Case Title: Sullivan, et al. v. Oracle Corp., et al.

Citation: 

Docket Number: s170577

State: california

Court: California Supreme Court

Date: 2011-06-30T00:00:00Z

Document:
1 
Filed 6/30/11 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
DONALD SULLIVAN et al., 
) 
 
 
) 
 
Plaintiffs and Appellants, 
) 
 
 
) 
S170577 
 
v. 
) 
 
 
) 
9th Cir. No. 06-56649   
ORACLE CORPORATION et al., 
) 
 
) 
C.D. Cal. No. 
 
Defendants and Respondents. ) 
CV-05-00392-AHS  
 
____________________________________) 
 
In this proceeding we address, at the request of the United States Court of 
Appeals for the Ninth Circuit,1 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.   
                                              
1  
(See Sullivan v. Oracle Corporation (9th Cir. 2009) 557 F.3d 979, 983 
(Sullivan III); Cal. Rules of Court, rule 8.548 (decision on request of a court of 
another jurisdiction).)   
 
 
2 
I. BACKGROUND 
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.2  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.)   
                                              
2  
Including Alabama, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, 
Maryland, Massachusetts, Minnesota, New Mexico, New York, Ohio, Oklahoma, 
Oregon, Texas, Utah, Virginia and Washington.   
 
 
3 
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 
 
 
4 
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.   
II. DISCUSSION 
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 
 
 
5 
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).3   
                                              
3  
“The Legislature finds and declares the following:  [¶]  (a) All protections, 
rights, and remedies available under state law, except any reinstatement remedy 
prohibited by federal law, are available to all individuals regardless of immigration 
status who have applied for employment, or who are or who have been employed, 
in this state.”  (Lab. Code, § 1171.5, subd. (a), added by Stats. 2002, ch. 1071, 
§ 4.) 
 
The immediate impetus for Labor Code section 1171.5‟s enactment was the 
Legislature‟s desire to protect undocumented workers from sharp practices in the 
wake of Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137, in which 
the high court held the National Labor Relations Board could not award backpay 
to a foreign national not legally entitled to work in the United States.  (See, e.g., 
Sen. Rules Com., Off. of Sen. Floor Analyses, 3rd reading analysis of Sen. Bill 
No. 1818 (2001-2002 Reg. Sess.) as amended Aug. 22, 2002, pp. 2-6; Assem. 
Com. on Lab. & Employment, Analysis of Sen. Bill No. 1818 (2001-2002 Reg. 
Sess.) June 22, 2002, pp. 2-3.)  Section 1171.5, however, cannot reasonably be 
read as speaking only to undocumented workers, given that it was drafted and 
 
(footnote continued on next page) 
 
 
6 
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 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
codified as a general preamble to the wage law and broadly refers to “all 
individuals” employed in the state.  (Id., subd. (a).)  More importantly, no reason 
exists to believe the Legislature intended to afford stronger protection under the 
employment laws to persons working illegally than to legal, nonresident workers.   
 
 
7 
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 Legislature ever contemplated such a result.  A 
contrary conclusion would be difficult, if not impossible, to reconcile with the 
Legislature‟s express declaration that “[a]ll protections, rights, and remedies 
available under state law . . . are available to all individuals . . . who are or who 
have been employed, in this state.”  (Lab. Code, § 1171.5, subd. (a).)   
Oracle, arguing that California‟s overtime law does exclude nonresidents, 
relies not on the language or history of the relevant statutes but on a misreading of 
our decision in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 
557 (Tidewater).  Oracle reads Tidewater as holding that California overtime law 
follows California residents wherever they go throughout the United States; based 
on that premise, Oracle contends that other states‟ overtime laws must be allowed 
to follow their own residents into California to avoid an offense to interstate 
comity.  The argument fails because the premise is incorrect:  Tidewater says no 
such thing.   
At issue in Tidewater, supra, 14 Cal.4th 557, was whether wage orders 
promulgated by the Industrial Welfare Commission (IWC) applied to California 
residents who worked for California employers on boats that transported workers 
and supplies from the California coast to oil-drilling platforms stationed offshore 
within California‟s state law boundaries, between the Santa Barbara coast and the 
 
