Do California’s Wage and Hour Laws apply to Workers who live in other States or who travel outside of the State for work?

California’s laws are among the best, if not the best, for workers in the United States. But do those laws apply to workers who live in other states? And how about workers who live and work in California, but also work in other states?

Oman v. Delta Air Lines and Ward v. United Airlines, two 2020 decisions from the California Supreme Court provide some guidance with respect to those questions. Because they build on an earlier case, Sullivan v. Oracle (2011) 51 Cal.4th 1191, 1201, we will start our analysis there.

Sullivan v. Oracle (2011) 51 Cal.4th 1191

In Sullivan, three employees who did not live in California, but who performed some of their work for their employer in California, claimed that California’s overtime laws applied to the work that they performed in California for a California-based employer. The California Supreme Court agreed, for several reasons.

First, California’s overtime laws apply by their terms to all employment in the state, without reference to the employee’s place of residence. Second, other states have no legitimate interest in shielding California-based employers from the requirements of California wage law as to work performed in California. Finally, even if they did, California’s interest would trump those other states’ interest.

While Sullivan is unquestionably a win for workers, it left open the question of whether other wage and hour laws would apply to such workers. That brings us to the recent decisions in Ward and Oman.

Ward v. United Airlines (2020) 9 Cal.5th 732

In Ward, the Court addressed the somewhat related question of whether California Labor Code section 226 (which requires wage statements containing specific information) applies to pilots and flight attendants who perform most of their work in airspace outside of California’s jurisdiction. The Court concluded that the answer to that question depends on whether the workers’ principal place of work is in California:

If the workers’ principal place of work is in California, then Section 226 applies and the employer must issue compliant wage statements.

The Court further held that workers can establish that their principal place of work is in California by showing either of the following:

1. That they work a majority of their time in California; or
2. That they have a definite base of operations in California and perform at least some work in the state for the employer.

Thus, for pilots and flight attendants who have a home-base airport, their principal place of work is in California if that airport is in California. Their principal place of work would not be in California if their home-base were outside of the state, regardless of where they live, where they get paid, and where they pay taxes.

Turning to Section 226, the Court noted that it contained no language specifying its intended geographic scope. Therefore, the Court had to consider its aims and its role in “the matrix of laws intended to ensure that workers are correctly and adequately compensated for their work.” From this, the Court concluded that where the work occurred is important in determining what state law applies.

Furthermore, Section 226 appears to contemplate a single wage statement for a worker who workers in different states.

Ultimately, the Court relied upon a rule that courts use when trying to figure out the geographic scope of legislative enactments: that the Legislature does not intend for its enactments to create conflicts with other states. The Court inferred from this rule that the Legislature intended for Section 226 to apply to workers who did not work predominantly in any one state, so long as California is the state with the most significant relationship to the work. The two part test for making that determination, described above, provides clarity and properly balances the State’s interest in protecting workers with other considerations of comity and avoiding conflicts of laws.

Oman v. Delta Air Lines (2020) 9 Cal.5th 762

In Oman, the plaintiffs were flight attendants who worked mainly outside of California. They argued that Labor Code sections 226 and 204 (which governs how often workers must be paid) applied to them, and also that Delta’s pay scheme failed to pay them at least the minimum wage for all hours worked.

Beginning with Section 226 issue, the Court applied the test set forth in Ward, concluding that whether or not the statute applied would depend on whether the workers were based in California for work purposes. (The parties agreed that the plaintiffs had never worked more than half of their time in California. Thus, prong one of the Ward test was answered in the negative.)

The Court also considered whether the fact that Delta was a nonresident corporation changed that analysis. It noted that Section 226 had no exemption based upon the employer’s location. Furthermore, California’s power to protect workers within its borders is not limited by whether the worker is a nonresident or employed by a nonresident entity.  Accordingly, the Court concluded as follows:

If employees are based for work purposes in California, that is sufficient to trigger the requirements of section 226, regardless of where their employer resides.

Turning to section 204, the Court concluded that there was no reason to treat that section differently than Section 226. That is because section 204 works closely with section 226 to regulate when a worker must be paid. See § 204(b)(2). Therefore, section 204 is subject to the same limits as section 226.

Finally, the Court turned to the question of whether Delta’s compensation scheme violated California law. Under that scheme, flight attendants are paid by the “rotation,” which means a series of flights over a day or multiple days. The flight attendants challenged one of the formulas for calculating pay for the rotations because that formula is based solely on flight time and did not take into account time spent working on the ground before and after flights.

The Court was careful to explain that “wage borrowing” is unlawful in California. By that, the Court meant that an employer who promises to compensate for certain hours or tasks cannot use that compensation to pay for other time that it requires an employee to work. That is true even if the employee’s compensation for the entire work ay is above the minimum wage. The Court summarized its analysis as follows:

For all hours worked, employees are entitled to the greater of the (1) amount guaranteed by contract for the specified task or period, or (2) the amount guaranteed by the minimum wage. Whether a particular compensation scheme complies with these obligations may be thought of as involving two separate inquiries. First, for each task or period covered by the contract, is the employee paid at or above the minimum wage? Second, are there other tasks or periods not covered by the contract, but within the definition of hours worked, for which at least the minimum wage should have been paid?

Turning to the specifics of Delta’s compensation scheme, the Court noted that Delta had chosen to compensate using a fixed amount, at a level in excess of the hourly minimum wage. The most common formula used did not directly attribute compensation to certain tasks, like preflight briefings. In other words, Delta’s formula for calculating the fixed amount, which it made know to its employees, did not account for all hours actually worked.

However, that fact not render the compensation scheme unlawful. Rather, rotation pay was intended to include all hours worked.

The Court then distinguished these facts from cases in which a company promises to pay a certain amount for certain tasks, but does not compensate them for other tasks, or for remaining at work between customers.  Accordingly, its holding does not affect the decisions in Gonzalez v. Downtown LA Motors, LP (2013) 215 Cal.App.4th 36, or Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314.

In his concurring opinion, Justice Gordon Liu emphasized the importance of determining the employer’s contractual commitment to its workers, and not allowing employers to characterize those commitments so as to cleverly circumvent the no-borrowing rule.

If you have questions about whether you being paid properly and in accordance with California law, you may wish to contact Hunter Pyle Law and to use our free and confidential intake process. We can be reached at (510) 444-4400 or at inquire@hunterpylelaw.com.