CA Overtime Laws Apply to Out-of-State Employees

July 1, 2011 ( - The California Supreme Court has ruled that California overtime laws apply to out-of-state workers who perform some work within the state, if done for a California employer.

The Court also held that overtime work performed by out-of-state employees within California can serve as the basis for a claim under California’s unfair competition law (UCL). However, in Sullivan v. Oracle, the court also held that overtime work, allegedly in violation of the Fair Labor Standards Act’s (FLSA) overtime provisions, performed by out-of-state employees outside California cannot serve as the basis for a California UCL claims.   

According to a client alert from law firm Seyfarth Shaw, Oracle, a California-based employer, employed the three named plaintiffs in the case as instructors who train its customers on how to use its software.  Two of the plaintiffs were Colorado residents; the other was an Arizona resident.  Each of the plaintiffs worked in the state in which they resided, and Oracle applied the wage-hour laws of those states to the plaintiffs.  From the three years of work history in evidence, the most number of days that any of the plaintiffs worked in California was 110 days; the fewest was just 20 days.    

The client alert said the plaintiffs filed three claims: (1) overtime compensation under the Labor Code; (2) the same claim as one for restitution under the UCL; and (3) restitution under the UCL for compensation due under the FLSA.  The 9th U.S. Circuit Court of Appeals ruled that “California has chosen to apply its Labor Code equally to work performed in California, whether that work is performed by California residents or out-of-state residents.”  The appellate court further ruled that overtime work of non-residents can form the predicate harm for a California’s UCL claim, and concluded that the UCL “does not apply to the claims of nonresidents of California who allege violations of the FLSA outside California.”  

In its decision, the California Supreme Court cited language of California Labor Code section 510, which provides that “[a]ny work . . . shall be compensated at the rate of no less than one and one-half times the regular rate of pay.”  The court then cited language in California Labor Code section 1171.5 which provides that California’s wage laws apply to “all individuals . . . who are or have been employed[] in this state.”    

Because there is no exemption for nonresident employees, as the California Legislature implemented in other California Labor Code sections (such as California’s Workers Compensation Act, Cal. Lab. Code § 3600 et seq.), the opinion concluded that the meaning of the California Labor Code provisions was clear.