arbitration, which will be the subject of a future post) of disputes in a particular court or location.  Like choice of law, some states limit the ability of a company to require resolution of disputes in a location far from where the employee works.  

If there is no agreement on choice of law or venue, the court may have to engage in a complicated analysis to determine which law applies and where litigation or arbitration is to occur. This can be a point of intense dispute.  

If choice of law or venue provisions are enforced, they can be a significant burden on the executive. The executive would have to retain counsel in the other jurisdiction, travel to the other jurisdiction for proceedings, and comply with law with which the executive may not be familiar. In most cases, it is advisable for the executive to resist provisions requiring application of another state’s law and resolution in a forum or location far from the executive’s residence. The company could also be burdened by additional costs and risks, but most companies can bear attorneys’ fees and other costs better than an individual. 

In many cases, there is plenty of room for argument regarding which law applies and where the dispute must be resolved. Such disputes are often time-consuming and expensive. Both parties would be well-advised to discuss these matters in the negotiations leading up to the employment agreement.