 
8 
Channel Islands.4  When the boats‟ crew members sued their employers for 
overtime, the employers sued for an injunction to prohibit the wage orders‟ 
enforcement.  We held the wage orders did apply.  Federal law, we explained, did 
not preclude California‟s assertion of jurisdiction, and “California employment 
laws implicitly extend to employment occurring within California‟s state law 
boundaries, including all of the Santa Barbara Channel.”  (Id., at p. 565; see Gov. 
Code, § 110 [“The sovereignty and jurisdiction of this State extends to all places 
within its boundaries as established by the Constitution.”].)   
Our opinion in Tidewater, supra, 14 Cal.4th 557, includes language intended 
to caution against overly broad conclusions about the extraterritorial application of 
employment laws.  Ironically, this is the language Oracle reads as holding that a 
state‟s employment laws follow its residents wherever they go.  In fact, our 
remarks were more limited.  We wrote:  “In some circumstances, state 
employment law explicitly governs employment outside the state‟s territorial 
boundaries.  (Lab. Code, §§ 3600.5, 5305 [California workers‟ compensation law 
applies to workers hired in California but injured out of state].)  The Legislature 
may have similarly intended extraterritorial enforcement of IWC wage orders in 
limited circumstances, such as when California residents working for a California 
employer travel temporarily outside the state during the course of the normal 
workday but return to California at the end of the day.  On the other hand, the 
Legislature may not have intended IWC wage orders to govern out-of-state 
businesses employing nonresidents, though the nonresident employees enter 
California temporarily during the course of the workday.  Thus, we are not 
                                              
4  
The question arose because state and federal law defined California‟s 
boundaries in the Santa Barbara Channel differently.  (See Tidewater, supra, 14 
Cal.4th 557, 564.)   
 
 
9 
prepared, without more thorough briefing of the issues, to hold that IWC wage 
orders apply to all employment in California, and never to employment outside 
California.”  (Tidewater, at pp. 577-578.)   
We thus foresaw in Tidewater, supra, 14 Cal.4th 557, as a possibility, only 
limited extraterritorial application of California‟s employment laws, precisely 
balanced by interstate comity:  California law, we suggested, might follow 
California resident employees of California employers who leave the state 
“temporarily . . . during the course of the normal workday” (id., at p. 578), and 
California law might not apply to nonresident employees of out-of-state businesses 
who “enter California temporarily during the course of the workday” (ibid., italics 
added).  In contrast, plaintiffs here claim overtime only for entire days and weeks 
worked in California, in accordance with the statutory definition of overtime.   
(See Lab. Code, § 510.)5  Nothing in Tidewater suggests a nonresident employee, 
especially a nonresident employee of a California employer such as Oracle, can 
enter the state for entire days or weeks without the protection of California law.   
Oracle attempts to bolster its argument with a Washington decision, Bostain 
v. Food Exp., Inc. (Wn. 2007) 153 P.3d 846, but the case offers Oracle no 
assistance.  Bostain involved a claim for unpaid overtime brought by an interstate 
truck driver hired in Washington and based at the Washington terminal facility of 
a California motor carrier.  The court held the plaintiff was entitled to overtime 
compensation under Washington law for the time he spent driving outside that 
                                              
5  
“Any work in excess of eight hours in one workday and any work in excess 
of 40 hours in any one workweek and the first eight hours worked on the seventh 
day of work in any one workweek shall be compensated at the rate of no less than 
one and one-half times the regular rate of pay for an employee.”  (Lab. Code, 
§ 510, subd. (a).)   
 
