Reporting from San Francisco — Residents of other states who work for California companies are protected by the state's overtime laws during business trips here, the California Supreme Court decided unanimously Thursday.
Employment lawyers predicted that the ruling would reduce business travel to the state and trigger hundreds of lawsuits against California companies in the coming days. Firms now typically pay employees in accordance with the labor laws of the states in which they live.
The court said the ruling would protect Californians from being replaced by less-expensive temporary workers from out of state.
"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," Justice Kathryn Mickle Werdegar wrote for the state high court.
The ruling came in a case brought against Oracle Corp., a California software company, by employees who live in Arizona and Colorado and wanted to benefit from California's generous overtime law during business trips. Oracle is headquartered in Redwood Shores, about 20 miles southeast of San Francisco.
California law says nonexempt employees who work more than eight hours a day or 40 hours a week are entitled to overtime at a rate of 1 1/2 times their normal pay. Overtime pay rises to double the regular rate for work in excess of eight hours on the seventh workday.
Arizona has no overtime law, and Colorado's law does not extend beyond state borders.
"Previously most employers in California believed that a non-California resident was not subject to California employment laws, even if that person came into the state for a brief period of time," said Robert S. Span, a lawyer who represented the airline, hotel and restaurant industries in the case. Those industries were involved to support Oracle.
California employers may now have to revamp payroll and tracking systems to ensure that visiting employees are paid according to California law, Span said. "And if you extend California law in the overtime area, will you also be extending other California labor laws to employees who live out of state?"
Charles S. Russell, who represented the workers in the case, said the ruling probably would extend only to minimum-wage law and other requirements considered to be matters of health and safety.
He said the case against Oracle involved claims that could cost the corporation tens of millions of dollars.
Russell described the decision as a victory against outsourcing. Companies may no longer skirt wage laws by bringing in temporary workers from other places, he said.
"This is a win for California employees because they are not going to have to compete unfairly with temporary workers brought into the state and also a win for temporary employees because they are going to be paid the same overtime wages California employees would be paid," Russell said.
An attorney for Oracle referred reporters to a company spokeswoman, who declined to comment on the decision.
The case, filed as a class action, was brought by employees who worked for Oracle all around the country and spent 20 to 110 days in California over three years.
"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," Justice Werdegar wrote for the court.
She said that nothing in the language of state overtime laws implied that they applied only to residents.
Laura Maechtlen, an employment lawyer, said the decision would greatly expand the use of California's wage law.
"Employers subject to the decision could face a slew of additional claims by nonresident employees claiming that they were improperly classified as exempt and/or owed overtime for work performed in California," said Maechtlen, whose San Francisco-based practice is focused on employment litigation and includes the defense of wage and hour class and collective actions.
"Plaintiffs will undoubtedly push the envelope of this ruling in the class-action context," she said.
Los Angeles employment lawyer Anthony J. Oncidi said the ruling would trigger more litigation.
"The court has extended California's unique pro-employee overtime rules to workers who do not even live here," Oncidi said. "This will only result in more lawsuits against California employers — and fewer unemployed lawyers."