AP&S recently defended a Rhode Island federal lawsuit brought by an employee against his employer. The employee accused the employer of reneging on a promise to give the employee options to purchase the employer’s stock.
The employer was based out of state, but for decades it had permitted the employee to live in and work out of Rhode Island. This gave rise to an important question: did the employer’s decision to let the employee work remotely from Rhode Island subject it to personal jurisdiction in Rhode Island? Or, to give a more concrete example, if you hire an employee who works remotely from Alaska, might you have to zip up a parka and hop on a prop plane to a courtroom in the Aleutian Islands if the relationship turns sour?
The short answer is, “it depends.”
The legal concept at issue here is “personal jurisdiction,” and the legal test that courts would apply here generally descends from a 1945 United States Supreme Court decision called International Shoe Co. v. Washington. Personal jurisdiction refers to a court’s authority to make decisions about a particular person or company. In International Shoe, the United States Supreme Court held that a federal court in State A only has the power to make decisions concerning people and companies that have some minimum level of contact with State A. If a person or company believes that it did not meet that level of minimum contacts, it can ask the court to dismiss the lawsuit for lack of personal jurisdiction. If the court agrees, the lawsuit won’t necessarily disappear, but it will play out in a courtroom that is closer to home.
Several courts have analyzed the personal jurisdiction question as it applies to remote employment, but no uniform, bright-line rule has emerged from their decisions. These decisions implicitly recognize that there is no such thing as a single, unitary concept of “remote employment,” and suggest that the presence or absence of personal jurisdiction may depend on the details of the employee-employer relationship. For example, the United States Court of Appeals for the Fifth Circuit held that the fact that an employer agreed to let an employee move to Louisiana did not mean that the employer had purposefully directed any activities towards that state.[1] On the other hand, the United States Court of Appeals for the First Circuit held that an employer was subject to personal jurisdiction in Massachusetts where it had recruited the employee at this home, registered a sales office in the Commonwealth, and pursued Mass.-based customers.[2] Federal courts in New Jersey, Minnesota, North Dakota, and more have similarly analyzed this question.
Given the increasing prevalence of remote work, one expects to see more decisions and perhaps more clarity emerge on this important question. Given the benefits of remote work for employees, courts might lean towards deciding that employers who let employees roam free purely for the employee’s own convenience cannot be dragged into court wherever the work happens to be done. Until then, keep your parka.
[1] Embry v. Hibbard Inshore, L.L.C, No. 19-30583, 2020 WL 707749, at *1 (5th Cir. Feb. 10, 2020).
[2] Cossart v. United Excel Corp., 804 F.3d 13, 16 (1st Cir. 2015).