 
10 
state.  (Id., at pp. 851-854.)  The question before the court was not whether another 
state‟s overtime law applied, but whether the plaintiff would be paid overtime 
under Washington law, or not at all.  Bostain says nothing about a case such as 
this, in which nonresident employees seek to apply the overtime law of the state in 
which they worked and in which the employer is based, and the employer seeks to 
avoid that law by applying the less favorable law of plaintiffs‟ home states.  Such 
disputes are resolved under the applicable conflict of laws analysis, which we 
address below.  (See post, at p. 12 et seq.)   
Speaking further to the issue of statutory construction, Oracle contends the 
Legislature would not likely have intended that California‟s wage law apply to 
visiting, nonresident employees if compliance imposed practical burdens on 
employers.  Such burdens, Oracle suggests, might arise not just from the effort and 
expense of complying with the overtime law, but from complying as well with 
other provisions of California wage law governing such matters as the contents of 
pay stubs, meal periods, the compensability of travel time, the accrual and 
forfeiture of vacation time, and the timing of payment to employees who quit or 
are discharged.  Because the laws on these subjects vary from state to state, Oracle 
argues, to require an employer to comply with the laws of every state in which its 
employees work might amount to an undue burden on interstate commerce and, 
thus, violate the commerce clause.  (U.S. Const., art. I, § 8, cl. 3.)  Oracle 
analogizes the situation to that of a trucking company required to comply with the 
conflicting laws of various states governing such matters as trailer length and mud 
flaps.  (See generally, e.g., Raymond Motor Transportation, Inc. v. Rice (1978) 
434 U.S. 429; Bibb v. Navajo Freight Lines (1959) 359 U.S. 520.)  We should, 
Oracle contends, construe the overtime statutes to avoid any such constitutional 
problem.  We find the argument unpersuasive for several reasons:   
 
 
11 
First, the case before us presents no issue concerning the applicability of any 
provision of California wage law other than the provisions governing overtime 
compensation.  While we conclude the applicable conflict-of-laws analysis does 
require us to apply California‟s overtime law to full days and weeks of work 
performed here by nonresidents (see post, at p. 12), one cannot necessarily assume 
the same result would obtain for any other aspect of wage law.  California, as 
mentioned, has expressed a strong interest in governing overtime compensation 
for work performed in California.  In contrast, California‟s interest in the content 
of an out-of-state business‟s pay stubs, or the treatment of its employees‟ vacation 
time, for example, may or may not be sufficient to justify choosing California law 
over the conflicting law of the employer‟s home state.  No such question is before 
us.   
Second, the asserted burdens on out-of-state businesses to which Oracle 
refers are entirely conjectural.  The stipulated facts contain nothing supporting 
Oracle‟s assertions, and no out-of-state employer is a party to this litigation; 
Oracle itself is based in California.   
Third, the Ninth Circuit has not asked us to address, nor do we address, any 
question concerning the commerce clause.  (U.S. Const., art. I, § 8, cl. 3.)  This 
does not mean, of course, that in reaching our decision we would ignore any 
constitutional ramifications.  Certainly we would not construe a statute in a 
manner that raised serious constitutional questions if the statute‟s language 
reasonably permitted any other construction.  (See People v. Engram (2010) 50 
Cal.4th 1131, 1161.)  Oracle, however, has raised no constitutional question of 
sufficient gravity to require us to undertake the exercise of determining whether 
California‟s overtime statutes might bear a restrictive, nonliteral interpretation.  
Challenges to state statutes under the commerce clause are typically addressed 
under the test set out in Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142:  
 
 
12 
“Where [a challenged] statute regulates even-handedly to effectuate a legitimate 
local public interest, and its effects on interstate commerce are only incidental, it 
will be upheld unless the burden imposed on such commerce is clearly excessive 
in relation to the putative local benefits.”  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.  (See Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.)  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.  (See ante, at p. 10.)  In any 
event, to the extent other states have legitimate interests in applying their own 
wage laws to their own residents for work performed in California, the applicable 
conflict-of-laws analysis takes those interests into account.  We turn to that 
analysis now.   
2. Conflict of Laws.   
Plaintiffs, as mentioned, contend California‟s overtime law governs their 
work in this state, while Oracle contends the laws of plaintiffs‟ home states 
(Colorado and Arizona) govern.  For over four decades, California courts have 
resolved such conflicts by applying governmental interest analysis.  (See, e.g., 
McCann v. Foster Wheeler LLC (2010) 48 Cal.4th 68, 83, 87-88; Kearney v. 
Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95, 100 (Kearney); Offshore Rental 
Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 163-170; Bernhard v. Harrah’s 
 
