A fundamental question is whether the existence of a remote workforce impacts jurisdictions where a company can be sued. The answer to that question is a definite maybe. Or put another way, it depends.

It has been a longstanding rule that personal jurisdiction exists over a company in the state of its incorporation, or where its corporate headquarters (i.e., its "nerve center") is located.

These well-accepted and longstanding jurisdictional principles are based on the notion that a company can reasonably expect to be hauled into court in these locales, and that a court in a particular state can exercise jurisdiction and make decisions concerning people and companies that have some minimum contacts with that state.

While several courts have addressed the question of personal jurisdiction based on remote employees being in a particular state, no uniform or bright line rule exists regarding how remote employment should be treated when considering whether a court has jurisdiction over a company.

Courts have been all over the map in deciding the issue. But a review of the various court decisions suggests that the particular details of the employer-employee relationship are a crucial factor in ascertaining whether a party may be subject to jurisdiction.

By way of example, one court found jurisdiction to exist over the employer where the remote employee was specifically recruited to work in a particular state to target customers in that locale.

On the other hand, another court held that jurisdiction did not lie in a state where an employer permitted or knew that an employee was working remotely in that state, noting that the employer did not purposely direct any activities toward that state.

As a second level of analysis, courts have noted that even if a defendant does purposely direct activities toward a state, due process concerns may preclude jurisdiction in a matter if there is no nexus between the plaintiff's claims and the defendant's activities in that state.

As one court considering the issue noted, "[i]n remote-work cases, however, a defendant's mere knowledge that an employee happens to reside in the forum state and conduct some work from home does not constitute purposeful availament."¹

One key takeaway is that when an employee lives in a state other than where the main company is based, the company may find itself subject to jurisdiction in a situation where the company directs the employee to serve the company's interests in that state or further the company's business interests.

During this time when employees are working remotely, it may be helpful or useful for companies to maintain a listing of where their employees are working from.

The issue of remote employees does not merely implicate interstate concerns, but intrastate issues as well.

Consider a recent case from the Supreme Court of Illinois regarding whether a personal injury lawsuit could proceed in Cook County (where verdicts tended to be higher) or in a locale perceived as more hospitable to defendants.

In that case, which involved an accident occurring in another state, the court determined that having an employee with a home office in a venue was insufficient to constitute "doing business" or maintaining an "other office" sufficient to satisfy the requirements of the Illinois venue statute.²

In that case, the Court considered some of the following factors in reaching its decision:

•the absence of the employer paying any expenses associated with the remote office;

•that the business did not identify the home office to customers;

•the business did not purposely select the location of the home office as a place to conduct its business activities; and

•the routing of the company's telephone system.

That decision, however, illustrates some of issues that businesses should be aware of where employees are working from their homes for the foreseeable future.

For example, a business paying for an employee's cell phone, office supplies, or other office equipment necessary to perform the job may unintentionally lead to a court decision that venue exists in a county where pre-COVID-19 the company may have had otherwise few or no contacts.

Also, an employee generating revenue from a home office may give rise to a finding of a company doing business in a locale.

Having a remote workforce creates additional issues in considering jurisdiction in patent disputes. At least theoretically, where a patent suit may be brought should not really matter.

But in practice, the venue is significant for a variety of reasons as differences in venue may lead patent owners to seek out venues with perceived rocket dockets (i.e., the Eastern District of Virginia) or venues with a practice of denying stay motions while the Patent Trial and Appeal Board conducts its review such as the Eastern District of Texas.

Venue in a case alleging patent infringement lies in one of two locations: a) where the defendant resides, or b) where the defendant has committed acts of infringement and has a regular place of business.

The law is conclusive that a defendant corporation resides for purposes of the venue statute in patent matters only in the place where it is incorporated. But where a business has a regular place of business is open for discussion in light of a company having a remote workforce.

The Federal Circuit issued a decision in In re Cray that is illustrative regarding what constitutes a company's regular and established place of business as a matter of law.

