Oxford, a Massachusetts LLC with places of business throughout the country, hired Jeremy Hernandez to work as an account manager in its Campbell, California office. Hernandez signed an employee Confidentiality, Non-Solicitation and Non-Competition Agreement that included an agreement that any disputes arising thereunder would be governed by Massachusetts law and that any lawsuit would be brought in a Massachusetts court. As a part of his employment, Hernandez was given access to the “Oxford Database,” a secure database of client information. After Hernandez left his employment, Oxford became aware that Hernandez was soliciting Oxford customers and allegedly had brought confidential information of Oxford to his new employers. After Oxford filed suit in Massachusetts state court, Hernandez moved to dismiss or transfer under the doctrine of forum non conveniens. The SJC first determined that California and not Massachusetts, law should apply despite the language of the agreement. Where a choice of law provision is executed, Massachusetts will uphold the provision unless it is contrary to public policy, which will be found where the application of Massachusetts law would be contrary to a fundamental policy of a state having a materially greater interest in the issue than Massachusetts and would be the law that applied in the absence of the choice of law provision. California has a settled policy in favor of open competition and employee mobility that, among other things, prohibits non-solicitation clauses and provides a statutory remedy to employees where an employer tries to enforce a non-competition or non-solicitation clause. Applying Massachusetts law would run contrary to this policy, and with the exception of Oxford’s place of incorporation, all relevant events occurred in California – Hernandez applied for the job, executed the agreement, worked for Oxford, and allegedly breached the agreement in California. Accordingly, applying Massachusetts substantive law would run afoul of a fundamental policy of California, and the SJC determined that the choice of law provision was unenforceable and California law would apply. Having so determined, the SJC next addressed the non conveniens argument, and held that an agreement to have suit brought in Massachusetts cannot preclude a non conveniens challenge as a matter of law. Noting that all relevant witnesses were in California and could not be compelled to appear in Massachusetts for trial , and that the case would involve interpretation of recently-passed California laws relating to employee agreements, the SJC decided that the California court would be in the best position to address the factual issues and consider the evolution of the interpretation of the new law, and dismissed the Massachusetts complaint so that it could be brought in California.
This case creates a new concern for multi-state corporations seeking to impose restrictions on employees in other states that, while acceptable in Massachusetts, might run afoul of the laws of the states in which the employees work. Businesses should review the employment laws of states in which they employ people and consider whether a choice of law clause will be upheld in light of the SJC’s decision.