Opinion ID: 3053944
Heading Depth: 4
Heading Rank: 1

Heading: Application of California’s Labor Code to Work

Text: Performed in California by Residents of Colorado and Arizona [1] The California Labor Code provides that overtime must be paid for work in excess of eight hours in any one day, and for work in excess of forty hours in any one week. Plaintiffs seek to apply the Labor Code to a day’s work when that work was performed entirely in California, and to a week’s work when that work was performed entirely in California. They do not seek to apply the Labor Code to a day’s or week’s work when only part of that day’s or week’s work was performed in California. Oracle contends that the overtime provisions of Colorado law should apply to work performed in California by the two Colorado residents, Plaintiffs Sullivan and Evich. It contends that the overtime provisions of the FLSA should apply to work performed in California by the Arizona resident, Plaintiff Burkow. (Arizona has no overtime law of its own.) [2] In determining what state law to apply, a federal court applies the choice-of-law rules of the state in which it sits. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In this case, we therefore look to the choice-of-law rules of California. For the reasons that follow, we conclude that a California court, applying California choice-of-law rules, would apply California’s Labor Code to Plaintiffs’ suit. SULLIVAN v. ORACLE CORP. 15267 In California (as in every other American jurisdiction) a court begins with the presumption that the applicable substantive rule is drawn from its own forum law. A California court will consider whether its substantive law should be displaced by the substantive law of another state or country if the party seeking the application of non-California law is able to “demonstrate that the latter rule of decision will further the interest of the foreign state and therefore it is an appropriate one for the forum to apply to the case before it.” Wash. Mut. Bank v. Superior Court, 15 P.3d 1071, 1080 (Cal. 2001) (citations and internal quotation marks omitted). When such a demonstration is made, it becomes the court’s obligation to assess the competing substantive rules of law and apply the one which, as it bears upon the issue before the court, the court determines to be the more appropriate of the two. Under California choice-of-law rules, the analysis proceeds in three steps. First, the court must determine whether the California law and the potentially applicable law of another state are “materially” different. Id. As part of resolving this initial question, the court must determine whether each state’s overtime provisions are intended to cover Plaintiffs’ situations. If one state has overtime provisions that would apply to the pertinent situation and another state does not, then the applicable law in each state is materially different. Kearney v. Salomon Smith Barney, Inc., 137 P.3d 914, 928 (Cal. 2006). Second, if the laws are materially different, the court must determine “what interest, if any, each state has in having its own law applied to the case.” Wash. Mut. Bank, 15 P.3d at 1080. Even if there are materially different laws, “there is still no problem in choosing the applicable rule of law where only one of the states has an interest in having its law applied.” Id. at 1081. Third, if the laws are materially different and if each state has an interest in having its own law applied, the court must “take the final step and select the law of the state whose interests would be ‘more impaired’ if its law were not applied.” Id. 15268 SULLIVAN v. ORACLE CORP.
There are three potentially applicable laws. For Plaintiffs Sullivan and Evich, they are California and Colorado law. For Plaintiff Burkow, they are California and Arizona law. We must compare the substantive provisions of California law with the substantive provisions of Colorado law and Arizona law, and must then consider whether each of the laws was intended to apply to Plaintiffs’ claim. [3] We begin with California’s overtime law. The California Labor Code provides: Eight hours of labor constitutes a day’s work. 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. