Calif. SC rules on overtime issue

By Jessica M. Karmasek | Aug 10, 2011

SACRAMENTO, Calif. (Legal Newsline) - The California Supreme Court has ruled that the state Labor Code's overtime provisions do apply to claims for compensation by a group of software company employees for work they performed in the state.

Plaintiffs Donald Sullivan, Deanna Evich and Richard Burkow formerly worked as "instructors" for defendant Oracle Corp., a large software company headquartered in California.

As instructors, the plaintiffs' job was to train Oracle's customers in the use of the company's products.

Sullivan and Evich reside in Colorado, and Burkow resides in Arizona. Required by Oracle to travel, plaintiffs worked mainly in their home states but also in California and several other states.

For years, Oracle did not pay its instructors overtime. The company deemed that its instructors were exempt, as teachers, from California and federal overtime laws.

In 2003, Oracle's instructors sued the company in a federal class action alleging misclassification and seeking unpaid overtime compensation.

Shortly thereafter, Oracle reclassified its instructors and began paying them overtime under California's Labor Code and the federal Fair Labor Standards Act.

In 2005, the federal action was settled and the claims of the plaintiff class dismissed with prejudice, except for the present claims concerning nonresident instructors.

The present claims include:

- Plaintiffs claim overtime compensation under the Labor Code for days longer than eight hours, and weeks longer than 40 hours, worked entirely in California;

- Plaintiffs restate the same claim as one for restitution under the Unfair Competition Law. The plaintiffs contend that Oracle's failure to pay overtime for work performed in California was an "unlawful (or) unfair... business act or practice" for purposes of the UCL; and

- Again under the UCL, plaintiffs claim restitution in the amount of overtime compensation due under the FLSA for weeks longer than 40 hours worked entirely in states other than California.

Plaintiffs plead the claims in a complaint filed in the U.S. District Court for the Central District of California. That court granted Oracle's motion for summary judgment.

On appeal, the Ninth Circuit Court of Appeals affirmed in part and reversed in part.

Reversing on the first and second claims, the appeals court held the Labor Code and the UCL did apply to the plaintiffs' claims for overtime days and weeks worked entirely in California.

Affirming on the third claim, the court held the UCL did not apply to the plaintiffs' claims under the FLSA for overtime worked in other states.

However, the Ninth Circuit subsequently withdrew its opinion and asked the state's high court to decide the underlying questions of California law, on which it had found no directly controlling precedent.

Justice Kathryn Werdegar authored the Court's June 30 opinion.

"California's overtime law, applying to all work performed in the state, regulates even-handedly to effectuate the legitimate local public interests we have previously identified, namely, protecting health and safety, expanding the job market, and guarding against the evils of overwork," Werdegar wrote.

"Oracle's argument that California's overtime laws might burden interstate commerce more than incidentally, by imposing onerous regulations on businesses that bring or send employees to work temporarily in California, is based in large part on the assumption that, if out-of-state employers must pay overtime under California law, they must also comply with every other technical aspect of California wage law. The assumption, as noted, is of doubtful validity."

The Court said to permit nonresidents to work in California without the protection of the state's overtime law would completely sacrifice, as to those employees, its important public policy goals of protecting health and safety and preventing the evils associated with overwork.

"Not to apply California law would also 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," it wrote.

For those reasons, the Court said the state's Labor Code does apply to overtime work performed in California for a California-based employer by the out-of-state plaintiffs in this case.

As to whether Oracle's alleged violations of the state's overtime provisions constitute unlawful acts potentially triggering liability under the UCL, the Court answered in the affirmative.

"We have already decided that the failure to pay legally required overtime compensation falls within the UCL's definition of an 'unlawful... business act or practice,'" it wrote.

The third certified question concerns the plaintiffs' claim that Oracle has also failed to compensate them according to the FLSA for overtime worked in other states.

The Court, in its 25-page opinion, said the UCL does not reach the plaintiffs' FLSA claims under the circumstances of this case.

"Neither the language of the UCL nor its legislative history provides any basis for concluding the Legislature intended the UCL to operate extraterritorially," the Court wrote.

From Legal Newsline: Reach Jessica Karmasek by email at

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