COVID-19 has drastically changed the way millions of Americans work, with a large segment of the workforce working remotely from home. Many companies are now making such arrangements permanent. In fact, according to a recent survey, the percentage of workers working permanently from home is expected to double by the end of 2021. While potentially providing real benefits to both the employer and employee, this new working relationship raises many legal questions relating to a host of issues, including benefits, unemployment, business expenses, taxes, etc. This article primarily addresses jurisdictional issues that arise when remote workers reside in a different state or country than their employer.
Just because an employee works remotely from Tennessee does not necessarily mean their New York employer has to only comply with Tennessee laws. For such laws to apply, the employee would need to establish that their state has specific jurisdiction over the employer. To do so, the employee must demonstrate that the employer has sufficient “minimum contacts” with the state in that it “purposefully availed” itself of the state. Many factors are considered in determining whether an employer availed itself of a remote state’s jurisdiction. Though many factors are at play, the reason why the employee works remotely in a different state is often determinative. An employer will generally be held to have “availed” itself of a remote state where it intentionally recruited the outof-state employee with the purpose of developing or conducting business in that location. For example, in Stuart v. Churn LLC, a North Carolina court found that it had jurisdiction over a New York employer because it purposefully hired the employee to expand the company’s business in North Carolina. Contrarily, jurisdiction will not be found where the employee resides in the remote state for reasons unrelated to their work duties. In Listug v. Molina Info Sys., LLC, a Minnesota court found that it did not have jurisdiction over an out-of-state employer, in part because the employee’s decision to live in Minnesota was primarily for personal convenience. Other factors considered by courts include whether the employer facilitated the remote work by providing office equipment, and where the employment contract, if any, was executed. To be clear, an employer’s “mere knowledge” that an employee happens to reside in another state will not subject the employer to the jurisdiction of the employee’s state of residence.
If jurisdiction is established, the employer will usually be required to follow the laws of the remote state, depending on if other prerequisites of the state law are met. This includes state anti-discrimination laws, leave laws and minimum wage laws. The employer will also have to follow the state’s payroll practices and laws, as well as the state’s laws regarding paycheck delivery.
Some particular issues arise with remote workers in the workers’ compensation context. For example, one issue that often arises is whether an at-home injury is covered. Typically, workers’ compensation will only cover at-home injuries if they occur “in the course of” and “arose out of” the remote employee’s employment. For example, in Sedgwick CMS v. Valcourt-Williams, an employee who was technically based in a Florida office, but remoted in from Arizona, tripped over her dog during work hours. While the court found that the employee’s injury occurred “in the course of” her normal work day, it denied the claim because the injury did not “arise out of” her employment because there was no “occupational causation.” Id., at 1134. According to the court, the risk of the employee tripping over her dog “existed before” she took her job, and it would continue to exist even after her employment ends. As such, her injury did not arise out of her employment. Id. Like employers incorporated in a different state, overseas corporations may be taken to a United States court if either general or specific jurisdiction is established. Generally, if a foreign company is doing business in the U.S., it will likely be subject to the jurisdiction of an American court. Likewise, employees who work remotely abroad for American companies will often be protected by the remote country’s employment rights laws and these laws typically start to apply as soon as the employee begins their remote work. Such rights could include termination rights, family leave rights, mandatory minimum vacation allowances, working time rights, sick pay, minimum wage rights, health and safety protections, and discrimination protections. Also worth noting is that many European countries’ employment rights are enhanced by collective bargaining agreements that apply to entire sectors of workers.
As for the implications of COVID-19, it is important to be aware that some countries have prohibited employers from terminating their employees during the pandemic. Employers will also have to comply with foreign health and safety standards, including those related to COVID-19.
The advent of workers remoting into work from different states, or even different countries, can be an advantage to both employers and employees, but it does raise several novel legal questions that may require close scrutiny by counsel.