California Supreme Court Applies California's Overtime Law to Nonresidents; Rejects Unfair Competition Law Claims Based on FLSA Violations Outside California

Article by John Nadolenco , Bronwyn F. Pollock , Donald M. Falk , Marcia E. Goodman and Jerome M. Jauffret

Originally published July 12, 2011

Keywords: California Supreme Court, overtime law, nonrisdents, unfair competition law, UCL, FLSA violations, California Labor Code

On June 30, 2011, the California Supreme Court issued its decision in Sullivan v. Oracle Corporation, No. S170577 (June 30, 2011), deciding three questions of state law that had been certified from the Ninth Circuit.

The Supreme Court held that California's overtime laws apply to work performed in the state for California-based employers by nonresident employees and that alleged violations of the overtime provisions of California law (Labor Code § 510) may serve as predicates for claims under California's Unfair Competition Law (Bus. & Prof. Code § 12700, et seq.) (UCL). The court did set geographic limits, however, holding that the UCL cannot extend to claims based on violations of the federal Fair Labor Standards Act (29 U.S.C. § 207(a)) (FLSA) that took place in other states, at least under the circumstances of Sullivan. Although the decision did not address the merits of the plaintiffs' claims, or the certifiability of the proposed class, the choice-of-law holdings are of significant interest to all companies whose non-California employees may work in California, and to all California companies defending against efforts by class-action lawyers to apply the UCL nationwide.

The Decision

Oracle, which is headquartered in California, had employees working in the position of "Instructor" in 20 states, including California. In 2003, Oracle's Instructors brought a class action in the federal court for the Central District of California alleging that their position had been misclassified as exempt and seeking overtime compensation under California law and the FLSA. Although most of the plaintiffs' claims were resolved in 2005 through a settlement of the class action, that settlement did not cover certain class claims of employees who were not California residents.

Three of those employees subsequently filed a separate action in the same district court to assert their outstanding claims. The plaintiffs in that new action were residents of Arizona and Colorado who worked mainly in their home states but were required by Oracle to travel to work in California and other states.

First, under the California Labor Code, plaintiffs sought to recover daily and weekly overtime...