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California Overtime Rules Apply To Work Performed In California By Out-Of-State Employees

July 13, 2011

By Tony DeCristoforo
Stoel Rives World of Employment
Stoel Rives, Oregon Law Firm

The California Supreme Court has ruled that California’s daily overtime requirements apply to work performed in California by non-residents. In Sullivan v. Oracle Corp., three employees of Oracle who were not residents of California worked as “instructors” and trained Oracle’s customers in the use of the company’s products. Required by Oracle to travel, the plaintiffs worked primarily in their home states but also in California and several other states. California is one of the few states that requires payment of daily overtime for hours worked in excess of eight in a day. At issue in the case was whether these non-residents of California were entitled to daily overtime for days they worked in California.

In a unanimous decision, California Supreme Court held that the California Labor Code does apply to overtime work performed in California for a California-based employer by out-of-state employees, such that overtime pay is required for work in excess of eight hours in a day. In reaching this conclusion, the Court noted California’s strong interest in applying its overtime law to all non-exempt workers, and all work performed, within the state’s borders. The Court stated that to permit non-residents to work in California without the protection of the state’s overtime law would completely sacrifice, as to those employees, California’s important public policy goals of protecting health and safety and preventing the evils associated with overwork. Additionally, not applying California law would encourage employers to substitute lower paid temporary employees from other states for California employees, thus threatening California’s legitimate interest in expanding the job market.

While not great news for employers, this decision provides guidance to multi-state employers about how to pay non-exempt employees who work occasionally in California. However, the Court left some important questions unanswered. First, the decision does not directly apply to employers that are based outside of California. The Court specifically limited its holding to out-of-state employees working for California-based employers. The question remains whether an employer based outside of California must comply with California’s overtime rules for those days its non-California employees work in California. Even though the ruling does not specifically address this scenario, the reasoning the Court employed in reaching its decision leaves the door open for an argument that its holding applies to employers based outside of California. Also, the Court was not asked to address, and did not address, whether other provisions of California’s wage law — such as the contents of pay stubs, meal period requirements, the compensability of travel time, the accrual and forfeiture of vacation time, and the timing of payment to employees who quit or are discharged — apply to work performed in California by non-resident employees.

California-based employers with non-exempt employees in other states who occasionally work in California should immediately confirm that all such employees are paid overtime in conformity with California law when working in California.

  
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