A recent decision by the Court of Appeals of North Carolina highlights, in the context of workers’ compensation claims, the importance of where the “last act” necessary to form an employment contract occurred — particularly for companies that draw workers from other states. The good news for employers is: If that step was taken outside North Carolina, the employer may have a jurisdictional defense.
In Holmes v. Associated Pipe Line Contractors, Inc., _ S.E.2d _, 7 February 2017, the plaintiff was a resident of Fayetteville, North Carolina, and the defendant was a business headquartered and with its principal place of business in Houston, Texas. A union steward for the defendant contacted the plaintiff in October 2013 about a job in Huntsville, Texas. She arrived in Texas shortly thereafter, underwent a mandatory drug test, consented to a background check, and began working within two hours after taking the drug test.
In January 2014, she suffered work-related injuries and filed her claim in North Carolina. The defendants asserted that North Carolina did not have jurisdiction to hear the claim. The plaintiff’s claim was dismissed for lack of jurisdiction by both a deputy commissioner and the Full Commission.
The Court of Appeals examined whether the plaintiff’s submission to a mandatory drug test in another state before beginning work constituted the last act necessary to form the employment contract. In North Carolina, the Industrial Commission has jurisdiction if the contract of employment was made in North Carolina, the employer’s principal place of business is North Carolina, or if the employee’s principal place of employment is in North Carolina. N.C. Gen. Stat. §97-36.
To determine where an employment contract is made, the “last act” test applies. This test holds that an employment contract is made in North Carolina if the final act necessary to make the contract binding is taken in North Carolina. Here, the court held that the drug test was a mandatory prerequisite to the plaintiff’s employment with the defendant. Because the court held that the last act occurred in Texas, it affirmed the decision that North Carolina lacked jurisdiction to decide this claim.