Metropolitan News-Enterprise


Friday, July 1, 2011


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S.C. Applies State Overtime Law to Non-Residents Working Here




California overtime laws apply to work done in this state by non-residents employed by a California company, even if the plaintiffs were primarily employed elsewhere, the state Supreme Court ruled yesterday.

With Justice Kathryn M. Werdegar writing for a unanimous court, the justices said residents of Colorado and Arizona can sue software developer Oracle Corporation under relevant provisions of the Labor Code. The plaintiffs claim Oracle misclassified former employees hired to train its customers as teachers, making them ineligible for overtime compensation.

Those plaintiffs have potential remedies under Labor Code Secs. 510 and 1194, and under the Unfair Competition Law, Werdegar said.

But they cannot sue under the Labor Code for failure to pay overtime for services rendered outside California, nor can they predicate a UCL claim on violations of state or federal law in connection with non-California work, the justice explained.

The ruling came in response to questions certified by the Ninth U.S. Circuit Court of Appeals in 2009.

Ninth Circuit Ruling

That court ruled in November 2008 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.

A Delaware corporation, Oracle is headquartered in Redwood City, 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.

Class Action

Oracle initially classified these 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 nonresidents, 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 federal court, and U.S. District Judge Alicemarie H. Stotler 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.

The California high court’s views were largely consistent with those of the Ninth Circuit panel.

Werdegar said the Labor Code applied, both as a matter of statutory construction and under choice-of-law principles. There is no “conflict” of laws, she said, because there is nothing in Colorado or Arizona law indicating those states intended to apply their laws to the plaintiffs.

“...Colorado and Arizona have expressed no interest in disabling their residents from receiving the full protection of California overtime law when working here,” Werdegar reasoned, “or in requiring their residents to work side-by-side with California residents in California for lower pay.” And even if those states have “a general interest in providing hospitable regulatory environments to businesses within their own boundaries,” as argued by Oracle, the justice said, “that interest is not perceptibly impaired by requiring a California employer to comply with California overtime law for work performed here.”

Werdegar emphasized that the high court was not expressing a view on Oracle’s Commerce Clause argument, which Stotler accepted but the Ninth Circuit panel rejected before withdrawing its opinion. The Ninth Circuit did not ask the state court to consider the issue, Werdegar noted.

The case is Sullivan v. Oracle Corporation, 11 S.O.S. 3571.


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