Labor & Employment Law Alert - California Overtime Provisions Apply to Work Performed in California by Non-Resident Employees

In yet another decision that may have a sweeping impact on employers who perform work in California, the California Supreme Court has held that the overtime provisions of the California Labor Code apply to out-of-state employees who temporarily work in California for a California-based employer. In Sullivan v. Oracle Corp., ---P.3d ----, 2011 WL 2569530 (Cal.), the Court concluded that “California’s overtime laws apply by their terms to all employment in the state, without reference to the employee’s place of residence” and finding that “[t]o exclude nonresidents from the overtime laws’ protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states.”

The holding applies to California’s rules requiring that non-exempt employees be paid daily overtime and double time under California law. The Court noted that it was not deciding a host of issues—most significantly the application of the holding to companies that are not “California based” and whether the same rule would apply to other California wage laws. Moreover, the Court did not define specifically which companies are “California-based.” However, given the Court’s reasoning and because the Court left these issues undecided, employers should expect further litigation as plaintiffs attempt to push the boundaries of California’s expansive employment laws. Accordingly, all organizations that have employees performing work in California, even on a temporary basis, should be aware of the possibility that such work may be subject to the overtime provisions of the California Labor Code.

In one aspect of the case that was beneficial for employers, the Court refused to adopt plaintiff's theory that California's Unfair Competition Law, Business and Professions Code Section 17200 (UCL), could be used to attack alleged misclassifications under the federal Fair Labor Standards Act (FLSA) where the work at issue was performed outside of California. Plaintiff had attempted to use this device to allow them to litigate nationwide FLSA claims under California's UCL with its longer four-year statute of limitations, but the Court rejected this theory.