Oklahoma’s stance on law choice may bring dangers for employers

Kristin Simpsen, a labor and employment attorney with McAfee & Taft, was interviewed by The Oklahoman on the benefits and pitfalls of including a choice-of-law clause in an employment contract.

Simpsen explained that such clauses, which specify which law is intended to be applied to an agreement – allow employers to choose a jurisdiction with favorable laws on issues important to the employer. Choice-of-law clauses will generally be upheld so long as the chosen state has a substantial relationship to the employer and employee in question, there is a reasonable basis for choosing that state’s law, and the chosen law doesn’t violate a fundamental policy of another state with a greater interest than the selected state.

While choice-of-law provisions are typically used to gain some advantage in the event of a contract dispute, she cautioned employers about using a choice-of-law clause to get around states with unfavorable laws on covenants not to compete. “States like Oklahoma that most closely restrict (or completely prohibit) the use of noncompete agreements tend to be equally unfavorable to choice-of-law provisions.”

Another option for employers, she said, is to include a forum selection clause that specifies which forum will apply the law to the agreement. “So a forum selection provision may require that disputes be brought before a court — or an arbitrator — in the employer’s jurisdiction even when that deciding court or official must apply the law of a different state,” she said. “These clauses typically are upheld unless they’re unreasonable. Essentially, requiring contract disputes to be actually litigated in the physical courts of a particular state isn’t a public policy concern.”