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Donald Sullivan et al v. Oracle Corporation et al

June 30, 2011


9th Cir. No. 06-56649 C.D. Cal. No. CV-05-00392-AHS

The opinion of the court was delivered by: Werdegar, J.

In this proceeding we address, at the request of the United States Court of Appeals for the Ninth Circuit,*fn1 questions about the applicability of California law to nonresident employees who work both here and in other states for a California-based employer. We conclude the Labor Code's overtime provisions (id., §§ 510, 1194) do apply to plaintiffs' claims for compensation for work performed in this state, and that the same claims can serve as predicates for claims under California's unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.). We also conclude that plaintiffs' claims for overtime compensation under the federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id., § 207(a)) for work performed in other states cannot serve as predicates for UCL claims.


Plaintiffs Donald Sullivan, Deanna Evich and Richard Burkow formerly worked as "Instructors" for defendant Oracle Corporation, a large software company headquartered in California. As Instructors, plaintiffs' job was to train Oracle's customers in the use of the company's products. Plaintiffs Sullivan and Evich reside in Colorado, and plaintiff Burkow resides in Arizona. Required by Oracle to travel, plaintiffs worked mainly in their home states but also in California and several other states.*fn2 During the time period relevant to this litigation (2001-2004), Sullivan worked 74 days in California, Evich worked 110 days, and Burkow worked 20 days.

For years, Oracle did not pay its Instructors overtime. Oracle's practice in this regard followed the company's determination that its Instructors were exempt, as teachers, from California and federal overtime laws. (See generally Industrial Welf. Com., wage order No. 4-2001, § 1(A)(3)(a), codified as Cal. Code Regs., tit. 8, § 11040, subd. (1)(A)(3)(a); 29 C.F.R. § 541.303 (2010).) In 2003, Oracle's Instructors sued the company in a federal class action alleging misclassification and seeking unpaid overtime compensation. (Gabel and Sullivan v. Oracle Corp. (C.D.Cal. Mar. 29, 2005, No. CV-03-00348-AHS); see Sullivan III, supra, 557 F.3d 979, 981-982.) Shortly thereafter, Oracle reclassified its Instructors and began paying them overtime under the Labor Code (in 2003) and the FLSA (in 2004). 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. (See Sullivan III, supra, 557 F.3d at p. 982.)

The present claims are three: First, plaintiffs claim overtime compensation under the Labor Code for days longer than eight hours, and weeks longer than 40 hours, worked entirely in California. (See Lab. Code, §§ 510, subd. (a), 1194.) Second, plaintiffs restate the same claim as one for restitution under the UCL. (Bus. & Prof. Code, § 17203.) Plaintiffs contend, in other words, that Oracle's failure to pay overtime for work performed in California was an "unlawful [or] unfair . . . business act or practice" (id., § 17200) for purposes of the UCL. Third, and again under the UCL, plaintiffs claim restitution in the amount of overtime compensation due under the FLSA (29 U.S.C. § 207(a)) for weeks longer than 40 hours worked entirely in states other than California. Plaintiffs thus seek to use Oracle's alleged violation of the FLSA in other states as the predicate unlawful act for a UCL claim under California law.

Plaintiffs pled the claims just described in a complaint filed in the United States District Court for the Central District of California. That court granted Oracle's motion for summary judgment based on stipulated facts. (Sullivan v. Oracle Corp. (C.D.Cal. Oct. 18, 2006, No. CV-05-00392 AHS) (Sullivan I).) On appeal, the Ninth Circuit affirmed in part and reversed in part. (Sullivan v. Oracle Corp. (9th Cir. 2008) 547 F.3d 1177, 1187 (Sullivan II).) Reversing on the first and second claims, the court held the Labor Code and the UCL did apply to 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 plaintiffs' claims under the FLSA for overtime worked in other states. Subsequently, however, the Ninth Circuit withdrew its opinion and asked us to decide the underlying questions of California law, on which it had found no directly controlling precedent. (Sullivan III, supra, 557 F.3d 979, 983.) The court noted the answers to its questions would have both "considerable practical importance" because "[a] large but undetermined number of California-based employers employ out-of-state residents to perform work in California," and possibly also "an appreciable economic impact on the overall labor market in California, given the competitive cost advantage out-of-state employees may have over California-resident employees if overtime pay under California law is not required for work they perform in California." (Ibid.)

