The COVID-19 pandemic changed the world in many ways, including how we work. In the five-plus years since then, the number of employees working remotely has dramatically increased. By some estimates, the number of remote workers has tripled or even quadrupled since 2019. This is often framed as a benefit for the workers, giving them flexibility and convenience.
Yet, the flexibility of remote work can benefit the employer, too. The available labor pool is no longer necessarily limited to those seeking employment in an employer’s location or among those potential employees willing to relocate to the employer’s place of business.
The legal considerations of hiring remote workers who may never set foot in Wisconsin are many. Here I focus on whether a Wisconsin-based business entity would be able to establish personal jurisdiction to sue a remote employee if that path became necessary.
Hypothetical Employment Scenario
For instance, presume that a Wisconsin-based company hires an employee from New York, and there is an employment contract with no venue or choice of law provisions. However, that same contract contains restrictive covenants related to non-competition and non-solicitation. Additionally, the employer’s service or product is all online, and the employee in question never visited Wisconsin during his employment, but obviously communicated with his bosses who were in Wisconsin.
After the employer terminated this employee, the employee attempted to solicit customers and vendors away from their former employer to start his own competing business. For good measure, the employee is making disparaging, and potentially defamatory, remarks about his former bosses.
Could the employer bring suit against the employee in Wisconsin?
Given the fact intensive nature of a personal jurisdiction inquiry, the answer is unclear.
Personal Jurisdiction Standard
Personal jurisdiction requires a two-step analysis.
First, the court must analyze whether the defendant is subject to jurisdiction under the Wisconsin long-arm statute and, second, it must ensure that exercise of that jurisdiction does not violate the defendant’s right to due process.[1]
Wisconsin’s long-arm statute requires that defendant either live in Wisconsin or be present in Wisconsin when served, or be engaged in substantial and not isolated activities within the state, including wholly interstate activities.[2]
To determine whether there are “substantial and not isolated activities,” Wisconsin courts consider factors such as the quantity, nature, and quality of contacts with Wisconsin, the source of the contacts and their connection with the cause of action, the interests of the state, and convenience of the parties.[3]
The second step related to due process requires the court to determine whether the defendant had sufficient “minimum contacts” with the forum state, here Wisconsin, to such an extent that maintaining suit in Wisconsin “does not offend traditional notices of fair play and substantial justice.”[4]In other words, does the defendant’s conduct rise to a level where they would reasonably anticipate having to answer for that conduct in a Wisconsin court?
In sum, the CITGO court determined the court must engage in three steps:
identify the contacts the defendant had with Wisconsin;
analyze whether the contacts meet the constitutional minimum so that it satisfies fairness and justice; and
determine whether the contacts are related to the causes of action in the suit.[5]
Analysis
In applying these standards, the CITGO court held that simply having a contact with a Wisconsin company is not enough to establish minimum contacts. Applying this to our hypothetical above, the fact there is an employment contact, in and of itself, is not enough.
But what other contacts were there? The hypothetical does not provide any specific examples, although we know that the employee was not soliciting Wisconsin residents for customers and that the service was provided online, presumably from the employee’s location in New York. Thus, no additional contacts there.
We know that there were some communications with his bosses located in Wisconsin. It is reasonable to infer – and let us presume – that he received frequent direction and input from his direct supervisors in Wisconsin. Moreover, the work the employee performed was a benefit to a Wisconsin employer and the employee knew his employer was based in Wisconsin. In other words, the work the employee performed and the revenue generated were flowing to Wisconsin. Still, this is not likely enough as the plaintiff’s location in Wisconsin from where it chooses to offer its services and from where a contract for the potential defendant’s services is too attenuated.[6]
When the Wisconsin employer terminated the New York employee, the employee attempted to interfere with contracts he knew the Wisconsin employer had with customers and vendors. Given this is arguably a direct breach of the non-competition and non-solicitation provisions of the employment agreement, these actions were clearly related to potential cause of action were the employer to file a civil action in Wisconsin. However, if all these customers and vendors were located outside of Wisconsin, this would not add to the former employee’s minimum contacts with Wisconsin.
There is likely an argument to be made that the employee’s actions, particularly post-termination, were enough to impose the standards of fairness and justice to the point that the employee could have reasonably anticipated being subject to claims in Wisconsin. On the other hand, there are so few direct contacts with Wisconsin that there is likely an argument that the minimum contacts threshold was not met in the first instance.
Conclusion
In the end, it will be a fact-intensive analysis to determine whether an out-of-state remote employee meets the standard for personal jurisdiction in Wisconsin.
However, for attorneys advising business clients that intend to hire remote employees, it is something that should be discussed proactively with clients so that they can ensure a suit in Wisconsin can be maintained instead of having to bear the expense of suits out of state.
This article was originally published on the State Bar of Wisconsin’s
Solo/Small Firm & General Practice Blog of the Solo/Small Firm & General Practice Section. Visit the State Bar
sections or the
Solo/Small Firm & General Practice Section web pages to learn more about the benefits of section membership.
Endnotes
[1] Druschel v. Cloeren, 2006 WI App 190, ¶6, 295 Wis. 2d 858, 723 N.W.2d 430. ↩
[2] Wis. Stat. § 801.05(1). ↩
[3] Druschel at ¶8. ↩
[4] CITGO Petroleum Corporation v. MTI Connect, LLC, 2020 WI App 57, ¶18, 394 Wis. 2d 126, 949 N.W.2d 577. ↩
[5] CITGO at ¶21. ↩
[6] CITGO at ¶¶32-33. ↩
