Remote Employees’ Access to Servers Strengthens Enforcement of Noncompete Agreements

Remote Employees’ Access to Servers Strengthens Enforcement of Noncompete Agreements

It is a rare business that doesn’t have at least a few employees working remotely, often in another state or even across the globe. But when a telecommuting relationship sours and ends up in court, where can the lawsuit be filed – in the company’s home state or that of the employee?

Thomas P. Wert, a business litigator in Dean Mead’s Orlando office, said the Florida Fourth District Court of Appeal recently tackled this question of jurisdiction in a dispute over enforcement of a noncompete agreement. The court took a surprising, digital-age view of what is required for a Florida company to keep an employee legal dispute in the state’s courts. “The court said mere access to a computer server in Florida may be enough to prove personal jurisdiction for an employment agreement,” Wert said.

Seven employees of Broward County-based Citrix Systems worked in sales at the company’s office in Raleigh, North Carolina. Citrix sued when these seven employees left to work for a competitor, citing a noncompete agreement all had signed. The company may have been confident that the case would be tried in Florida courts because the agreement explicitly said it would be governed by Florida law, and any legal action would be brought in Broward County, Florida.

A jurisdiction clause is a key part of every noncompete agreement because states vary considerably in what they will enforce in such contracts. While the clause in the Citrix employee agreement was clear – “I agree that any action … shall be initiated only in … Broward County …,” – the court wasn’t satisfied, saying that such a clause, however explicit, is not enough. “A forum selection clause cannot serve as the sole basis for Florida to exercise personal jurisdiction” over a nonresident, the court said in Ware v. Citrix Systems Inc.

A digital spin on “minimum contacts”

In exercising “long-arm” jurisdiction over a nonresident, a court must determine whether there are “minimum contacts” with the state. The two sides told competing versions of how much contact the North Carolina employees had with the company’s operations in Florida through meetings, training, support and supervision, and the appellate court held it would take a trial court evidentiary hearing to make the determination of the degree to which the employees had contacts with Florida.

However, Wert said the intriguing part of the ruling came in the court’s assessment of whether jurisdiction based upon the employees’ alleged commission of a tortious act in Florida was justified. The court noted that the employees’ alleged misappropriation of trade secrets would have to occur in Florida to support Citrix’s claim of tortious conduct. While the trial court would have to determine the factual validity of the trade secret claim, the court said that if the employees had access to confidential information on the company’s Florida servers, this could be enough to bring them under Florida’s long-arm statute. In other words, mere access to confidential information on the server in Florida would be enough to establish jurisdiction, and the trial court does not need to decide whether the employees actually misappropriated the information to establish jurisdiction.

Two takeaways for Florida noncompete agreements

While the appeals court sent the case back to the trial court to resolve the factual issues, Wert sees two important takeaways for Florida businesses.

• The most important takeaway, Wert said, is that if employees anywhere in the world have access to confidential information on a Florida-based server and they allegedly steal it, that may be enough to establish Florida jurisdiction.
• Don’t rely exclusively on forum selection clauses in contracts to establish personal jurisdiction. Florida law is well settled that such clauses alone are not enough.

Wert said the issue of personal jurisdiction over remote employees likely will continue to play out in the courts, but the Fourth District has articulated the important principle that courts may consider digital access to a company’s information as “contact” in the state in deciding such issues.