As a result of the COVID-19 pandemic, many companies now employ persons who work remotely from all parts of the U.S. and beyond. Among other legal issues raised by remote workforces is whether those employees can sue their employers in the states where they live. To maintain a lawsuit in a particular state, the court must establish that it exercises personal jurisdiction over the defendant (usually the employer in employment cases). A new North Carolina Supreme Court decision demonstrates how complex these jurisdictional questions can be.
In Schaeffer v. SingleCare Holdings, LLC, the plaintiff was a California resident when he signed an employment contract with the defendant. The joint employers were Delaware and Massachusetts companies. The plaintiff then moved, with his employers’ approval, to North Carolina, where he worked remotely until he was terminated. He sued his employers and several of its executives in North Carolina state court, alleging that he was deprived of promised stock benefits.
The defendants moved to dismiss most of the suit on the basis that North Carolina courts could not exercise personal jurisdiction over them. The North Carolina Court of Appeals agreed, and the plaintiff appealed this decision to the state Supreme Court. The court partially reversed the prior decision, reinstating the suit against the corporate defendants.
In its opinion, the Supreme Court said that the question of personal jurisdiction depends on an analysis of the defendants’ overall contacts within the state. In this case, the employers facilitated his move to North Carolina and approved of his activities to expand the companies’ business in North Carolina. They employed other remote workers in the state and had other business dealings in North Carolina beyond the plaintiff’s work.
The court rejected the employers’ argument that the stock agreement that was the basis of the suit was formed in California and therefore had no relationship to North Carolina. Again, the question of personal jurisdiction depends on a view of the totality of contact with the state during the employment relationship and not just at the time of its formation. The Supreme Court affirmed the dismissal of the claims against the individual defendants, concluding that they did not have sufficient contacts within the state to exercise personal jurisdiction.
The question of personal jurisdiction depends on a fact-specific analysis. No one factor will be determinative. If employers use written contracts with employees, they should include a venue provision that establishes where claims regarding the relationship will be heard. While these venue clauses are not legally airtight, they can help avoid exposing the employer to litigation in the range of jurisdictions where a remote workforce may reside.