On February 17, 2009, the Ninth Circuit withdrew its November 6, 2008 decision in Sullivan v. Oracle Corporation, 547 F.3d 1177 (9th Cir. 2008), and asked the California Supreme Court to weigh in on a number of issues. As mentioned in our November 2008 Management Alert, the court had held in the now-withdrawn opinion that non- California residents who perform work in California are entitled to overtime pay under the California Labor Code— regardless of the overtime laws in their home states—and may also assert claims under California’s unfair competition law, Business and Professions Code section 17200. The court based this conclusion, in part, on a determination that California had a sufficient interest in protecting employees working within its borders, even if these employees are not residents of California.

In conjunction with the withdrawal of this decision, the Ninth Circuit has sought guidance from the California Supreme Court on three questions central to the case: (1) Do the California Labor Code’s overtime provisions apply to out-of-state employees working overtime in California for a California-based employer in the circumstances of this case? (2) Does California’s Business and Professions Code section 17200 apply to the overtime work described in question one? (3) Does California’s Business and Professions Code section 17200 apply to out-of-state employees performing overtime work outside California for a California-based employer where the employer violates the overtime provisions of the federal Fair Labor Standards Act (which, unlike the California Labor Code, does not require overtime pay for more than eight hours worked in a day, but only for more than 40 hours worked in a week)?

The Ninth Circuit’s request reflects the uncertainty of California law. A federal appellate court can ask a state supreme court for guidance on critical state-law issues where there is inadequate authority on those issues. Here, the Ninth Circuit clearly had second thoughts about issuing an important state-law decision in the absence of any “directly controlling precedent.” Its request for guidance by the California Supreme Court, however, does not mean that guidance is necessarily forthcoming. The Supreme Court can decline to answer any or all of the questions certified by the Ninth Circuit. Meanwhile, Sullivan is no longer binding authority, and all further proceedings in the case have been stayed. Once the Supreme Court acts (either through review or a decision not to review), the Ninth Circuit will presumably issue a new decision.

Until then, employers should continue to carefully monitor the working hours of any non-California-resident employees who are performing work in California, and prepare for the possibility that California overtime law will be held to apply to such employees.