The California Supreme Court recently issued a decision with significant implications for employers that have nonresident employees performing work in California on a routine or sporadic basis. In Sullivan v. Oracle, the court unanimously held that when an employee crosses into California, even temporarily, the employer must comply with California overtime laws in addition to federal law and the law of the state where the employee is actually “employed” or resides. The court based its decision on California’s “strong interest in applying its overtime laws to all nonexempt workers, and all work performed, within its borders.” Accordingly, it appears that employees traveling within the state of California will be governed by California’s overtime requirements. As California employers already know, “getting it right” is essential, with mistakes often leading to significant liability for back pay and penalties. The court also clarified that employers who fail to pay overtime owed to nonresident employees performing work in California may be subject to actions under California’s unfair competition law (UCL). Finally, the court held that the UCL does not apply to claims under the Fair Labor Standards Act for overtime work performed by nonresidents in other states.

Case Summary

Sullivan v. Oracle originally was brought as a class action against Oracle, a large software company with its principal place of business in California. The class was composed of Oracle “instructors,” hired as employees on a contract basis to travel throughout the country and train Oracle customers in the use of Oracle software. The class members were nonresidents of California who spent a small amount of their time working and traveling in California. During the period relevant to this lawsuit, Oracle classified its instructors as exempt “teachers” and did not pay the overtime under California or federal law. The instructors alleged that they wer misclassified, that they were non-exempt, and that they therefore were entitled t overtime under California law for the work they performed in California. Oracle argued that the instructors were not covered by California law because they resided, worked primarily, and paid taxes in other states. Despite strong and appealing arguments regarding the impracticality of requiring national employers to constantly adjust their pay practices each time an employee works in another state, the California Supreme Court, in responding to a request from the Ninth Circuit to decide the issue, held that California overtime laws apply to employees working in California regardless of the length of their stay or their state of residency.