NJ Decision Highlights Telecommuting Can Pose Problems For Employers

Thanks to technology, many New Jersey companies employ workers located outside of the state or even outside of the country. While telecommuting allows businesses to draw from talent pools located both near and far, it can impact their legal options should a dispute arise.

In a recent decision, the Appellate Division of the New Jersey Superior Court ruled that a New Jersey business located in Edison could not compel a former employee who worked in Illinois to defend a lawsuit filed in this state.

The Facts of the Case

The case, Baanyan Software Services v. Kuncha, involved a breach of contract dispute between Baanyan Software Services, Inc. (Baanyan) and its former computer systems analyst, Hima Bindhu Kuncha. Baanyan hired Kuncha pursuant to a written   consulting agreement, which required Kuncha to relocate from California to Illinois. The terms of the agreement were negotiated via email and telephone.

During her employment, Kuncha never visited the company’s headquarters in Edison New Jersey. Rather, she submitted her time sheets electronically and her checks were issued via direct deposit to her Illinois account.

In October 2011, Kuncha ended her employment with Baanyan and began to work directly for Halcyon Inc., a company for which she had been providing consulting services as an employee of Baanyan. Thereafter, Baanyan filed suit against Kuncha alleging breach of contract, tortious interference with its business relationships, breach of fiduciary obligations, unjust enrichment, and fraud. Kuncha moved to dismiss the complaint for lack of personal jurisdiction.

The Court’s Decision

The Appellate Division ultimately concluded that because the employee lacked minimum contacts with New Jersey, subjecting her to jurisdiction in New Jersey would “offend traditional notions of fair play and substantial justice.”

The court rejected Baanyan’s argument Kuncha sought out employment with Baanyan in New Jersey, noting that its company website states that it “finds and retains qualified professionals” by “reaching out from its locations in USA and India…to locate and attract the very best computing talent from all over the globe.”

It further noted that New Jersey courts have previously held that telephonic and electronic communications with individuals and entities located in New Jersey alone are insufficient minimum contacts to establish personal jurisdiction over a defendant. Similarly, the court noted that time sheets and payments sent to and from Edison “was all done electronically and did not require any contact with New Jersey.”

Finally, the panel concluded that “to allow Baanyan, an international company, to compel an individual employee to defend against a New Jersey lawsuit, where that employee was hired to work in Illinois, and never lived in, worked in or visited New Jersey, violates principles of fair play and substantial justice.”

If you have any questions about this case or would like to discuss the use of telecommuting employees, please contact me, Joel Kreizman, or the Scarinci Hollenbeck attorney with whom you work.