Metropolitan News-Enterprise


Thursday, April 23, 2009


Page 3


S.C. to Decide Whether Ex-Oracle Workers Can Sue for Overtime


By a MetNews Staff Writer


The California Supreme Court yesterday agreed to decide whether California law provides a remedy to non-residents who did work for a California company—with the work being done primarily in another state—and claim they were misclassified in order to avoid liability for overtime compensation.

The plaintiffs, residents of Colorado and Arizona, claim software developer Oracle Corporation violated California law by classifying former employees hired to train its customers as teachers, making them ineligible for overtime compensation.

The justices, at their weekly conference in San Francisco, voted 6-0 to accept certified questions of law from the Ninth U.S. Circuit Court of Appeals in Sullivan v. Oracle Corporation, 06-56649. Justice Carol Corrigan was absent and did not participate.

The Ninth Circuit ruled last November that California has a greater interest in applying its own law to work done here by the plaintiffs than their home states have in applying their laws, and that state overtime requirements apply to work done in California by nonresidents, even those who work primarily in other states. But the panel subsequently withdrew its opinion and asked the California high court to consider the state-law issues.

The panel framed those issues as:

•“[D]oes the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case...?”

•Does the California Unfair Competition Law apply to such work?

•Does the Unfair Competition Law “apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the” federal Fair Labor Standards Act?

A Delaware corporation, Oracle is headquartered in Redwood City, south of San Francisco, and from 1999 to 2006 hired “instructors” through a Canadian subsidiary to travel throughout the United States and Canada training customers to use its software.

Exemption Argued

Oracle initially classified its instructors as “teachers” exempt from the overtime provisions of the Labor Code and the FLSA but in 2004 it reclassified instructors nationwide and began paying them overtime, apparently prompted by a 2003 class action in the U.S. District Court for the Central District of California that was settled.

However, the settlement excepted claims under California law for periods of time employees may have worked in the state while a nonresident, and the three plaintiffs filed their action seeking to certify a class of hundreds of other instructors after Oracle declined to retroactively provide overtime payments for work performed prior to the reclassification.

Colorado residents Donald Sullivan and Deanna Evich, who respectively worked 74 and 80 days in California in six years with Oracle, and Arizona resident Richard Burkow, who worked here 20 days during four years with the company, claimed Oracle violated the Labor Code and the UCL when it failed to pay overtime for work performed in California to instructors domiciled in other states.

They similarly alleged a violation of the UCL predicated on a claim the company violated the FLSA by failing to pay overtime for work performed throughout the country.

The plaintiffs claim they worked more than eight hours some days, which would entitle them to overtime pay if they were not exempt and if California law applied. Both federal and California law require payment of overtime pay to non-exempt employees who work more than 40 hours weekly.

Oracle removed the suit to the district court, and U.S. District Judge Alicemarie H. Stotler of the Central District of California granted the company summary judgment, but the Ninth Circuit partially reversed on appeal, rejecting Stotler’s conclusions that the Labor Code does not apply to nonresidents who work primarily in other states, and that the law would violate the Constitution if it did.

Choice of Law

Applying California choice-of-law rules, Judge William A. Fletcher wrote that California’s laws—not Colorado’s or Arizona’s—applied to the three plaintiffs, because California overtime law was “clearly intended to apply to work done in California by nonresidents,” and because Oracle had failed to demonstrate that application of the other states’ laws would further those states’ interests.

Fletcher conceded that California’s overtime compensation requirements were “materially different” than Colorado and Arizona law, but he reasoned that California law should be applied because the state’s “strong interest” in applying its law to work performed in California by other states’ citizens was compelling, particularly given that the other states had “no interest” in that Colorado overtime law did not extend beyond the state’s boundary and Arizona law made no provision for payment of overtime at all.

Declining, as a result, to proceed to the third step of traditional choice of law analysis, which compares the impairment of interests, the judge then opined that application of the California Labor Code did not violate due process under the Fourteenth Amendment because Oracle’s presence and activities in California constituted sufficient contacts with the state such that choosing California law was neither arbitrary nor fundamentally unfair.

He similarly rejected Oracle’s argument that applying the California law would violate the Dormant Commerce Clause, which prohibits states from passing legislation that improperly burdens or discriminates against interstate commerce, noting that there could be “no plausible…argument when California has chosen to treat out-of-state residents equally with its own.”

Fletcher agreed with Stotler, however, that the plaintiffs could not predicate a UCL claim on alleged violations of the FLSA. The appellate jurist said the state law does not apply to the claims of nonresidents who allege violations of the federal act outside of California.


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