Late last month, the California Supreme Court made its ruling on a pivotal case pertaining to overtime pay for out-of-state workers. The issue in the case was three-fold and involved i) whether the (worker-friendly) California Labor Code applies to out-of-state workers performing employment tasks for a California-based company; ii) whether California’s Unfair Competition Law (UCL) applies in this same situation, and; iii) whether the UCL would apply to out-of-state workers facing federal Fair Labor Standards Act (FLSA) violations?
These issues may seem complex and tedious, but the Supreme Court’s holding with respect to these questions has significant implications for all California-based companies seeking to outsource their work to workers in other states or to those willing to telecommute from other states.
The case came about when Oracle, a California company, hired instructors to teach customers how to operate its products. When out-of-state instructors were routinely not paid overtime and felt taken advantage of, they immediately turned to California’s Labor Code & UCL. Oracle defended the suit on grounds that the employees had no standing to sue in California and the trial court immediately granted summary judgment in favor of Oracle.
On appeal, the employees contended that since their work was for a California-based company and they were paid from California accounts, they had significant ties to the state and they should be allowed to sue under California’s laws. The U.S. Court of Appeals for the 9th Circuit initially agreed to review the issues, but later issued the above three inquiries to the California Supreme Court for clarification before moving forward. This is common practice on the federal appellate level as federal circuit judges juggle laws from multiple states and jurisdictions and offer require legal clarity before proceeding.
The California Supreme Court, in an unanimous ruling, answered all three questions with a resounding….yes and no.
The Supreme Court held in the affirmative for the first two inquiries. Namely, out-of-state residents should have access to the California Labor Code and the UCL, particularly in situations like that faced by employees of Oracle. However, the Court also held that any out-of-state employee raising federal claims against a California employer cannot avail himself to the UCL.
The Court made clear that this ruling applies only to the questions presented in this Oracle case and it may reach a different result in situations involving “pay stubs, meal periods, compensability of travel time, the accrual and forfeiture of vacation time, and the timing of payment to employees who quit or are discharged.”
An interesting case and an even more interesting holding that will likely impact more and more California businesses as commerce is ever growing and evolving to include telecommunication and web-based positions. Now, employees of a California company who have never set foot in the state of California can access the California Labor Code and its Unfair Competition Law.