 
13 
Club (1976) 16 Cal.3d 313, 320-321; Reich v. Purcell (1967) 67 Cal.2d 551, 554-
556.)  Section 196 of the Restatement Second of Conflict of Laws, which Oracle 
suggests might also be relevant, has nothing to do with this case.  Section 196 
identifies the state whose law governs the validity of an employment contract.  
The right to overtime under California law is unaffected by contract.  (See Lab. 
Code, § 1194, subd. (a) [“Notwithstanding any agreement to work for a lesser 
wage, any employee receiving less than . . . the legal overtime compensation . . . is 
entitled to recover . . . the unpaid balance . . . .” (italics added); see also Gentry v. 
Superior Court, supra, 42 Cal.4th 443, 456 [statutory right to overtime 
compensation is unwaivable].)   
We typically summarize governmental interest analysis as involving three 
steps:  “First, the court determines whether the relevant law of each of the 
potentially affected jurisdictions with regard to the particular issue in question is 
the same or different.  Second, if there is a difference, the court examines each 
jurisdiction‟s interest in the application of its own law under the circumstances of 
the particular case to determine whether a true conflict exists.  Third, if the court 
finds that there is a true conflict, it carefully evaluates and compares the nature 
and strength of the interest of each jurisdiction in the application of its own law „to 
determine which state‟s interest would be more impaired if its policy were 
subordinated to the policy of the other state‟ [citation], and then ultimately applies 
„the law of the state whose interest would be the more impaired if its law were not 
applied.‟ ”  (Kearney, supra, 39 Cal.4th 95, 107-108, quoting Bernhard v. 
Harrah’s Club, supra,16 Cal.3d 313, 320.)   
a. Do the relevant laws differ? 
We determine, first, “whether the relevant law of each of the potentially 
affected jurisdictions with regard to the particular issue in question is the same or 
 
 
14 
different.”  (Kearney, supra, 39 Cal.4th 95, 107.)  California‟s overtime law 
clearly differs from that of Colorado and Arizona, plaintiffs‟ home states.  
California law requires overtime compensation at the rate of one and one-half 
times the regular rate of pay for work in excess of eight hours in one workday, 40 
hours in one workweek, and the first eight hours on the seventh workday in one 
week.  Overtime compensation increases to twice the regular rate for work in 
excess of eight hours on the seventh workday.  (Lab. Code, § 510, subd. (a).)  In 
contrast, Colorado requires pay at one and one-half times the regular rate for work 
in excess of 40 hours in one workweek, 12 hours in one workday, and 12 
consecutive hours without regard to when the workday starts and ends.  (7 Colo. 
Code Regs. § 1103-1(4) (2011).)  Arizona has no overtime law, so the federal 
FLSA applies by default, requiring overtime compensation at one and one-half 
times the regular rate for hours worked in excess of 40 hours in one workweek.  
(29 U.S.C. § 207(a)(2)(C).)  Unlike California law, neither Colorado law nor the 
FLSA requires double pay for any work.6   
b. Does a true conflict exist? 
Because the relevant laws differ, we next “examine[] each jurisdiction‟s 
interest in the application of its own law under the circumstances of the particular 
case to determine whether a true conflict exists.”  (Kearney, supra, 39 Cal.4th 95, 
107-108.)  In conducting this inquiry, “we may make our own determination of 
[the relevant] policies and interests, without taking „evidence‟ as such on the 
                                              
6  
Differences also exist in the way California law, Colorado law and the 
FLSA determine whether an employee is exempt from the requirement of 
overtime compensation.  These additional differences do not, however, affect our 
analysis or conclusion.   
 