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee. Cal. Lab. Code § 510(a). To summarize, this provision requires overtime pay of one and one-half times regular pay beyond 8 hours worked in any single day, 40 hours in one week, and the first 8 hours of work on the seventh day worked of any one workweek. Additionally, it requires double pay for hours worked beyond 12 in a day or 8 hours on the seventh day of any one workweek. [4] Contrary to Oracle’s assertions, the California Labor Code is clearly intended to apply to work done in California by nonresidents. The California Supreme Court has concluded SULLIVAN v. ORACLE CORP. 15269 that California’s employment laws govern all work performed within the state, regardless of the residence or domicile of the worker. In Tidewater Marine Western, Inc. v. Bradshaw, 927 P.2d 296, 301 (Cal. 1996), the Court wrote, “Like the criminal laws . . . , California employment laws implicitly extend to employment occurring within California’s state law boundaries[.]” Oracle relies on two cases to argue that the Labor Code should not be construed to extend to Plaintiffs’ work in California. We find Oracle’s arguments unconvincing. First, Oracle quotes a sentence from Tidewater Marine. The Court wrote, “If an employee resides in California, receives pay in California, and works exclusively, or principally, in California, then that employee is a ‘wage earner in California’ and presumptively enjoys the protection of . . . regulations [promulgated under the Labor Code].” Id. at 309. Oracle asks us to read into this sentence a negative inference that a nonresident is not a “wage earner” within the meaning of the Labor Code. But the status of a non-resident was not the issue in Tidewater Marine. Rather, the issue was whether California residents working outside California were covered by the Labor Code. The Court answered that they were covered. To the degree that any inference can be drawn from Tidewater Marine, it is the opposite from that drawn by Oracle. Two sentences before the sentence quoted by Oracle, the Court speculated that the legislature “may not have intended” the Labor Code to apply to “out-of-state businesses employing nonresidents, though the nonresident employees enter California temporarily during the course of the workday.” Id. (emphasis added). If the Court described an out-of-state employer’s employees coming into California temporarily during the course of a workday as the marginal case for Labor Code coverage, there is an inference that an in-state employer’s employees coming into California for entire workdays and workweeks is not a marginal case. That is, there is an inference that such a case comes within the Code’s coverage. 15270 SULLIVAN v. ORACLE CORP. Second, Oracle relies on Campbell v. Arco Marine, Inc., 50 Cal. Rptr. 2d 626 (Ct. App. 1996). In Campbell, Plaintiff had sued her California-based employer for sexual harassment in violation of California’s Fair Employment and Housing Act (“FEHA”). The Court of Appeal dismissed her complaint as not covered by FEHA. Oracle describes the Court as having held “that the action must be dismissed because the plaintiff was not a resident of California and worked in California only on a limited basis.” That is not a fair description of the Court’s holding. The actual words of the Court of Appeal were: “We hold that the FEHA was not intended to apply to non-residents where, as here, the tortious conduct took place out of this state’s territorial boundaries.” Id. at 628 (emphasis added). Even if we assume that the coverage of FEHA is congruent with the coverage of the Labor Code, Campbell does not support Oracle’s argument. In our case, unlike in Campbell, the allegedly wrongful conduct took place inside rather than outside California. [5] We next consider Colorado and Arizona law. The relevant Colorado minimum wage regulation provides: Overtime Rate: employees shall be paid time and one-half of the regular rate of pay for any work in excess of: (1) forty (40) hours per workweek; (2) twelve (12) hours per workday, or (3) twelve (12) consecutive hours without regard to the starting and ending time of the workday (excluding duty free meal periods), whichever calculation results in the greater payment of wages. Hours worked in two or more workweeks shall not be averaged for computa- tion of overtime. Performance of work in two or more positions at different pay rates for the same employer shall be computed at the overtime rate based on the regular rate of pay for the position in which the overtime occurs, or at a weighted average of the rates for each position, as provided in the Fair Labor Standards Act. SULLIVAN v. ORACLE CORP. 15271 7 Colo. Code Regs. § 1103-1(4). Unlike California law, this provision only requires one and one-half regular pay when an employee works more than 12 hours in a day or more than 40 hours in a week. Also unlike California law, Colorado law does not impose a double-pay requirement, as California law does in some instances, nor does it require any overtime pay for work on the seventh consecutive day. [6] Arizona does not have its own state overtime law. The FLSA provides the only overtime requirements for employees in Arizona. See Industrial Commission of Arizona, Wage Payment Laws: Frequently Asked Questions, available at http:// www.ica.state.az.us/faqs/labor/wage_payment_laws.html#. [7] The district court concluded that the differences between California law and the laws of Colorado and Arizona are material, and we agree. We therefore proceed to the next step in the analysis.
