When Is an Employee's Home Office an Employer's Home Office
The modern workforce is everywhere, even in your employees’ homes. Sometimes those homes are in different states from your headquarters. But what happens when an employer’s only operations in a state is an employee who is working out of his den? Can an employer be sued in a state where it has no office other than an employee’s in-home office?
In two recent decisions by federal judges, one in Illinois and the other in Texas, the judges found that employers with only employees working from home in a state are not subject to patent infringement suits in such states. In Billingnetwork Patent, Inc., v. Modernizing Medicine, Inc., the court dismissed plaintiff’s patent-infringement suit in November of this year, holding that defendant did not have a “regular and established place of business” within the meaning of 28 U.S.C. § 1400(b) when defendant’s only operations in Illinois were in the homes of five employees. In Uniloc USA v. Nutanix, decided in December in Texas, the judge also found the 19 Nutanix employees working from their home did not constitute places of business for the company for purposes of allowing a patent-infringement lawsuit to be brought.
What we find in these cases is that registering to do business and designating an agent for service in a state is not sufficient grounds for suit to be filed against the company in that state. In the Illinois case, the defendant had also designated the homes of these workers as workplaces for purposes of workers’ compensation, but the judge found that doing so did not establish the employees’ homes as places of business for the defendant.
In discussing when such a home office might subject a company to suit in the state when an employee works out of their home, the courts cited several actions that might have changed the outcome. For instance, if an employer listed an employee’s home as a place of business on its website or otherwise included the employee’s home telephone number in their online directory, the court’s conclusion might have been different. The Illinois judge also noted that if the employer placed any type of signage on the employee’s home, that might factor into finding that the employer had established a place of business in the state. The Texas judge added that the court’s decision might have been affected had the location of where the employees worked been of consequence to the employer, such as territories assigned or otherwise.
There are many complications related to having employees work out of their homes. The good news is that in these cases, employers receive some guidance on what those home offices may mean to the employer in terms of defending lawsuits in states where it otherwise has had no other operations. Carefully managing these circumstances can avoid many legal complications.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.