By Nancy L. Gunzenhauser and Ian Carleton Schaefer.
How can an employee of a national employer not “work” where her employer works? How can such an employee not be subject to suit in the corporation’s backyard?
According to a recent New Jersey state court decision, a technology consultant for a New Jersey corporation who worked in Illinois and provided no services to New Jersey based clients could not be subject to suit in New Jersey. This decision is instructive for technology companies with a significant national workforce (particularly if they leverage remote/agile workers) in how to structure the employment relationship to gain home-field advantage in litigation.
In Baanyan Software Services Inc. v. Hima Bindhu Kuncha, Kuncha began working as a computer systems analyst for Baanyan in February 2011. While Kuncha was an employee of the New Jersey-headquartered technology company, she never actually worked within the state. Instead, she performed work on behalf of several of Baanyan’s clients, including her subsequent employer Halcyon, from her home state of Illinois or Ohio. None of Kuncha’s work was in New Jersey, nor did she ever travel to headquarters or perform work for any of Baanyan’s New Jersey-based clients. When Kuncha left to work for Halcyon, Baanyan brought a lawsuit in New Jersey alleging breach of contract, tortious interference with business relationships, and fraud, among other claims.
When a party brings a lawsuit, the defendant must have personal jurisdiction, meaning some minimal contact with the state or federal district in which she is being sued. The New Jersey appellate court found that Kuncha did not have sufficient “contacts” with New Jersey to be sued there, even though her employer was headquartered in the state, she received payment from the New Jersey corporation, and submitted timesheets and reports to the home office. The court noted that subjecting the former employee to a lawsuit in New Jersey would “offend traditional notions of fair play and substantial justice.” The court further determined that any contacts the former employee may have had with New Jersey were “attenuated at best,” and were insufficient to subject Kuncha to personal jurisdiction.
So -- how can a technology employer, with a global (and often remote or agile) workforce, manage its ability to bring suit against former employees where it chooses (especially if it chooses to sue in the headquarters’ backyard)? As the Baanyan case instructs, in order to gain personal jurisdiction over a former employee, the employee must have “purposefully availed” herself to the state. Employers may employ a variety of approaches to hail its former employees to its corporate backyard, including requiring employees to make periodic trips to the company headquarters to attend meetings, engaging employees with headquarter-clients, and setting up reporting relationships with HQ managers. Employers may also consider including contractual provisions in employment or confidentiality agreements in which the employee consents to submit to personal jurisdiction in the state courts where headquarters are situated.
Finally, the case also serves as a reminder to employers: before bringing in action to enforce a restrictive covenant in a particular jurisdiction, due consideration should be given as to whether the employee in question had sufficient contacts with the contemplated state. Otherwise, the court may dismiss the action with the order: “Not in My Backyard.”