 
15 
matter.”  (Offshore Rental Company, Inc. v. Continental Oil Co., supra, 22 Cal.3d 
157, 163, fn. 5.)   
Whether a true conflict exists under the circumstances of this case is 
doubtful, at best.  California has, and has unambiguously asserted, a strong interest 
in applying its overtime law to all nonexempt workers, and all work performed, 
within its borders.  (See Lab. Code, § 1171.5, subd. (a) [“All protections, rights, 
and remedies available under state law . . . are available to all individuals . . . 
employed, in this state.”]; see also id., §§ 510, subd. (a) [“[a]ny work”], 1194, 
subd. (a) [“any employee”], 1199 [criminal sanctions]; see also discussion ante, at 
p. 6 et seq.)  California‟s interests, as this court has identified them, are in 
protecting health and safety, expanding the labor market, and preventing the evils 
associated with overwork.  (Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.)  
Similar interests underlie the FLSA‟s overtime provisions (Barrentine v. 
Arkansas-Best Freight System (1981) 450 U.S. 728, 739) and, we may assume, 
Colorado law as well.  Neither Arizona nor Colorado, however, has asserted an 
interest in regulating overtime work performed in other states.  Arizona, as 
mentioned, has no overtime law at all, and Colorado‟s overtime law purports to 
govern only “work performed within the boundaries of the state of Colorado . . .” 
(7 Colo. Code Regs. § 1103-1(1) (2011)).  These circumstances reveal no genuine 
basis for concluding a true conflict exists.   
Arguing against this conclusion, Oracle points out that Colorado‟s and 
Arizona‟s workers’ compensation statutes, like California‟s, expressly have 
extraterritorial effect for certain resident employees who suffer industrial injuries 
outside their home states.  (See Colo. Rev. Stat. § 8-41-204 [discussed in 
Hathaway Lighting v. Indus. Claim App. Off. (Colo.Ct.App. 2006) 143 P.3d 1187, 
1189]; Ariz. Rev. Stat. § 23-904.A [discussed in DiMuro v. Industrial Com’n of 
Arizona (Ariz.Ct.App. 1984) 688 P.2d 703, 707]; cf. Lab. Code, § 3600.5, 
 
 
16 
subd. (a).)  Broadly extrapolating from these statutes, Oracle argues that Colorado 
and Arizona have an interest in extending the protection of their employment laws 
to their residents who work in other states.  Certainly a state has such an interest, 
at least in the abstract, when the traveling, resident employee of a domestic 
employer would otherwise be left without the protection of another state‟s law.  
(Cf. Tidewater, supra, 14 Cal.4th 557 [California overtime law protects residents 
working offshore within California‟s state law boundaries]; Bostain v. Food Exp., 
Inc., supra, 153 P.3d 846 [Washington overtime law protects resident interstate 
truck driver; no other state‟s law claimed to apply].)  But the statutes on which 
Oracle relies speak narrowly to the subject of workers‟ compensation.  
Accordingly, those statutes for present purposes show only that Colorado and 
Arizona know how to assert an interest in applying their laws extraterritorially, 
and thus highlight the same states‟ failure to assert any extraterritorial interests 
with respect to overtime compensation.  In any event, Colorado and Arizona have 
expressed no interest in disabling their residents from receiving the full protection 
of California overtime law when working here, or in requiring their residents to 
work side-by-side with California residents in California for lower pay.  (Cf. 
Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, 822 [as a matter of due 
process, a state “ „may not abrogate the rights of parties beyond its borders having 
no relation to anything done or to be done within them‟ ”].)   
Oracle next posits that Colorado and Arizona have an interest in providing 
hospitable regulatory environments for their own businesses and, based on that 
premise, argues those states also have an interest in shielding their own businesses 
from more costly and burdensome regulatory environments in other states.  We do 
not doubt the premise that a state can properly choose to create a business-friendly 
environment within its own boundaries.  “[T]he federal system contemplates that 
individual states may adopt distinct policies to protect their own residents and 
 
