By: Amy Komoroski Wiwi, Esq., and Joy N. Eakley, Esq. January 2012
Assume you are a California based
employer with employees
living and working in several
states. Occasionally, employees
who neither live nor regularly work
in California perform short-term
assignments in California.
Perhaps, for example, certain
non-exempt employees attend
annual meetings or trainings in
California. When that happens,
you adjust their schedules so
that they do not work more than
40 hours in a week. They do,
however, work more than eight
hours per day while in California.
Do you have to pay them
overtime? Yes, you do.
In a series of decisions spanning the
last three years in the case of Sullivan
v. Oracle Corp., both state and federal
courts, including, most recently, the
United States Court of Appeals for the
Ninth Circuit, grappled with this and
closely related issues. The employee plaintiffs
in Sullivan were Oracle
instructors who lived and worked in
Arizona and Colorado, but who also
worked in California occasionally. They
claimed they were owed overtime for
all work performed in California that
exceeded eight hours per day or 40
hours per week.
The Ninth Circuit ultimately certified
three questions to the California
Supreme Court, so that the state
court could decide critical issues of
state labor law that would impact the
outcome of the federal court case. Last
June, the California Supreme Court
decided those questions as follows:
• “The California Labor Code does
apply to overtime work performed
in California for a California-based
employer by out-of-state plaintiffs …
such that overtime pay is required for
work in excess of eight hours per day
or in excess of forty hours per week.”
• An employer’s failure to pay
legally required overtime to its
employees as described above can
give rise to a cause of action under
California Labor Code 17200, which
prohibits “unlawful … business
act[s] or practice[s].”
• California Labor Code 17200
“does not apply to overtime work
performed outside of California
for a California-based employer
by out-of-state plaintiffs … based
solely on the employer’s failure
to comply with” federal overtime
laws. In reaching this decision,
the California Supreme Court left
open the possibility that out-ofstate
employees who are “paid (or
underpaid) in California” might have
a Section 17200 claim. The court did
not discuss what it means to be paid
“in California.”
In the Ninth Circuit’s most recent
Sullivan decision, issued December 13,
2011, it applied the state court’s ruling
to the plaintiffs in the federal case,
over Oracle’s objection that applying
California’s Labor Code to nonresidents
would violate the U.S. Constitution. The
Ninth Circuit held that the California
Supreme Court’s answers to the
certified questions were conclusive.
Also, just one day after the Ninth
Circuit ruled, another federal court
in California applied the decision and
held that the location of payment
issue, referenced in passing by the
California Supreme Court, should not
affect the outcome of an overtime
claim for employees who have never
worked in California. In Wallace
v. Countrywide Home Loans, the
Central District of California – citing
the line of Sullivan decisions –
stated that “a singular focus on the
location of payment of nonresident
employees by a California-based
employer would lead to absurd
results.” However, neither Sullivan
nor Wallace determined whether the
location of payment would affect the
outcome of an overtime suit brought
by nonresident employees who
occasionally worked in California for a
California-based employer, but whose
claims related solely to work performed
outside of California. Although all
other issues raised in the Sullivan case
seem to be settled now, we can expect
to see more litigation on this remaining
“location of payment” issue.
Finally, although the question was not
before the court, employees working
for employers not based in California
are likely to argue that they too should
be entitled to overtime for all hours
worked in excess of eight in each
day they perform work in California.
Although the California Supreme
Court’s decision might be viewed as
supporting that argument, the decision
was specifically limited to the Sullivan
facts and involved a detailed choice of
law analysis. Before ruling on Sullivan’s
applicability to employees of an out-ofstate
employer, a court would have to
perform a similar analysis based on the
specific facts of the case.
What is the bottom line?
• If you are a California-based
employer with out-of-state
employees who occasionally
perform work in California, you
must pay them overtime according
to California state overtime laws for
all work performed in California.
Unclear at this time is whether the
location of payment might create
additional obligations relating to
out-of-state work and, if it does,
what it means to pay an employee
“in California.”
• If you are a California-based
employer with out-of-state
employees who never work in
California, you must pay them
overtime according to federal or
applicable state law, not
California state law.
If you have any questions
about the Sullivan v. Oracle
Corp. decision, please call Amy
Komoroski Wiwi or Joy N. Eakley
at 973.597.2500. We also would
be pleased to provide you with
assistance with respect to other
employment practices and
workplace compliance issues.
New York
1251 Avenue of the Americas
New York, NY 10020
212 262 6700
Palo Alto
390 Lytton Avenue
Palo Alto, CA 94301
650 433 5800
Roseland
65 Livingston Avenue
Roseland, NJ 07068
973 597 2500
© 2012 Lowenstein Sandler PC. In California, Lowenstein Sandler LLP.
www.lowenstein.com
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Client Alert based upon events subsequent to the date of its publication, such as new legislation, regulations, and judicial decisions. Readers should consult legal counsel of their own
choosing to discuss how these matters may relate to their individual circumstances.
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