New Decision Highlights The Importance Of Forum Selection Clauses In Cross-Border Employment Agreements

Multinational employers often negotiate, with their key employees, employment agreements and restrictive covenants that prohibit unfair competition across borders. To prevent inconsistent judgments and give the parties a firmer expectation regarding their rights, many employers negotiate choice-of-law and choice-of-forum provisions that select one jurisdiction's laws or forum over another's.

The enforceability of these provisions in the United States was recently affirmed by the U.S. District Court for the Southern District of New York in Martinez v. Bloomberg LP, 2012 U.S. Dist. LEXIS 113227 (S.D.N.Y. Aug. 10, 2012). This decision holds important lessons for multinational employers concerning the enforceability and limitations of these clauses.

The lawsuit was filed by a former employee who was initially hired by Bloomberg in New York, spent three years in Tokyo, and was then transferred to the London office. In London, he entered into a new employment agreement that designated London as his primary place of business, provided that English law would govern his employment, and that "any dispute arising hereunder shall be subject to the exclusive jurisdiction of the English courts."

In 2011, the employee lost his job in a workforce reduction. He sued the company in New York federal court, alleging employment discrimination under the U.S. Americans with Disabilities Act, as well as New York State and New York City anti-discrimination laws.

Three days after filing suit in New York, the former employee sued in England under English employment law. He did not assert any claims for discrimination before the English tribunal, and later withdrew his action there, citing the high cost of litigating in England. The employer moved to dismiss the New York action for improper venue based on the forum selection clause, and also moved to dismiss the state and city law claims for lack of jurisdiction.1

While the former employee did not dispute that the choice-of-forum clause was reasonably communicated to him and was "mandatory," he argued that the clause was not meant to bar statutory claims, but, by virtue of the clause's express language ("any dispute arising hereunder"), only claims that related to the employment contract per se. He asserted that the discrimination claims could go forward despite the language of the agreement because those claims were statutory, not contractual.

This argument might have passed muster under New York law. As the...