PHILADELPHIA - A Philadelphia federal judge has ruled that employers can bring legal action against remote employees in Pennsylvania, even if those employees live and work outside of the state.
In Numeric Analytics, LLC v. McCabe, Pennsylvania-based Numeric Analytics filed a lawsuit against five former employees alleging violations of non-solicitation agreements. The former employees lived in Colorado, Ohio, Wisconsin and Virginia.
The lawsuit alleged that these former employees started competing businesses and solicited clients from Numeric Analytics, in violation of the non-solicitation agreements they had signed.
The former employees moved to dismiss the case on the grounds that the court did not have personal jurisdiction over them because they did not reside or work in Pennsylvania.
“The court’s jurisdictional analysis is very fact-specific regarding the defendants’ contact with Pennsylvania for purposes of breach of contract and breach of loyalty claims,” said Heather Steele, of Fisher and Phillips in Philadelphia.
“Other federal courts are likely to engage in a similar, factually-specific analysis of the claims of each defendant.”
Judge Gerald McHugh, of the U.S. District Court for the Eastern District of Pennsylvania, considered four facts to reach the conclusion that his court does have personal jurisdiction over the defendants.
First, that during their employment, all back office personnel management occurred in Pennsylvania. Second, that benefits including medical coverage and retirement plans were administered from Pennsylvania. Third, that timekeeping and billing were managed from Pennsylvania. And finally, that the defendant’s salaries were paid using a Pennsylvania bank.
“Each of these, by itself, might not be enough to confer jurisdiction. It is settled law that the mere existence of a contract is insufficient to establish minimum contacts,” McHugh wrote in his opinion, referencing the decision in a 2008 case, Budget Blinds, Inc. v. White.
Though the contract between Numeric Analytics and its employees did not include a forum selection clause, the court found that the benefit to the plaintiff in trying the court in Pennsylvania outweighed any burden on the employees.
“Remote employees should be aware that if their employer initiates litigation against them, they may be forced to litigate the case in a geographically remote jurisdiction,” Steele said.
However, the plaintiff also filed tort claims including breach of duty of loyalty and breach of fiduciary duty. McHugh ruled the court has jurisdiction of those claims over a single plaintiff.
“Plaintiffs allege that defendants sought to hire individuals who were not Pennsylvania residents and solicited business of non-Pennsylvania companies,” McHugh wrote. “Plaintiff argues that the injury was felt in Pennsylvania.”
The court found that while some injury may have been felt, it was not the same as a deliberate targeting of Pennsylvania.
The one plaintiff over which the court will exercise jurisdiction on the claims was the president of the company. The court found that with this position comes fiduciary duty and a duty of loyalty.
Such complex issues of jurisdiction could be avoided if employers include specific forum selection clauses in all restrictive covenant and confidentiality agreements with employees, Steele said.