[8] California has a clear interest in the economic welfare of its own residents who perform work in California, both in ensuring that they have work and that such work is fairly compensated. California also has an interest in the effect compensation for nonresidents working in California will have on the compensation for California residents. The Labor Code provides: It is the policy of this state to vigorously enforce minimum labor standards in order to ensure employees are not required or permitted to work under substandard unlawful conditions or for employers that have not secured the payment of compensation, and to protect employers who comply with the law from those who attempt to gain a competitive advantage at the expense of their workers by failing to comply with minimum labor standards. 15272 SULLIVAN v. ORACLE CORP. Cal. Lab. Code § 90.5(a). See also Lusardi Const. Co. v. Aubry, 824 P.2d 643, 648 (Cal. 1992) (describing California’s public policy interests in enforcing § 90.5(a) for all work performed within its boundaries). If a California employer may avoid the requirements of the state Labor Code by the simple expedient of hiring nonresidents, California residents will be substantially disadvantaged in the labor market by the cheaper labor that will thereby be made available to California employers. [9] We next compare California’s interest in applying its Labor Code to work performed by nonresidents in California with the interests of Colorado and Arizona in applying the terms of their minimum wage laws (or the absence thereof) to work performed by their residents in California. Colorado has expressed the same interests as California in the welfare of its workers. The Colorado minimum wage statute provides: The welfare of the State of Colorado demands that workers be protected from conditions of labor that have a pernicious effect on their health and morals. . . . The general assembly hereby finds and deter- mines that issues related to the wages of workers in Colorado have important ramifications for the labor force in this state. The general assembly, therefore, declares that the minimum wages of workers in this state are a matter of statewide concern. Colo. Rev. Stat. §§ 8-6-101(1) & (2). However, Colorado law provides no protection whatsoever to workers performing work outside Colorado. Id. § 1103.1(1) (providing that the Wage Order “regulates wages, hours, working conditions and procedures for certain employers and employees for work performed within the boundaries of the state of Colorado”). Thus, the interests expressed generally in Colorado’s minimum wage statute are not significant here, where the only work at issue was performed in California. SULLIVAN v. ORACLE CORP. 15273 However, Oracle argues that Colorado has a strong interest in the application of its overtime law (or lack thereof) to the Colorado plaintiffs in this case, contending that Colorado has expressed a general interest in the extraterritorial application of its wage laws. To support its argument, Oracle cites Hathaway Lighting, Inc. v. Industrial Claim Appeals Office, 143 P.3d 1187, 1190 (Colo. Ct. App. 2006), for the proposition that the Colorado Court of Appeals has affirmed the power of Colorado to control the terms of employment of Coloradans temporarily working outside Colorado because of “the state’s interest in the welfare and protection of its citizens.” However, that language in Hathaway Lighting indicated the court’s approval of the interests motivating the Colorado Workers’ Compensation Act, which has an explicit extraterritorial provision. Id. at 1189. Hathaway Lighting is of limited help in evaluating Colorado’s interests in the extraterritorial application of overtime regulations that are explicitly limited in their application to work performed within Colorado’s geographic boundaries. [10] As indicated above, Arizona has no state law regulating overtime work. Protection is provided to Arizona workers by the FLSA, which operates uniformly, as federal law, throughout the country. Arizona has thus expressed no interest in the wages paid to its residents except such interest as is expressed in the FLSA. [11] Nevertheless, we are willing to assume for the sake of argument that Colorado and Arizona do in fact have interests in the welfare of their residents when they work in other states, even if those states have never expressed this interest with respect to their overtime laws. However, we cannot discern how these interests would in any way conflict with the interest of California in applying its Labor Code to Colorado and Arizona residents performing work in California. To the degree that Colorado or Arizona would be interested in the economic welfare of its residents working in California, these states both have an interest in the application of California 15274 SULLIVAN v. ORACLE CORP. rather than Colorado or Arizona law, for California’s Labor Code is by any measure the most advantageous to the employee. We fail to see any interest Colorado or Arizona have in ensuring that their residents are paid less when working in California than California residents who perform the same work. [12] We therefore conclude that California has a strong interest in applying its Labor Code to the work performed by Plaintiffs in California. By contrast, we conclude that Colorado and Arizona have no interest in applying their minimum wage laws (or lack thereof) to Plaintiffs’ work in California.
Because we find that neither Colorado nor Arizona has an interest in applying its minimum wage laws to Plaintiffs’ employment in California, we do not reach the third step of the analysis under Washington Mutual.