Beware: Non-California Employees Working  in California On a Limited Basis

The California Supreme Court ruled in Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011), that California overtime laws apply to work performed in California for California-based employers by their employees who do not live in California.

Specifically Sullivan ruled that non-exempt Oracle employees who lived and primarily worked in Arizona and Colorado should receive overtime pay in keeping with California law for overtime worked during occasional short- term work trips to California.

The case arose when the Ninth Circuit Court of Appeals asked the California Supreme Court: “Does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case …?” The Ninth Circuit posed that question because it had been asked to decide whether overtime claims brought by such employees against Oracle should be allowed to proceed to trial or should be dismissed for lack of merit. 

The Sullivan Decision: What does it Mean for Non-California Employees Working  in California on a Limited Basis?

In Sullivan, three employees brought a class action against their employer, Oracle, headquartered in California. The three named plaintiffs in the case worked for Oracle as instructors and were tasked with teaching Oracle’s customers how to use Oracle’s software. 

The employees were residents of Arizona and Colorado who worked primarily in their home states but occasionally traveled to California for work. 

In the three years before they filed their lawsuit, one of the employees worked in California an average of less than 20 days per year; another averaged just over 25 days per year; and the third less than 10.

Since the employees were classified as non-exempt, Oracle paid them time and one-half for all hours worked over 40 in a week, as required under the FLSA (unlike California law, the FLSA does not require employers to pay overtime for hours worked over eight in a day). Oracle did not pay the employees overtime pay for hours worked over eight in a day during their occasional work assignments in California.

The California Supreme Court unanimously held that California’s overtime laws applied to any work by non-resident employees involving a full day or week in California for a California-based employer “in the circumstances of this case.”  The Court reasoned that application of its overtime laws is necessary to protect the health and safety of workers and the general public, emphasizing California’s strong public policies.

Upon remand from the California Supreme Court, the Ninth Circuit held that the state court's opinion was “conclusive” and held that California overtime law applies to non-residents who perform work within the state. (The Ninth Circuit also ruled that a California-based employee who worked entirely outside California could not sue the employer under the California Unfair Competition Law ("UCL") for the employer's alleged failure to pay overtime to non-California employees.) Sullivan, D.C. No. CV-05-00392-AHS (9th Cir. Dec. 13, 2011)

Take Away

The Sullivan courts’ rulings may have far-reaching implications:

  1. Employees from any state who occasionally visit California for work may seek to have overtime and other California employment laws apply to them, too. This could include both non-exempt and exempt employees.
  2. While the Sullivan case focuses on the issue of whether California’s overtime law applies, there is the possibility that in future cases other California wage-and-hour laws will be found to apply in similar circumstances. These include California’s unique stricter requirements regarding, among other things, classification as exempt, travel-time pay, meal-and-rest periods, pay stubs, commissions, etc.
  3. Although Sullivan involved a “California-based” employer, even employers who are not “California-based” but operate in California should consider adjustments to policies and practices, based on the Sullivan reasoning.

Given the increasing mobility of the workforce, the issue of which state’s laws apply to a traveling employee is becoming more and more common. Employers, whether or not based in California, need to be vigilant and carefully review state employment laws to insure they are in compliance, particularly California employment law.