Employment Contracts & Multi-State Mergers: Who has Jurisdiction?

Justia Opinion Summary:

Plaintiff, a resident of Georgia, entered into an employment contract with Employer. Plaintiff was in South Carolina when he signed the offer letter. Plaintiff later transferred to Employer's Charlotte, North Carolina division, but Plaintiff never had a route that involved any deliveries in North Carolina during his employment with Employer. After Plaintiff received a work-related injury, Plaintiff began receiving disability and medical compensation according to Georgia law. Plaintiff later filed a claim for benefits with the North Carolina Industrial Commission. The Commission concluded that it did not have subject matter jurisdiction over Plaintiff’s claim. The Court of Appeals reversed, concluding that Plaintiff’s transfer to Employer’s Charlotte division involved a modification of Plaintiff’s employment contract and that the modification was a proper basis to find the contract was “made” within North Carolina for purposes of establishing the Commission’s jurisdiction. The Supreme Court reversed, holding that N.C. Gen. Stat. 97-36, which authorizes compensation pursuant to North Carolina law if an individual’s employment contract was “made” in North Carolina, does not apply to a contract initially made in another state and subsequently modified in North Carolina.

The North Carolina Supreme Court recently ruled on an interesting jurisdictional issue in Burley v U.S. Foods, Inc.  The basic question was whether the North Carolina Industrial Commission (NCIC) had jurisdiction over an employee whose contract was originally formed in South Carolina but was substantially modified in North Carolina. 

The plaintiff was originally hired in Fort Mill, South Carolina, to work for US Foods.  He accepted the position by signing an offer letter.  Two years later, the company merged with another company, and the plaintiff was given the choice to terminate his contract or accept a position in Charlotte, North Carolina, or Lexington, South Carolina.  

The plaintiff elected to transfer to Charlotte, North Carolina.  Throughout the transfer, the plaintiff remained employed by US Foods.  The court’s ruling said that North Carolina did not have jurisdiction over such an employment contract since it originated in South Carolina.   

The majority basically concluded that once the contract has an identifiable site (meaning originating site), the contract is not then changed or jurisdiction transferred because it is modified elsewhere.  

Additional job duties or benefits are not enough to change the original existing contract of employment.  

Because it was a case of the first impression in North Carolina, the court relied heavily on Larson’s as well as what other states, including Missouri, Louisiana, and California, are doing in similar situations.

Justice Hudson wrote a well-reasoned dissent.  He basically said that the 2002 merger of the companies made it impossible for employment to continue under the original terms.  Because the employment relationship was continued under terms different than those of the original, a new contract was formed in 2002 when the Charlotte office of US Foods approved the Plaintiff’s transfer.  Justice Hudson concluded that it was not a mere modification but a break from his old employment, and therefore, the new arrangement was a new contract which gave NC jurisdiction over the claim.

This case makes it clear that, before filing a claim with the NCIC, a party must first determine where the employment contract originated in order to determine whether the NCIC has jurisdiction.

Published by Maggie Senter Bennington on June 20, 2016