Three factors come into play for this analysis:

(1) there must be a physical place in the district;

(2) it must be a regular and established place of business; and

(3) it must be the place of the defendant.³

The first two criteria are fairly non-controversial. The court noted that the physical place requirement is satisfied by a company having a physical, geographical location.

The second requirement is met when business conducted from that location is steady as opposed to temporary or sporadic. As employees have been working remotely for more than a year due to COVID-19, companies would be hard-pressed to argue that the situation is temporary.

Work from home arrangements raise particular concerns regarding the third element necessary for venue in a patent case — whether or not the location of the remote work is the place of the defendant.

The court laid out five factors to be considered in answering this question:

•whether the company owns, leases, or exercises other indicia of possession or control over the site;

•whether the company conditions employment on continued residence in the venue;

•any marketing or advertising of the employee's location as a place of business;

•any representations by the company regarding the locale as a place of business on the internet, in a telephone directory or otherwise; and

•a comparison of the nature and activity of the business at the location vis-a-vis other locations of the business.

Applying this test, the Federal Circuit in Clay held that the company employee working from home was not enough to trigger venue in that district.

But in making that determination, the court contrasted the situation with other cases where courts had held that the presence of remote workers was sufficient to establish venue.

The majority of courts having considered the issue post-Clay have declined to find that venue exists based on the presence of a remote employee. But there are exceptions to that general rule, which will be further tested as employees continue to work at home for the foreseeable future.

Companies should heed these five factors as employees at all levels continue to work from home or other remote locations. The alternative is facing a judge or jury in a forum that is unanticipated and potentially unwelcome.

An at-home workforce raises other jurisdiction and venue issues for companies as well, particularly about various labor statutes.

Let's take a straightforward example — worker's compensation. Just because a worker is working from home does not mean that he or she cannot be injured while on the job.

Courts can consider a home office as an extension of the workplace, particularly where businesses are directing employees to work remotely. If an employee is injured while working remotely, the business can be held responsible just as if the worker was working in the office.

As a matter of course, the employee needs to have suffered the injury during work-related activities for the worker's compensation rules to apply. For example, an employee injuring himself while grabbing a beer from the refrigerator will still likely not count for a worker's compensation claim.

Another issue relates to wage and hour rules which tend to vary from state to state. Companies may find themselves running afoul of the overtime, meal and rest break requirements.

Additionally, minimum wage standards may differ between states, and even between different areas within a state.

Based on the length of time that employees have been working remotely due to COVID-19, the rules of the remote location may very well apply and companies may be subject to penalties for non-compliance.

Companies with employees working from home may also be submitting themselves to different states for tax purposes and subjecting themselves to the jurisdiction of disparate taxing authorities.

Illinois, for example, has a requirement that employers are required to register with the state department of revenue and withhold Illinois state taxes when an employee performs work duties in Illinois for more than 30 days. Other states have similar requirements.

Failure to register or properly withhold can result in penalties and interest being assessed against the company.

While some states have waived the penalties and interest against out-of-state employers if the sole reason for the withholding requirement was an employee working from home due to the pandemic, the requirements themselves still apply.

At the end of the day, COVID-19 protocols have led to changes in the workforce that have potential implications on the question of what authorities have jurisdiction over different aspects of corporate existence.

The best prescription is for companies to manage the risk of where it may be subject to jurisdiction by knowing where their employees are working and considering the jurisdictional implications for each state involved.

That way, a company can best position itself to avoid being subjected to jurisdiction in places other than its headquarters or some other type of physical location.

1 Perry v Nat'l Assoc. of Home Builders, No. 20-cv-454, (D. Md. Sept. 28, 2020).

2 Tabirta v. Cummings et. al., No. 124798, 2020 IL 124798 (IL Oct. 22, 2020).

3 In re Cray Inc., 871 F. 3d 1355, 1360 (Fed. Cir. 2017).