The California Supreme Court’s 2011 decision in Sullivan v. Oracle Corp. (“Sullivan”) and its more recent decisions in Ward v. United Airlines (“Ward”) and Oman v. Delta Air Lines, Inc. (“Oman”) provided employers with a certain amount of clarity in regard to non-California residents working within the State on a temporary basis. Sullivan made clear that nonresident employees working in California for extended periods of time – “entire days or weeks” – for California-based employers are entitled to overtime pursuant to California Labor Code section 511. As for Ward and Oman, they made clear that nonresident employees are entitled to the protections of Labor Code sections 226 and 204 if California is their principal place of work or if California serves as the base of their work operations.
What these cases also made clear, however, is that what is true for Labor Code sections 226, 204, and 511 may not necessarily be true for other portions of the Labor Code. Specifically, the California Supreme Court made clear in all of these cases that the application of California wage and hour protections to nonresident employees could vary on a statute-by-statute basis. While this ambiguity and clarity keeps California labor and employment attorneys busy, it is not especially helpful for employers looking to properly navigate the law and avoid litigation.
Sullivan involved a lawsuit brought by three former employees of Oracle Corporation, which at the time was headquartered in California. While none of these former employees were residents of California, they did travel to California for work on behalf of Oracle for extended periods of time. The employees alleged that Oracle failed to pay them overtime pursuant to California law during the periods of time they performed work in the State. For its part, Oracle argued that California law did not apply to these nonresidents, even nonresidents who were performing work in California.
The California Supreme Court sided with plaintiffs and held that the California Labor Code applied to overtime work performed in California for a California-based employer by nonresident employees. In reaching this conclusion, the Court focused on the following: (1) California’s overtime law had broad language that did not distinguish between residents and nonresidents, (2) public policy supported an expansive application of the overtime rules, which policy would be usurped by limiting its application to residents as it would only encourage employers to import unprotected workers from other states, (3) California had a strong interest in governing overtime compensation for work performed in the State, and (4) the plaintiffs in Oracle were claiming overtime for entire days and weeks. In its decision, however, the Court made clear that this same result would not necessarily be true for all portions of the California Labor Code.
Ward and Oman involved different portions of the Labor Code. In Ward, the Supreme Court determined that California Labor Code section 226 applies to wage statements provided by an employer if the employee’s principal place of work is in California, e.g., if the employee works a majority of the time in California or, for interstate transportation workers whose work is not primarily performed in any single state, if the worker has his or her base of work operations in California. Unlike with its decision in Sullivan, however, the Court eschewed any conflict of law analysis and instead focused on the purpose and aim of the statute in question.
As for Oman, in that case the Supreme Court confirmed its holding in Ward and also established that the residence of the employer plays no role in that analysis. The Court also held that same analysis applied to California Labor Code section 204, which governs the timing of wage payments.
So where does that leave employers? To be sure, employers employing non-California residents to perform work in California must compensate them for overtime pursuant to California law if those employees are working extended periods of time in California and their work is more than transitory. Employers must also provide nonresident employees California-compliant wage statements (pursuant to Labor Code section 226) and pay them pursuant to California law (Labor Code section 204) to the extent their principal place of work is in California. It is also clear that these obligations do not depend on whether the employers in question are headquartered in California.
As for whether other provisions of the Labor Code apply to nonresident workers, that is currently unclear. With that said, the following lessons can be gleaned from these cases:
First, the provisions of the California Labor Code will almost certainly apply if California is the principal place of work of the nonresident employees.
Second, and if California is not the principal place of work, the likelihood of California law applying will increase the longer the employee works in California. For example, an employer will have a better chance of arguing that a nonresident employee working in California for a few hours is not entitled to meal and rest breaks pursuant to California law than if that same employee is working in California for days and weeks.
Sullivan, Ward, and Oman left many questions unanswered. For that reason, and as is always the case, all employers engaging nonresidents working within California’s borders should exercise caution and seek legal advice before excluding any of these workers from the protections of California’s wage and hour laws.