California Supreme Court Says Cross-Border Work Not Always Subject to California Wage and Hour Law

By SHLC on July 22, 2020 in Legal Update
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Many employers, especially in states neighboring California (like Nevada), have long dealt with the problem of whether California wage and hour law applies to work performed by their employees, when those employees perform work both inside and outside of California during a single pay period. Recently, the California Supreme Court issued two companion opinions that have helped to answer this thorny question, at least with respect to certain specific wage and hour provisions of the California Labor Code.

Ward v. United Airlines, Inc.

In Ward, the plaintiffs were pilots and flight attendants for United Airlines all of whom resided in California but performed most of their work outside the State. The question presented to the California Supreme Court was, given the nature of these employees’ work, were they entitled to receive wage statements that comply with California Labor Code section 226(a)? (Section 226(a) contains strict requirements for the information that must be displayed on each paystub issued to employees, and carries steep penalties for non-compliance.) To download the full June 29, 2020 opinion, click here.

Oman v. Delta Air Lines, Inc.

The four plaintiffs in Oman were all flight attendants for Delta. They lived in various states (including New York, Nevada, and California) and had various airports as their “home base” (including airports in New York and California). The questions presented in Oman were, again, whether these employees were entitled to wage statements under Section 226(a), and whether they were entitled to the protections of California Labor Code section 204, which sets forth timing requirements for the bi-monthly payment of wages. To download the full June 29, 2020 opinion, click here.

A New Standard for Multi-State Workers

The Court concluded that employers can determine whether their cross-border employees are entitled to the protections of Labor Code sections 204 and 226 by asking two questions. First, are the majority of the employee’s working hours in the pay period (i.e., more than half) spent in California? If yes, the employer must follow Sections 204 and 226 with respect to that employee. Second, if the employee does not spend more than half of her working time in the pay period in any one state, is the employee “based for work purposes in California?” To be “based for work purposes in California” means that California serves as the physical location where the worker presents himself to begin work. In making this determination, the residency or domicile of the employee is not a relevant factor; rather, what matters is where the employee reports to work during the relevant pay period.

Referred to by the Court as the “principal place of work rule,” its effect is that some periods of work in California will not be covered by Sections 204 and 226. On the other hand, “some periods of work outside California will be covered, if they occur as part of an overall period in which most work occurs inside California or are performed by an employee who primarily works in no state but is based in California.”

Takeaways for Employers

Businesses with employees who regularly perform work both inside and outside of California—especially those based outside California—should consult with experienced employment law counsel to analyze the jobs of those employees performing work in California, and determine whether and to what extent California wage and hour law, and potentially other California laws, must be followed. Although the Ward and Oman opinions provide some insight into how the California Supreme Court might rule on the extraterritorial application of other California wage and hour and/or labor laws, the opinions were specifically limited to the application of California Labor Code sections 204 and 226 only.

Notably, the Ward and Oman opinions did not address the California Supreme Court’s prior opinion in Sullivan v. Oracle, which held, generally, that out-of-state employees who perform work in California for a California-based employer are entitled to be paid overtime under California law for their work time in California. Thus, it remains to be seen which other California wage and hour laws will be subject to the new “principal place of work rule” articulated in Ward and Oman.

Special Live Webinar and Other Resources

To more fully address the impact of the important Ward and Oman opinions, Sutton Hague will be holding a special live webinar on Thursday, July 30, 2020 from 10:30 a.m. to 12:00 p.m. PDT, entitled: “WHAT EMPLOYERS WANT TO KNOW ABOUT…™ California Supreme Court Issues Important Decisions Impacting Application of California Wage and Hour Law to Cross-State Border Workers.” To sign up, please visit our Events page.

Nevada employers are also encouraged to consult CalNevaLaw.com, Sutton Hague’s online resource for understanding, at a basic level, the primary differences between Nevada and California wage and hour law. Among other resources, CalNevaLaw allows employers to download webinar presentations and podcast episodes covering a wide range of topics on the intersection of California and Nevada employment law.

For more up-to-date information on California and Nevada labor laws, please visit our SHLC Blog or view and sign up for upcoming legal presentations on our Events page. Also, subscribe to our CalNeva Law Podcast for discussions of the latest legal issues affecting California and Nevada employers. Find the podcast here.