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Out-Of-State employees may be subject to California's Labor Laws while working in this state.

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December 2008

WAGE & HOUR UPDATE


Out of State Residents Subject To California

Labor Law While Working In State


By Christopher W. Olmsted

If a company sends its out-of-state employees to work on an assignment in California, does the California Labor Code apply during the assignment? The answer, according to the federal Ninth Circuit in a case captioned Sullivan v. Oracle Corp., is “yes.”

The answer has daunting implications. The California Labor Code is unlike any other. Companies in other states sending their employees into the Golden State may be in for a rude surprise.

In the Oracle case, two software instructors resided in Colorado, and a third in Arizona. Oracle sent them to California to teach software classes for between one to five weeks. The instructors later sued Oracle, alleging that the software company had improperly classified them as exempt, and failed to pay them overtime while they worked in California.

The district court dismissed the claim in response to Oracle’s motion, finding that California law did not apply to nonresidents.

When in California…


The Ninth Circuit reversed, finding that California labor law did apply to the nonresident workers. “Contrary to Oracle’s assertions, the California Labor Code is clearly intended to apply to work done in California by nonresidents,” ruled the court. “The California Supreme Court has concluded that California’s employment laws govern all work performed within the state, regardless of the residence or domicile of the worker.”

Notably, the California Supreme Court has not expressly ruled that out-of-state residents are subject to the California Labor Code. In a case titled Tidewater Marine Western, Inc. v. Bradshaw, the Court ruled that California residents working offshore for a maritime company were subject to California law. The Ninth Circuit’s ruling in the Oracle case is the first to hold that out-of-state employees temporarily working in state are subject to California labor laws.

Employers Face Uncertainty


As a result of this ruling, employers will face uncertainty regarding work performed by nonresident workers while in California. The court’s conclusion will not apply to every employee of every employer. The court’s analysis turned on a comparison of California’s labor laws to the laws of the labor laws of the worker’s home state (here, Arizona and Colorado). The ruling also turned on whether Oracle had sufficient business in California to make it subject to the state’s laws (yes, it is headquartered here). For other companies, and employees in other states, the answer may differ.

Further, it remains to be seen how California state courts, including the California Supreme Court, will address the issue.

The Bottom Line:


The court’s ruling should prompt employers who send out of state employees to work in California, even temporarily, to consider the following issues:

  • Does the company have sufficient ongoing contacts within the state of California, such that under the Oracle court’s ruling, California labor laws should apply to its workers while working in California?
  • Does the applicable California labor law provide superior protection to the out-of state resident? (In most cases, the answer will be “yes” because of California’s more rigorous laws.)
  • What rights under California law apply to the workers? Consider, for example, wage and hour law (e.g. exempt status, overtime, meal and rest periods), and fair employment practices (e.g. disability law).

    Employers should consult with California legal counsel regarding the implications of this ruling. The decision provides a strong incentive for employees (or their class action counsel) to file lawsuits in California.

    More Legal Update articles.
    Download entire December Legal Update in PDF format.


    This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2008 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.



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