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Business travel to California just got a lot more expensive

July 1, 2011

The California Supreme Court held yesterday that employees who perform work in California get paid overtime under California labor law, even if it’s not the employee’s primary workplace.  From now on, any non-exempt employee spending a day or more in California for work needs to be paid overtime pursuant to California’s overtime rules.

The case is Sullivan v. Oracle Corp., and can be found here.  Oracle employed residents of Arizona and Colorado to train Oracle customers on Oracle’s software.  The instructors traveled frequently for work, and spent time in many states other than their home state — including California.  The instructors were non-exempt employees, and Oracle paid them overtime pursuant to the laws of their home states, regardless of where the work was done.

California’s overtime laws are, of course, more favorable for employees than Arizona’s or Colorado’s — and virtually every other state’s, for that matter.  (In fact, as the court noted, Arizona doesn’t even have an overtime law.)  The primary differences — California requires overtime pay at time-and-a-half for work in excess of 8 hours in one day; requires overtime pay for the first 8 hours of a seventh consecutive day of work, and requires  super-premium pay (doubletime) for employees working more than 12 hours in one day or more than 8 hours on the seventh day.  So, not surprisingly, the instructors sued Oracle for overtime pay under California’s scheme, for the work the employees did in California.

The Supreme Court held that work done in California had to be paid under California’s rules.  The court’s reasoning, while interesting to legal geeks like me, is less important than the practical impact this decision will have on employers who send non-residents to California for work.  There are substantial administrative difficulties involved in ensuring that a trip to California (or, presumably, anywhere else with more favorable OT rules, but we’ll let the other states address that) is properly accounted for and compensated differently.  ADP’s programmers are pulling out their hair this morning.

There’s also significant historical exposure for any employer in Oracle’s situation.  Nothing in the decision says it should apply prospectively only; the general rule is new cases apply retroactively.  The look-back period for wage violations is three years, and was effectively extended to four by the Sullivan court’s conclusion that the overtime violations also violated California’s unfair competition law.  Look for the next wave of wage and hour class actions to involve traveling workers like the Oracle instructors involved in this case.  Employers of any substantial size should consider conducting an internal review to gauge their exposure.

For the moment, the Sullivan decision applies only to overtime — and not to the myriad other workplace regulations covered in California’s wage and hour orders.  (Meal and rest breaks, anyone? Maybe you should sit down.)  And, while the Sullivan court hinted that the situation would stay that way, it’s going to have to be fought out in future cases — cases in which you might be involved.

So employers, you have been warned.  It’s time to get to work.  Hire a consultant or lawyer to help you identify which states you send your employees to have tougher OT laws than the workers’ home states.  Change those payroll procedures to properly account for out-of-state travel.  And as if business travel wasn’t expensive enough, you need to train managers to recognize the extra expense involved in sending that employee physically to California.  Video conferencing is suddenly looking better and better.

Or, perhaps best yet, just stop sending your non-exempt folks here.  If you listen closely, you can hear the convention bureaus howling….

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From → Wage and hour

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