California law requires that non-exempt employees be paid overtime after 8 hours in a day or 40 hours in a week. In many states, and under federal law, employees earn overtime only after 40 hours in a week, regardless of the number of hours worked in a day. So what law applies when a California-based employer has out-of-state employees travel to California for work? This is the question that the California Supreme Court addressed last week in Sullivan v. Oracle.
Oracle is based in California and the named plaintiffs lived in Arizona and Colorado, but traveled throughout the country training Oracle customers how to use the company’s software. During a four-year period, the employees spent between 20 and 110 days in California.
The Court concluded that California’s overtime requirements apply equally to all employees who perform full days or weeks of work in California, regardless of their state of residence.
The unanimous decision placed considerable emphasis on the fact that the statutory language did not specifically exclude non-residents (where other provisions of the California Labor Code did).
By this rationale, the ruling seems to apply with equal force to companies based outside of California who have employees travel to California to work. For full days or weeks of work done in California, it now appears that employees must be paid overtime according to California law.
Oracle, of course, pointed out the burdens this places on employers who may have employees working all over the country. Tracking overtime is complicated enough when an employee is subject to only one state’s overtime rules. The idea of paying traveling employees according to the laws of multiple jurisdictions is enough to give even the most sophisticated payroll professionals nightmares. But the Court (rather naively) responded that “the asserted burdens on out-of-state businesses to which Oracle refers are entirely conjectural.”
Oracle also observed that the ruling could affect not only overtime laws, but myriad other Labor Code requirements, such as those regarding “the contents of pay stubs, meal periods, the compensability of travel time, the accrual and forfeiture of vacation time, and the timing of payment to employees who quit or are discharged.” The Court responded that its ruling only addressed overtime and “one cannot necessarily assume the same result would obtain for any other aspect of wage law.” So expect further litigation before there’s any clear guidance on whether these other rules apply to out-of-state employees working in California.
In the meantime, here’s a summary of some of the aspects of California employment law that most often trip up out-of-state employers.