June 30, 2011 / 10:08 PM / 9 years ago

Court rules against Oracle on California overtime pay

NEW YORK (Reuters) - Employers based in California must pay nonresident workers for overtime work performed in the state, the California Supreme Court ruled on Thursday, a decision that could have wide ramifications for companies that do business in California.

The state’s high court concluded that Oracle Corp could be found liable for unpaid wages if it did not pay its out-of-state computer trainers for overtime work performed in California under the state’s wage and hour laws.

The case arose from a proposed class-action lawsuit now on appeal before the 9th U.S. Circuit Court of Appeals.

Oracle employees who were residents of Arizona and Colorado had sued the company for not paying them overtime for work over eight hours a day or 40 hours a week when they visited California to train customers how to use Oracle software. The 9th Circuit asked the California Supreme Court to provide guidance on whether California labor code applies to nonresident employees when they perform work in the state.

“To permit nonresidents to work in California without the protection of our overtime law would completely sacrifice, as to those employees, the state’s important public policy goals of protecting health and safety and preventing the evils associated with overwork,” Justice Kathryn Werdegar wrote in the court’s unanimous opinion.

The court concluded that not applying California law would encourage employers to substitute lower-paid temporary employees from other states for California employees.

Oracle did not immediately respond to requests for comment. Oracle’s lawyer, Paul Cane, declined to comment.

Charles Russell, a lawyer for the plaintiffs, said the ruling prevents California-based businesses from avoiding the state’s wage requirements by importing temporary workers from other states, a practice he described as “common” at Oracle.

California labor law is more protective than other states, according to Russell. Unlike many states, California calculates overtime work on a daily rather than weekly basis.

The ruling has particular significance for migrant workers who come to California to pick crops, Russell said.

“They can’t be denied protections just because they don’t live here,” he said.

Laura Maechtlen, an employment lawyer at Seyfarth Shaw, said the broad language of the ruling could lead to a spike in wage-and-hour lawsuits against companies doing business in California.

Although the court limited its ruling to California-based businesses, Maechtlen said the ruling likely will incite claims by out-of-state employees at non-California companies who perform work for California businesses.

She added that companies nationwide could also become vulnerable to a host of strict California labor laws, including laws on pay stub requirements, meal and rest breaks and compensation for travel time.

“Employers should be concerned about how far the implications of this holding go,” Maechtlen said.

In addition to the question of what law applies to nonresidents who work in California, the court also addressed whether plaintiffs could sue Oracle under California’s unfair competition law for out-of-state employees who don’t perform any work in California.

The court sided with Oracle, finding that the plaintiffs could not apply the California law to overtime work performed outside of California under the facts of the case.

The case is Sullivan et al v. Oracle Corp et al, California Supreme Court, No. S170577.

Reporting by Terry Baynes; Editing by Phil Berlowitz

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