56 Cal.App.5th 702
Cal. Ct. App.2020Background
- Finch started with Midwest in 2014 under a written employment agreement containing an Ohio forum-selection clause.
- Exhibit C of the agreement incorporated Finch’s annual "Compensation and Annual Plan Letter," which governed pay and bonuses.
- Midwest issued revised Compensation and Annual Plan Letters in March 2017 and March 2018 that changed Finch’s compensation.
- Finch sued in Contra Costa County in 2019 for Labor Code and related claims; Midwest moved to dismiss or stay under the Ohio forum-selection clause.
- The trial court found the 2017–2018 compensation letters modified the 2014 employment contract and therefore §925 allowed Finch to void the forum-selection clause; Midwest sought writ relief and lost on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Labor Code §925 applies only when a forum-selection clause itself is modified after Jan. 1, 2017, or when any provision of a contract containing such a clause is modified after that date | Finch: §925 applies if the contract containing the clause was entered into, modified, or extended on/after Jan. 1, 2017 — any modification suffices | Midwest: §925 should apply only when the forum-selection clause itself is added or modified on/after Jan. 1, 2017 | Court: §925 is triggered when the contract (not just the clause) is entered, modified, or extended on/after Jan. 1, 2017; any modification to the contract allows the employee to void the forum-selection clause |
| Whether application of §925 to pre-2017 agreements modified after Jan. 1, 2017 is unconstitutional as an impairment of contract or retroactive law | Finch: statute is not retroactive; it applies prospectively to post-2017 modifications and serves a legitimate public purpose | Midwest: interpreting §925 to reach modifications of any term results in unconstitutional retroactive impairment of contract and other constitutional issues | Court: §925 does not operate retroactively because it requires an act (modification) on/after Jan. 1, 2017; any impairment is not substantial or is justified by public purpose |
| Whether the Compensation and Annual Plan Letters modified the employment agreement | Finch: the letters were incorporated by reference into Exhibit C and thus modified the agreement | Midwest: (argued implicitly) compensation changes did not alter the 2014 agreement’s forum clause | Court: the letters were incorporated into the agreement; the 2017 and 2018 letters modified the contract and triggered §925 |
Key Cases Cited
- City of San Jose v. Superior Court, 2 Cal.5th 608 (2017) (statutory interpretation principles and rules for examining legislative intent)
- Ryze Claim Solutions LLC v. Superior Court, 33 Cal.App.5th 1066 (2019) (§925 applies only when contract was entered into, modified, or extended on/after Jan. 1, 2017)
- West v. JPMorgan Chase Bank, 214 Cal.App.4th 780 (2013) (definition and effect of contract modification requires mutual agreement)
- Wolschlager v. Fidelity Nat. Title Ins. Co., 111 Cal.App.4th 784 (2003) (incorporation by reference of separate documents into a contract)
- 20th Century Ins. Co. v. Superior Court, 90 Cal.App.4th 1247 (2001) (distinguishing impairment of remedy from impairment of substantive contractual obligations)
- Sveen v. Melin, 138 S. Ct. 1815 (2018) (framework for assessing whether a statute impairs contractual obligations)