Three years ago, the California Supreme Court addressed the
scope of California's overtime regulations contained in the
California Labor Code and Wage Orders promulgated by its Industrial
Welfare Commission.Sullivan et al v. Oracle Corporation. The
Supreme Court held that work performed in California by nonresident
employees of Oracle was covered by the California Labor Code.
But the Court further concluded that overtime claims based on
violations of the Fair Labor Standards Act (FLSA) for work
performed by nonresident employees outside California are not
covered by California's unfair competition laws.
The Court cautioned that it was ruling on limited facts and thus
was not prepared to hold that California's wage orders
necessarily applied to "all employment in California,
and never to employment outside California." The
California Supreme Court's ruling therefore left unresolved
many specific factual and legal questions for California
employers.
Fortunately, a recent decision provides guidance that limits the
scope of California's extra-territorial jurisdiction. The
federal district court for the Northern District of California
recently held that a California-based business hiring allegedly
misclassified independent contractors to work exclusively in states
other than California could not be liable for noncompliance with
California wage and hour laws in those other states. The court held
that it was not sufficient for the employees to show that the
employer's principle place of business was California, that its
decision to classify the drivers as independent contractors was
made in California, or that its decision to charge a challenged
"administrative fee" was made in California.
The court also rejected the employees' argument that the
conflict of laws rules required California's laws to be applied
in part because California's laws were more protective than
other states. The court made clear that this was simply not
universally true, noting that both Washington and Oregon's
minimum wages were higher than in California.
More importantly, the court rebuffed the employees' attempt to
extend the Sullivan holding, noting that this decision
"focused on the location of the work," which actually
supported the court's decision. The federal court reasoned that
each state has a right (subject to federal law) to regulate work
performed within its own borders without having to worry about
another state's approach to regulating the employee-employer
relationship.
The court concluded that there is "no hint" that
California's wage and hour laws could ever apply to employees
who work exclusively in another state. The court also ruled that
parties could not legally agree to apply California's wage and
hour laws to regulate pay for work performed outside
California. Cotter v. Lyft, Inc.
Despite this ruling, remember that there still may be occasions
where the wage-hour laws of California will follow an employee to
other states, such as when an employee works and resides in
California, but occasionally works outside the state for periods of
short duration (e.g., truck drivers, traveling salespersons,
traveling executives). Because a number of factors must be
considered, we suggest that you seek legal counsel whenever such
issues arise during the course of employment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
