Ninth Circuit Choice-of-Law Ruling Has Important Employment and Trade Secret Ramifications

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On February 8, 2012, the United States Court of Appeals for the Ninth Circuit issued a decision in Ruiz v. Affinity Logistics Corporation with important consequences for the choice-of-law terms that companies often place in employment agreements. In short, the decision may make it more difficult for companies headquartered outside of California to choose non-California law to govern trade secret and other employment-related disputes that involve California-based employees.

In Ruiz, the question in dispute turned in part on whether Ruiz was Affinity's employee or its independent contractor. Ruiz, a truck driver, was based in California and signed his contract with Affinity in California. The contract, however, stated that the law of Georgia applied because Affinity is a Georgia-based corporation. The agreement defined Ruiz as an independent contractor rather than an employee.

Ruiz filed a class action lawsuit under federal and California law. Resolving the dispute required the court to determine whether Georgia law or California law applied. Georgia and California have different approaches to determining whether an individual is an independent contractor or an employee when the contract states that the individual is a contractor.

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