Remote work is here to stay. The shift from in-person office work to working from home has been dramatic, and the data and commentators suggest it may be permanent. Employers, therefore, need to develop thoughtful telecommuting options and employment policies to go with them.
For companies with workers in other states, the work-from-home (WFH) scenario creates a risk of defending lawsuits in unfamiliar and distant courts. To prevent this, employers must understand the legal concept of “personal jurisdiction” and the specific steps they can take to avoid litigating in an employee’s home court.
Why Should an Employer Care?
Litigating in your home court is better and probably cheaper. The advantage is not so much with judges, who should always be impartial, but with the law and local practices. Employment laws vary drastically around the country. California, for example, requires an employer to give nonexempt employees regular meal and rest breaks, whereas many other states do not. These differences can lead to unexpected disputes.
Other advantages of litigating at home include familiarity with the sensibilities of the deciders (judge and jury), which is key to developing case themes, assessing risk and valuing a case. The home-towner also avoids travel expenses and other complications of having to defend a lawsuit away from home.
For the out-of-towner, everything is new. There are new local court rules and procedures to learn. For all these reasons, employers should think twice before giving up the home court advantage by becoming subject to “personal jurisdiction” in their employee’s home state.
What Is Personal Jurisdiction?
A court’s power is not absolute. Generally, courts have jurisdiction over people and businesses in the state where the court is located. But courts also have power over those outside the state if the foreigners do something to subject them to personal jurisdiction in that state.
In the employment context, there are many ways employers can subject themselves to the personal jurisdiction of an employee’s home state. The legal test starts with an assessment of the “contacts” out-of-state employers had with their employee’s state.
Remote work creates numerous contacts between an employer and the employee’s home state, first in recruiting and hiring and later in everything from calls and e-mails to Zoom meetings. Business registration filings add to those contacts, as do paying taxes, generating revenue, and advertising. Courts will consider all of these in deciding whether to exercise jurisdiction over an out-of-state employer.
Generally, a court first assesses the employer’s contacts with the forum, with a keen eye toward who initiated them. In nearly every case, there are calls and e-mails to the employee. However, the existence of e-mails and calls, even if voluminous, is not enough to establish jurisdiction.
Usually, cases hinge on these factors:
Who initiated first contact? Courts sometimes focus on who initiated first contact with the employee’s home state. If the employer reached into the state to recruit the employee, the employer is likely to be subject to personal jurisdiction there.
Whose idea was it, and who benefits? If the employer asked the employee to work from home and the employer benefited, courts won’t hesitate to subject the employer to jurisdiction in the employee’s home state. But courts have reached the opposite conclusion in cases when work from home was at the employee’s request.
Forum selection and choice-of-law clauses may help. An employer can protect its forum of choice by having the employee agree contractually to litigate in a certain forum and be bound by its laws. However, states vary on whether, and on what terms, these clauses will be enforced.
How to Keep Home Court Advantage
Recruit locally. This avoids claims that the employer reached into the state to hire its citizens. For national employers, this is easier said than done, but it still pays to be mindful that recruiting is an important factor in the personal jurisdiction analysis. If possible, job postings should make clear that the position requires work at and travel to the employer’s location.
Negotiate locally. If the prospective employee is from outside the employer’s home state, employers should always have the person come to the home office for final interviews, contract negotiation, and execution of any employment agreement. Such routine early actions can greatly impact the personal jurisdiction analysis.
Manage locally. Whenever possible, key communications about hiring, changes in benefits or pay, discipline, or firing should be made with the employee physically present at the home office.
Updating Employment Policies
Employment policies and agreements should reflect the current and foreseeable work climate. Consider using these:
Pandemic proviso. If your work-from-home situation is not expected to outlast the pandemic, enact a policy that says so. Make clear that the key decisions and meetings are being done remotely only because of the pandemic or local or state mandate, not at the employer’s choice; that employees have unilaterally decided their locations; and that work from home is temporary.
Document employee’s choice(s). If true, document that the work-from-home arrangement is exclusively for the employee’s convenience and at his or her choice.
Document employee control over work environment. Likewise, consider documenting that the employer does not control, nor will it attempt to control, the employee’s work location or environment and that the employee is responsible for the operation, health, and safety of his or her (home) work environment. Where sensitive or trade secret information is involved, employers should mandate that employees safeguard information without exercising more control than necessary over their ultimate location.
Do not pay directly for utilities or equipment. Employer support for an employee outpost should be indirect, if at all. Avoid direct payment for utilities, installation/upgrade of phone or Internet capabilities, and sending equipment/furniture directly to the employee. Doing so creates a series of contacts between the employer and the employee’s forum. Consider instead providing a flat monthly stipend or reimbursement to facilitate remote work generally but not at any particular location.
Never allow home address on business cards or company e-mail signatures. Always use a company office address. No mail address is preferable to including the employee’s home as a company address.
Employing these strategies will help employers establish and maintain their home court advantage.
Jeff MacHarg is a partner in the Litigation department of Fox Rothschild and a resident in the firm’s Charlotte, North Carolina, office.