In this series, we will explore some of the ways states vary from one another in their employment laws.

Not that long ago, many multi-state employers thought they had a workaround to avoid pro-employee state laws — they would simply insert a choice of law provision for a state they preferred that had more favorable laws for employers. While this may still work in some places, many pro-employee states have caught on to this tactic and have fought back with laws preventing employers from using out-of-state choice of law provisions.

Illinois’ Workplace Transparency Act limits employers from using confidentiality and non-disparagement clauses that prohibit employees from reporting unlawful employment practices. In the past, an easy workaround would have been to draft a settlement agreement or employment agreement that used a different state’s law, even if the employee was located in Illinois. 

However, the Illinois legislature recently amended the Act to state that any such agreement that applies non-Illinois law to an Illinois employee’s claim or requires a venue outside of Illinois to adjudicate an Illinois employee’s claim “is against public policy, void to the extent it denies an employee … a substantive or procedural right or remedy related to alleged unlawful employment practices, and severable from an otherwise valid and enforceable contract under this Act.”

California has a comparable law. Labor Code Section 925 prohibits employers from requiring California-based employees to agree to a contractual provision that would require the employee to bring a legal claim outside of California or deprive the employee of the protections of California law.

In the restrictive covenant space, Washington has taken a similar tactic. As of 2024, employers cannot avoid the cumbersome terms of Washington’s non-compete law by relying on an out-of-state choice of law.

Employers must remember that, increasingly, there is no easy way to avoid pro-employee laws in certain states. Rather than relying on loopholes, employers must make themselves aware of relevant state laws and work within their restrictions.