The pandemic isn't in the rearview mirror yet, but it's already clear that the U.S. business landscape has changed. Many employers, for example, are expected to allow their remote workforce to remain working from home even though social distancing may no longer be necessary.
If you're mulling this decision or have already decided to allow employees to work from home permanently, make sure you review the possible employment law-related consequences. Having a disbursed workforce could be disadvantageous if your company becomes involved in employment litigation. Here's what you need to know about the legal concept of personal jurisdiction and how it applies to your company.
Employers that are sued by employees normally want to defend themselves in the state where they're headquartered. Prevailing state laws and rules governing legal practice in those states can have a significant impact on litigation proceedings.
However, if employees work from home in other states and decide to take legal action against your company, they most likely will want to file where they live. This can put you at a disadvantage. For example, if another state has jurisdiction, litigation may be less convenient and more expensive for you. Also, your legal team and professional advisors may be less familiar with judges and local rules if they take place in a different state.
In general, employers' personal jurisdiction is determined by the number of direct "contacts" or connections they have in a state. Having an employee work remotely in a different state creates contacts — or connections — within that state. Other contacts might include business registration filings, tax payments, receipt of revenue and advertising.
In general, courts review several factors when determining jurisdiction. Three contacts in particular weigh heavily in the decision:
It's important to do what you can to maintain in-state jurisdiction should it ever become necessary. For instance, recruiting employees locally is generally less hazardous than recruiting across state lines. Be clear in any job postings that the employer's state will serve as a home base.
Similarly, conduct employment negotiations from your offices. Arrange for out-of-state employees to come to the company premises for interviews, contractual signings and other employment-related matters. Any legal documents should be drawn up in your home state.
Also update your employment policies and procedures, including written representations in your employee manual. Specifically:
Even if you take every precaution, it's possible an out-of-state court will rule against your company when it comes to jurisdiction. Be sure to discuss preventive steps with legal counsel and HR staff.
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