In Sullivan v. Oracle Corp., the Ninth Circuit Court of Appeals recently ruled that the California Labor Code applies to work performed in California by non-residents of California.

Oracle Corporation, a large software company, employed hundreds of workers to train Oracle customers in the use of its software. During the relevant period, Oracle classified these workers as teachers who were not entitled to compensation for overtime work under either federal or California law. Three California non-residents (who lived in Colorado and Arizona, respectively) brought a class action against Oracle seeking damages under California law for failure to pay overtime.

Plaintiffs performed only some of their work for Oracle in California. Plaintiffs sought to apply the Labor Code to a day's work when that work was performed entirely in California, and to a week's work when that work was performed entirely in California. (Plaintiffs did not seek to apply the Labor Code to a day's or week's work when only part of that day's or week's work was performed in California.) On the other hand, Oracle argued that the overtime provisions of Colorado law should apply to work performed in California by the two Colorado residents, and similarly, that the overtime provisions of the Fair Labor Standards Act should apply to work performed in California by the Arizona resident (because Arizona has no overtime law of its own).

Applying California's choice-of-law rules, the Ninth Circuit concluded that a California court would apply California's Labor Code. The Ninth Circuit concluded that the California Labor Code is clearly intended to apply to work done in California by non-residents.

While this ruling does not affect all employers, those employers to which it does apply will obviously need to ensure that their non-resident employees are correctly paid for their work done in California. This case does not address situations in which non-resident employees work only partial days in California, nor does it answer questions about whether California courts will attempt to apply all provisions of the California Labor Code (for example, pay stub requirements). Employers should consult their labor counsel as needed.