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California Overtime Laws MAY Extend To Out-Of-State Employers Who Send Employees to California

Prepared By: Melissa C. Marsh, Los Angeles Employment Attorney
Written: November 2008

In Sullivan v. Oracle Corporation (November 6, 2008), the Ninth Circuit Court of Appeals held that California's wage and hour laws, including the state's overtime provisions, apply to out-of-state employers and non-resident employees who occasionally perform work in California. In short, if your company sends an employee to California, even for a day, the out-of-state employer must comply with California's wage and overtime laws.

Under California's overtime pay laws, an employee is entitled to be paid overtime pay at a rate of time and one half for: (1) each hour worked over eight in a single workday; (2) each hour worked over forty in a single workweek, and (3) the first eight hours worked on the seventh day of work in any workweek. California's overtime pay laws also require employers to pay employees who work in California double time for: (1) each hour worked over twelve in a single day and (2) each hour worked over eight on the seventh consecutive day of work in any given workweek.

Employers who fail to adhere to California's overtime pay laws can be assessed penalties by California's Department of Labor Standards and Enforcement in the amount of $50 per improperly paid worker for each pay period the worker was not paid correctly. A complaint by a single employee can trigger a full review of an employer's records for all of its employees and penalties for each violation discovered.

Facts of the Case.

Oracle Corporation (“Oracle”) is a Delaware corporation with its principal place of business in California. Oracle employed hundreds of workers nationwide to train Oracle customers in the use of its software. Oracle classified these workers as contract teachers who were exempt from compensation for overtime work both under applicable federal law (Fair Labor Standards Act) and California law (California Labor Code §510(a)). Three workers who lived in Colorado and Arizona, but performed some of their services in California brought suit against Oracle seeking damages under California Labor Code § 510(a) for failure to pay overtime. These Plaintiffs performed a majority of their work in their home states (Colorado and Arizona), and only some of their work in California (an average of 15 to 30 days per year).

Oracle argued that Arizona and Colorado law should apply because the employees regularly worked and lived in those states. Arizona does not have a state law providing for overtime and relies on the provisions of the Fair Labor Standards Act. Colorado's overtime law essentially provides for the payment of overtime wages at a rate of time and one-half for any work in excess of 40 hours per workweek, or 12 hours per workday, whichever results is the greater payment of wages. Although quite similar to California's overtime laws, Colorado's overtime provisions only requires time and one-half when an employee works more than 12 hours in a day, while California's law requires time and one-half when an employee works more than 8 hours in one day, and double time for hours exceeding 12 in a given day.

California Appellate Court's Holding.

The Court held that contrary to Oracle’s assertions, the California Labor Code is clearly intended to apply to all work performed in the state of California, even if the employee is an out of state resident. The court cited Tidewater Marine Western, Inc. v. Bradshaw, 927 P.2d 296, 301 (Cal. 1996), in which the California Supreme Court held that California’s employment laws govern ALL work performed in the state, regardless of the residence or domicile of the employee.

What Out Of State Employers Must Do.

What does this mean for out-of-state employers who send their employees to California to perform a temporary job? If you operate a business that sends any of its employees to California (even on a temporary assignment), you must comply with California's wage and hour laws, including its minimum wage, overtime, and meal period and rest break laws, as set for in the California Labor Code.

The decision has been temporarily placed on hold. The California Court of Appeals has asked the California Supreme Court to decide whether: (1) California's overtime pay requirements and unfair competition laws apply to overtime work performed in California by out-of-state workers? and whether (2) California's unfair competition laws apply to overtime work performed outside of California, but for a California based employer?

The decision by the Supreme Court will have a huge impact on both California employers and California employees. Many California employers employ out-of-state residents. If California employers are not required to adhere to the laws set forth in California's Labor Code with respect to out-of-state employees, the California employee may find their opportunities severely limited. California employers could essentially revise their hiring practices to favor out-of-state employees who can telecommute, or travel on a daily or weekly basis back to their home state of residence. When the California Supreme Court Rules, we will provide an update.

Our employment law practice consists of: (1) assisting employees with their wage claims and (2) counseling employers who seek to comply with new state and federal employment laws, providing human resource training, and providing essential contracts and employee policies to prevent employee lawsuits. To schedule a consultation with employment law lawyer Melissa C. Marsh, call 818-849-5206 or Send Us An Email.

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California employment lawyer, Melissa C. Marsh, is based in Sherman Oaks and West Hollywood, and serves individuals and businesses throughout Los Angeles County, including: West Hollywood, Miracle Mile, Beverly Hills, Century City, Santa Monica, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.

© 2008 Melissa C. Marsh. All Rights Reserved.

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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.