• 23
  • July
    2011

A recent decision by the California Supreme Court found that California's wage and hour laws apply to both residents and nonresidents when they perform work in the state. Although the California Labor Code is silent on the question, the Court concluded that if the legislature had intended to distinguish between residents and nonresidents who work in the state, it could have drafted the law differently.

The case involved employees of Oracle Corp., which is headquartered in California. The employees were instructors whose job was to train Oracle's customers on how to use its products. They lived in other states but traveled nationwide for Oracle, and sometimes their work brought them to California.

Oracle's position was that, since the employees lived outside of California and worked primarily outside of California, they should not receive the benefits of California's Labor Code. The employees argued that the Labor Code should apply, at least when they were working inside the state, and they sought unpaid overtime accrued during those periods.

The plaintiffs brought a federal class action lawsuit, but the federal court determined that the issues had to be decided by the California Supreme Court, which has ultimate authority on issues of California law.

The plaintiffs also sued under California's Unfair Competition Law (UCL), claiming that Oracle's behavior violated the federal Fair Labor Standards Act (FLSA). If Oracle were found to have engaged in what the UCL deems wrongful business practices, any party injured by those wrongful practices could seek restitution from Oracle.

As to the applicability of the California Labor Code to these employees, the Court held that, in the absence of any provision that excluded nonresidents, the legislature must have intended the law to apply to both resident and nonresident workers.

The Court pointed out that if the state's wage and hour laws did not apply, employers could abuse that loophole by importing out-of-state workers, rendering the protections afforded by the California Labor Code useless.

On the issue of whether Oracle had violated the UCL, the Court ruled for Oracle, saying that the California Business and Professions Code does not apply to work performed outside of California by out-of-state employees, even for a California-based employer.

The Court explicitly refused to rule on whether this decision applies to nonresident employees performing work in California for companies headquartered in other states.

Source: Insurance Journal, "Nonresidents Workers in California Are Subject to California Overtime," Patricia-Anne Tom, July 11, 2011