Sullivan v. Oracle: Non-California Residents Working in California For California-Based Employers Are Subject To California Daily Overtime Requirements

In an opinion with significant implications for California-based employers, and potentially for non– California-based employers, the California Supreme Court has ruled that the daily and weekly overtime requirements of the California Labor Code apply to work performed in California for California-based employers by nonresident employees. In a unanimous opinion in Sullivan v. Oracle Corporation, issued on June 30, the court held that Oracle, a California employer, must pay its out-of-state employees according to California's overtime rules if and when those employees perform overtime work within California. The court also held that California's Unfair Competition Law (UCL), which has a four-year statute of limitations, applies to the failure to pay overtime for work performed in California by nonresidents, but does not apply to the failure to pay overtime under the federal Fair Labor Standards Act (FLSA) for work performed outside of California.

The court left open the question of whether the California Labor Code and UCL extend to non- California employers whose employees may occasionally perform work in California. The court also did not address whether any of the other numerous and unique California wage and hour laws apply to nonresident employees performing work in California.

Background

Oracle, which is headquartered and has its principal place of business in California, employed "instructors" throughout the country to train the company's customers in the use of its software. These instructors did not have a fixed location of work; they could be asked to perform work in any state. For a number of years, Oracle classified its instructors as exempt from state and federal overtime provisions. In 2003, Oracle reclassified those instructors who lived in California as nonexempt and began paying them overtime under the California Labor Code, including "daily" overtime. In 2004, Oracle reclassified its instructors who lived outside of California as nonexempt and began paying them weekly overtime under the FLSA.

The three plaintiffs who brought suit were residents of Arizona and Colorado. They had worked as instructors for Oracle in their home states, but occasionally (anywhere from five to 36 days per year) trained customers in California. The plaintiffs sued Oracle in California state court to recover daily overtime for the days they worked more than eight hours in California. Specifically, the plaintiffs alleged that Oracle violated California Labor Code Section 510(a) by failing to pay overtime for work...