California Labor Code Applies to Employees Temporarily in California

Posted: Thursday, November 13, 2008

By: David M. Kight

Topic: Non-Compete Cases

In an opinion sure to send ripples through the corporate world, the Ninth Circuit Court of Appeals ruled recently that the California Labor Code applies to workers who only briefly or temporarily work in California.  The case, Sullivan v. Oracle Corp., No. 06-56649, 2008 WL 4811911 (9th Cir. Nov. 6, 2008), began as a wage and hour - overtime lawsuit by three former Oracle employees.  The employees were residents of Colorado and Arizona, and worked for Oracle on assignments in California.  The California Labor Code requires, among other things, that overtime be paid for work in excess of 8 hours in a day and for work in excess of 40 hours in a week.  There is no tip credit, no fluctuating work week and the exemptions in California do not necessarily follow the exemptions under the Fair Labor Standards Act.

The employees sought the application of California Labor Code to a day's work when worked in California and to a week's work when the week was worked in California.  The employer argued that the wage and hour laws applicable in the states in which the employees were residents applied.

The Court of Appeals rejected the employer's argument and found, apparently in a case of first impression, that the entire Labor Code applies to non-resident employees working in California.  Thus, employers who do not operate in California, but occasionally send employees to California will have an entirely new set of wage and hour laws to contend with.  Though not explicitly stated by the Court, but certainly implied is the application of the anti-non-compete provisions of the California Labor Code to non-resident employees.  A non-resident of California who works in California for even a single day for the company may now have their non-compete voided under California's Labor Code.  Though this issue is certain to be litigated going forward, employers should certainly give strong consideration to whether or not it will have employees work in California even on a temporary basis.  If the employer does have non-residents work in California it will need to take exceeding care in ensuring compliance with the California Labor Code or risk litigation.