Orange County Business Litigation Lawyer & Attorney : Morris & Stone Law Firm : Santa Ana, Tustin, Irvine, Newport Beach, Southern California, CA

• Email This
• Print
• Comments (1)
• Trackbacks

A recent decision shows that hiring an out-of-state employee can create a maze of labor laws for a company.

Oracle Corporation hired three individuals (plaintiffs) to train customers to use Oracle software.  Although Oracle is a California corporation, it hired these plaintiffs in their home states with employment terms specific to their home states' labor laws.  Plaintiffs, residents of Colorado and Arizona, traveled away from their cities of domicile to "teach" for Oracle, and were classified as workers not entitled to compensation for overtime work under federal or California law.  Although only a fraction of the time spent teaching took place in California, they sought damages under California's Labor Code for failure to pay overtime.  The district court granted summary judgment to Oracle on the labor claims, finding California law did not apply to nonresidents who worked primarily in other states. 

The Court of Appeals disagreed and reversed.  Under California's choice-of-law rules, a court is required to compare California law to the applicable law of other states and to weigh each state's interest in having its own law applied.  Here, the competing laws were "materially different," with California's being the most advantageous to the employee.  California also had the stronger interest in having its law applied.  California's Labor Code thus governed work performed in California by residents of Colorado and Arizona.  Because the Labor Code applied to work by nonresidents in California, the court's grant of summary judgment on plaintiffs' first two claims was reversed.  The court did conclude, however, that plaintiffs were only entitled to overtime on the hours worked in California.

While decisions such as this can seem over reaching, they are often necessary to keep some employers from gaming the system.  On the one hand, it would seem reasonable that a company should be able to hire someone in another state and pay that person pursuant to that state's laws.  If that job involves travel, it is onerous to expect an employer to keep track of the laws of every state to determine if a different pay scale applies when the employee travels there.  If an employee agrees to work for, say, $25 an hour, how does that agreement somehow change when the employee crosses a state line?

But now look at it from the standpoint of companies attempting to game the system.  If California companies decide that the labor laws of Arizona are more advantageous, you can bet it won't be long until one or more of them creates a system where the employees are hired in Arizona and then sent to California on "temporary assignments."