 
17 
generally may apply those policies to businesses that choose to conduct business 
within that state.”  (Kearney, supra, 39 Cal.4th 95, 105.)  However, every state 
enjoys the same power in this respect.  Therefore, “[i]t follows from this basic 
characteristic of our federal system that, at least as a general matter, a company 
that conducts business in numerous states ordinarily is required to make itself 
aware of and comply with the law of a state in which it chooses to do business.”  
(Ibid.)  The federal Constitution does not require a state “ „to substitute for its own 
[laws], applicable to persons and events within it, the conflicting statute of another 
state‟ ” (Phillips Petroleum v. Shutts, supra, 472 U.S. 797, 822 [discussing the full 
faith and credit and due process clauses (U.S. Const., art.  IV, § 1 & 14th 
Amend.)]) or permit one state to project its regulatory regime into the jurisdiction 
of another state (Healy v. The Beer Institute (1989) 491 U.S. 342, 336-337 
[discussing the commerce clause (U.S. Const., art. I, § 8, cl. 3)]).  Consequently, 
neither Colorado nor Arizona has a legitimate interest in shielding Oracle from the 
requirements of California wage law as to work performed here.   
c. Which state’s interest would be more impaired? 
The final step in governmental interest analysis requires us “ „to determine 
which state‟s interest would be more impaired if its policy were subordinated to 
the policy of the other state‟ ” and to apply “ „the law of the state whose interest 
would be the more impaired if its law were not applied.‟ ”  (Kearney, supra, 39 
Cal.4th 95, 108, quoting Bernard v. Harrah’s Club, supra, 16 Cal.3d 313, 320.)  
Assuming for the sake of argument a genuine conflict does exist (see ante, at 
p. 15), to subordinate California‟s interests to those of Colorado and Arizona 
unquestionably would bring about the greater impairment.  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 
 
 
18 
protecting health and safety and preventing the evils associated with overwork.  
(Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.)  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.  (Ibid.)  By way of 
comparison, not to apply the overtime laws of Colorado and Arizona would 
impact those states‟ interests negligibly, or not at all.  Colorado overtime law 
expressly does not apply outside the state‟s boundaries, and Arizona has no 
overtime law.  (See ante, at p. 14.)  Alternatively, viewing Colorado‟s and 
Arizona‟s overtime regimens as expressions of a general interest in providing 
hospitable regulatory environments to businesses within their own boundaries, that 
interest is not perceptibly impaired by requiring a California employer to comply 
with California overtime law for work performed here.   
For these reasons, we answer the first of the certified questions as follows:  
The California Labor Code does 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.  (See Sullivan III, supra, 557 F.3d 979, 
983.)   
B. Does the UCL Apply to Violations of the Labor Code in California?   
With the second certified question, the Ninth Circuit asks us in effect to 
decide whether Oracle‟s alleged violations of the overtime provisions of California 
law (Lab. Code, §§ 510, 1194) constitute unlawful acts potentially triggering 
liability under the UCL (Bus. & Prof. Code, § 17200 et seq.).  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” (Bus. & Prof. 
 
 
19 
Code, § 17200; see Cortez v. Purolator Air Filtration Products Co. (2000) 23 
Cal.4th 163, 177 [UCL authorizes, as restitution, order for payment of unlawfully 
withheld wages]), and the parties offer no argument on the point.   
Accordingly, we answer the second certified question as follows:  Business 
and Professions Code section 17200 does apply to the overtime work described in 
question one.  (See Sullivan III, supra, 557 F.3d 979, 983.)   
C. Does the UCL Apply to Claims Under the FLSA for Overtime Work 
Performed by Nonresidents in Other States? 
Our discussion thus far has exclusively concerned Oracle‟s alleged failure to 
compensate plaintiffs according to California law for overtime worked in this 
state.  We turn now to the third certified question, which concerns plaintiffs‟ claim 
that Oracle has also failed to compensate them according to the FLSA (29 U.S.C. 
§ 207(a)) for overtime worked in other states.7  This claim, despite its reference to 
the FLSA, arises under California and not federal law.  In the prior class action 
(see ante, at p. 2), plaintiffs settled their timely claims under the FLSA, which 
were subject to a limitation period of two or three years, depending on the 
circumstances.  (29 U.S.C. § 255(a).)  Now, in this action, plaintiffs attempt to 
restate time-barred FLSA claims, which were excluded from the prior settlement, 
as UCL claims based on the predicate “unlawful . . . act” (Bus. & Prof. Code, 
§ 17200) of violating the FLSA.8  (See Korea Supply Co. v. Lockheed Martin 
                                              
7  
Plaintiffs do not specifically identify the states in which they performed the 
overtime work relevant to this claim.  As noted, plaintiffs worked in several states 
other than California and their home states.  (See ante, at p. 2 & fn. 2.)   
8  
Plaintiffs candidly explained at oral argument in the Ninth Circuit that their 
reason for suing under the UCL is to obtain recovery for a year the FLSA no 
longer reaches by invoking the UCL‟s four-year statute of limitations.  (Bus. & 
Prof. Code, § 17208.)   
 
