California based employers who send workers from other states into California must pay the employees pursuant to California law, not the law of the state where those employees reside, according to the California Supreme Court ruling in Sullivan v. Oracle Corp. (SC S170577 6/30/11). The Supreme Court’s decision is a mixed bag of chocolates in that the Court went to great lengths to try to limit its holdings to employers headquartered in California but may have left the door open for litigation regarding employers headquartered in other states who send workers into California. The plaintiff’s bar may seize upon such statements by the Court as:
To permit nonresidents 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 over work . . . Not to apply California law would also encourage employers to substitute lower paid temporary employees from other states for California employees, thus threatening California’s legitimate interest in expanding the job market.
What is clear is if you are an employer headquartered in California and have employees residing in other states, you have to be sensitive that those employees must be paid pursuant to California law if they enter California for a full day or more.
This decision will affect perhaps thousands of workers sent from out of state to work on assignments in California for days or weeks. The greatest impact will be on non-exempt workers who will be entitled to daily overtime, a rarity in most other states.
Specifically, California’s highest court ruled that (1) the California Labor Code applies to overtime work performed in California for “a California-based employer” by out-of-state plaintiffs “in the circumstances of this case;” (2) California’s Business and Professions Code section 17200 (Unfair Competition Law) applies to such overtime work performed in California by out-of-state plaintiffs; and, (3) Section 17200 does not apply to overtime work performance outside of California for a California-based employer by out-of-state plaintiffs in the circumstances of the case if the employer failed to comply with FLSA overtime provisions.
The Court limited its holding to Labor Code provisions governing overtime and expressly stated California’s interest in the content of out-of-state pay stubs, or treatment of vacation time was not at issue. All employers who send non-exempt, out of state employees to work in California should seek legal advice regarding the impact, if any, of this decision on the employer’s procedures. The decision also may be an ominous sign for employers with respect to how the Court may rule in the meal and rest break cases pending before the Court.
Cynthia Filla, Robert Pattison and Jonathan Siegel drafted this blog entry