NINTH CIRCUIT ASKS FOR HELP FROM CALIFORNIA SUPREME COURT ON APPLICATION OF STATE OVERTIME LAW TO OUT-OF-STATE EMPLOYEES

In February, the Ninth Circuit took the unusual step of withdrawing one of its published opinions, Sullivan v. Oracle Corporation, 547 F.3d 1177 (9th Cir. 2008). At the same time, the Ninth Circuit asked the California Supreme Court to answer certified questions of state law designed to decide the issues in its now-withdrawn opinion. Proceedings in the case have been stayed pending action by the California Supreme Court which may, but need not, answer the questions posed to it by the Ninth Circuit. The central issue, which the Ninth Circuit characterized as of "considerable practical importance," is whether California's overtime laws apply to out-of-state residents when they perform work in California for a California employer. The employees at issue in the case spent relatively few days in California; the most time worked in California by any of the three plaintiffs was 80 working days over a four-year period.

The Ninth Circuit's decision to submit this issue to the California Supreme Court was a significant about-face from the court's assertion in Sullivan that "the California Labor Code is clearly intended to apply to work done in California by nonresidents." (See discussion of Sullivan in our Winter 2008 newsletter). The court acknowledged in February that "there is no directly controlling precedent on the question."

What this Means for Employers

The questions posed to the California Supreme Court in Sullivan deal with overtime claims of out-of-state employees of a California employer. Even if the Court chooses to decide those questions, however, other related issues may remain open, including: (1) whether the myriad of other California wage and hour laws apply to work performed in California by out-of-state employees; and (2) whether any of these laws apply in the situation where both the employer and the employee reside outside California, but the work at issue was performed inside California.

Pending the outcome of Sullivan, the safest course for employers is to follow California's wage and hour laws regarding work performed in California by out-of-state employees, whether the employer is headquartered inside or outside California.