 
20 
Corp. (2003) 29 Cal.4th 1134, 1143 [UCL borrows violations from other laws, 
making them independently actionable as unfair practices].)  The question before 
us is whether the UCL reaches plaintiffs‟ FLSA claims under the circumstances of 
this case.  We conclude it does not.   
Plaintiffs‟ claim implicates the so-called presumption against extraterritorial 
application.9  (See generally Diamond Multimedia Systems, Inc. v. Superior Court 
(1999) 19 Cal.4th 1036, 1059.)  However far the Legislature‟s power may 
theoretically extend, we presume the Legislature did not intend a statute to be 
“ „operative, with respect to occurrences outside the state, . . . unless such 
intention is clearly expressed or reasonably to be inferred “from the language of 
the act or from its purpose, subject matter or history.” ‟ ”  (Ibid., quoting North 
Alaska Salmon Co. v. Pillsbury (1916) 174 Cal. 1, 4.)  Neither the language of the 
UCL nor its legislative history provides any basis for concluding the Legislature 
intended the UCL to operate extraterritorially.  Accordingly, the presumption 
against extraterritoriality applies to the UCL in full force.  (See, e.g., Norwest 
Mortgage, Inc. v. Superior Court (1999) 72 Cal.App.4th 214, 222-225.)  We thus 
proceed to consider whether plaintiffs‟ proposed application of the UCL would 
cause it to operate, impermissibly, with respect to occurrences outside the state.   
The Ninth Circuit has asked us to decide whether the UCL applies to 
plaintiffs‟ FLSA claims “in the circumstances of this case” (Sullivan III, supra, 
557 F.3d 979, 983), which we understand to mean in accordance with the same 
                                              
9  
Plaintiffs‟ claim also potentially implicates the due process clause of the 
United States Constitution (14th Amend.), which places additional limitations on 
the extraterritorial application of state law.  (See, e.g., Phillips Petroleum Co. v. 
Shutts, supra, 472 U.S. 797, 818.)  We need not address any such constitutional 
issue, however, given our conclusion that the UCL does not apply.   
 
 
21 
stipulated facts on which the federal courts have based their decisions.  Those 
stipulated facts identify only a single instance of relevant conduct occurring in 
California:  “The decision-making process to classify Instructors as exempt from 
the requirement to be paid overtime wages under the FLSA occurred primarily 
from within the headquarters offices of Oracle Corporation located in Redwood 
Shores, California.”  Certainly the UCL reaches any unlawful business act or 
practice committed in California.  (See Bus. & Prof. Code, § 17200 [“As used in 
this chapter, unfair competition shall mean and include any unlawful, unfair or 
fraudulent business act or practice . . . .”].)  But for an employer to adopt an 
erroneous classification policy is not unlawful in the abstract.  (Cf. Walsh v. IKON 
Office Solutions, Inc.  (2007) 148 Cal.App.4th 1440, 1462 [addressing California 
wage law].)  What is unlawful, and what creates liability under the FLSA, is the 
failure to pay overtime when due.  (See 29 U.S.C. § 207(a)(1) [“no employer shall 
employ any of his employees . . . for a workweek longer than forty hours unless 
such employee receives [overtime] compensation”].)  Accordingly, that Oracle‟s 
decision to classify its Instructors as exempt was made in California does not, 
standing alone, justify applying the UCL to the nonresident plaintiffs‟ FLSA 
claims for overtime worked in other states.10  Nor does any other basis for 
applying the UCL to those claims appear in the stipulated facts.   
                                              
10  
The decisions on which plaintiffs rely in arguing to the contrary, Wershba 
v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, and Clothesrigger, Inc. v. 
GTE Corp. (1987) 191 Cal.App.3d 605, are inapposite.  In each case, the unlawful 
conduct that formed the basis of the out-of-state plaintiffs‟ claims (i.e., fraudulent 
misrepresentations made to induce consumer transactions), and that justified the 
application of California law to resolve those claims, occurred in California.  (See 
Wershba v. Apple Computer, Inc., supra, at pp. 241-242; Clothesrigger, Inc. v. 
GTE Corp., supra, at p. 613.)   
 