We granted the Ninth Circuit's request. Accordingly, the following certified questions are now before us:

"First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week? Second, does [Business and Professions Code section] 17200 apply to the overtime work described in question one? Third, does [section] 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?" (Sullivan III, supra, 557 F.3d 979, 983.)

We note that, while plaintiffs' complaint contains class action allegations, the federal district court has not yet certified a class, and no question concerning class certification is before us. Also not before us is the question whether Oracle properly classified plaintiffs as exempt from the overtime laws during the relevant time period.


A. Do the Labor Code's Overtime

Provisions Apply to Work Performed in California by Nonresidents?

The question whether California's overtime law applies to work performed here by nonresidents entails two distinct inquiries: first, whether the relevant provisions of the Labor Code apply as a matter of statutory construction, and second, whether conflict-of-laws principles direct us to apply California law in the event another state also purports to regulate work performed here. These inquiries lead to the conclusion that California law does apply.

1. Statutory Construction.

California's overtime laws apply by their terms to all employment in the state, without reference to the employee's place of residence. The overtime statute declares simply that "[a]ny work in excess of eight hours in one workday and . . . 40 hours in any one workweek . . . shall be compensated at the rate of no less than one and one-half times the regular rate of pay . . . ." (Lab. Code, § 510, subd. (a), italics added.) The civil enforcement provision provides that "any employee receiving less than . . . the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance . . . ." (Id., § 1194, subd. (a), italics added.) Moreover, a preambular section of the wage law (Lab. Code, div. 2, pt. 4, ch. 1, §1171 et seq.) confirms that our employment laws apply to "all individuals" employed in this state (id., § 1171.5, subd. (a), italics added).*fn3

That the overtime laws speak broadly, without distinguishing between residents and nonresidents, does not create ambiguity or uncertainty. The Legislature knows how to create exceptions for nonresidents when that is its intent. The Legislature has, for example, exempted certain out-of-state employers who temporarily send employees into California from the obligation to comply with the workers' compensation law (Lab. Code, § 3200 et seq.), on the conditions of compliance with the home state's compensation laws and interstate reciprocity (see id., § 3600.5, subd. (b)). In contrast, the Legislature has not chosen to authorize an exemption from the overtime law on the basis of an employee's residence, even though it has authorized exemptions on a variety of other bases. (See id., §§ 510, subd. (a)(1) -(3), 511, 514, 515.)

That California would choose to regulate all nonexempt overtime work within its borders without regard to the employee's residence is neither improper nor capricious. As a matter of federal constitutional law, "[s]tates possess broad authority under their police powers to regulate the employment relationship to protect workers within the State. Child labor laws, minimum and other wage laws, laws affecting occupational health and safety, and workmen's compensation laws are only a few examples." (De Canas v. Bica (1976) 424 U.S. 351, 356.) Furthermore, the overtime laws serve important public policy goals, such as protecting the health and safety of workers and the general public, protecting employees in a relatively weak bargaining position from the evils associated with overwork, and expanding the job market by giving employers an economic incentive to spread employment throughout the workforce. (Gentry v. Superior Court (2007) 42 Cal.4th 443, 456.) The Legislature has considered these purposes sufficiently important to make the right to overtime compensation unwaivable (Lab. Code, § 1194) and the failure to pay overtime a crime (id., § 1199; see Gentry, at p. 456). To exclude nonresidents from the overtime laws' protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states. Nothing in the language or history of the relevant statutes suggests the ...

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