Daily Overtime for Non-Resident Employees

CALIFORNIA SUPREME COURT’S RULING ON OVERTIME FOR NON-RESIDENT EMPLOYEES

California continues to be one of the most hostile and business-unfriendly states for employers in the country.  As California businesses are already well aware, California’s laws on overtime for employees are far more generous than federal and most other state laws – employers are required to pay its California employees daily overtime for all hours worked in excess of 8 hours a day.  On June 30, 2011, the California Supreme Court ruled that non-resident employees are entitled to the daily overtime protections of the California Labor Code and California’s Unfair Competition Laws (UCL) for work performed in the state, even if it is only for a single day.  The Sullivan et al. v. Oracle Corp decision will have a far reaching impact on all employers throughout the United States who have employees who even occasionally send their employees to work in the state.

THE FACTS

California based Oracle Corporation brought in out-of-state employee “instructors” to train customers on how to use Oracle’s software. These instructors, who resided in Colorado and Arizona, often worked more than eight hours per day while training at Oracle.  These employees filed suit against Oracle, claiming that they were entitled to unpaid overtime for work performed in California and other states.

The District Court granted Oracle’s summary judgment motion and the employees filed an appeal.  The Ninth Circuit initially reversed the District Court’s determination, but later withdrew its opinion and posed three specific issues to be answered by the California Supreme Court:

  1. Are California based employers required to pay overtime to non-resident employees in compliance with the restrictive California Labor Code?
  2. Does failure to pay employees in compliance with the Labor Code actually violate California’s Unfair Competition Law?
  3. Does the UCL apply to work performed in states other than California based on a violation of the Fair Labor Standards Act (FLSA)?

THE SUPREME COURT RULING

The California Supreme Court unanimously ruled that work performed in California by “non-resident employees” is covered by California’s Labor Code, and that overtime violations can also be brought as claims under the UCL (Questions 1 and 2).  In answer to Question 3, the Court ruled that FSLA violations for work performed in other states are not covered by California’s UCL.

The Court wrote: “To permit non-residents to work in California without the protection of our overtime law would completely sacrifice, as to those employees, the state’s important public policy goals of protecting health and safety and preventing the evils associated with overwork.”

The Supreme Court made it clear that its ruling applied to the overtime laws only, and that other employment laws would have to be analyzed separately.  Nevertheless, this decision potentially opens the door to applying all California employment laws to non-resident employees who work in California.

In this case, the employer was based in California.  It is unclear whether the Court’s ruling would have been different if the employer had only a minor presence in California.  However, the Court’s decision seems to make California’s daily overtime laws applicable to all nonresident employees, regardless of the employer’s presence in California.

If you have questions on this article or on how this particular ruling may impact your business, please contact Gary Basham at gary@bashamlawgroup.com or (925) 309-6114.

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