 
22 
In contrast to the abstract classification decision, the failure to pay legally 
required overtime compensation certainly is an unlawful business act or practice 
for purposes of the UCL.  (Bus. & Prof. Code, § 17200; see Cortez v. Purolator 
Air Filtration Products Co., supra, 23 Cal.4th 163, 177 [UCL authorizes, as 
restitution, order for payment of unlawfully withheld wages].)  Thus, the UCL 
might conceivably apply to plaintiffs‟ claims if their wages were paid (or 
underpaid) in California, but the stipulated facts do not speak to the location of 
payment.  The parties invite us to speculate about the place of payment as a basis 
for holding the UCL does, or does not, apply.  We decline to do so.  Whether the 
parties are entitled to rely on facts or assertions beyond the stipulated facts to 
support or defeat the motion for summary judgment is a question of federal 
procedure for the federal courts.  Given the limitations of the certified question 
procedure, which does not confer on us plenary jurisdiction over cases pending in 
the courts of other sovereign entities, our answer must be confined to the 
circumstances of this case as established by the stipulated facts.   
 
 
23 
 
Accordingly, we answer the third certified question as follows:   Business 
and Professions Code section 17200 does not apply to overtime work performed 
outside California for a California-based employer by out-of-state plaintiffs in the 
circumstances of this case based solely on the employer‟s failure to comply with 
the overtime provisions of the FLSA.   
 
 
 
 
 
 
 
WERDEGAR, J. 
WE CONCUR: 
CANTIL-SAKAUYE, C.J. 
KENNARD, J. 
BAXTER, J. 
CHIN, J. 
CORRIGAN, J. 
BOREN, J.*
                                              
*  
Presiding Justice of the Court of Appeal, Second Appellate District, 
Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the 
California Constitution. 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Sullivan v. Oracle Corporation 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding XXX on request pursuant to rule 8.548, Cal. Rules of Court 
Review Granted 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S170577 
Date Filed: June 30, 2011 
__________________________________________________________________________________ 
 
Court: 
County: 
Judge: 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Callahan, Thompson, Sherman & Caudill, Robert W. Thompson and Charles S. Russell for Plaintiffs and 
Appellants. 
 
Law Offices of Jeffrey K. Winikow and Jeffrey K. Winikow for California Employment Lawyers 
Association as Amicus Curiae on behalf of Plaintiffs and Appellants. 
 
Paul, Hastings, Janofsky & Walker, Paul W. Cane, Jr., and Stephen L. Berry for Defendants and 
Respondents. 
 
Steinbrecher & Span, Robert S. Span and Alan K. Steinbrecher for Air Transport Association of America, 
Inc., California Hotel & Lodging Association and California Restaurant Association as Amici Curiae on 
behalf of Defendants and Respondents. 
 
Mitchell Silberberg & Knupp, Lawrence A. Michaels and Adam Levin for Employers Group as Amicus 
Curiae on behalf of Defendants and Respondents. 
 
Gibson Dunn & Crutcher, Pamela L. Hemminger, Gail E. Lees, Elisabeth C. Watson and Christopher 
Chorba for California Employment Law Council as Amici Curiae on behalf of Defendants and 
Respondents. 
 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
Charles S. Russell 
Callahan, Thompson, Sherman & Caudill 
2601 Main Street, Suite 800 
Irvine, CA  92614 
(949) 261-2872 
 
Paul W. Cane, Jr. 
Paul, Hastings, Janofsky & Walker 
55 Second Street, 24th Floor 
San Francisco, CA  94105-3441 
(415) 856-7000