While there’s a certain tinge of technology to Sullivan v. Oracle Corp. , the unanimous Supreme Court decision stemming from it has implications for staffing in California and potentially far beyond.
The case pits Redwood City, CA-based Oracle Corp. against some of its out-of-state employees, who apparently want to cash in on the state’s overtime bonuses while they were on business trips as trainers for Oracle software in California. The state Supreme Court ruled that Oracle must pay them according to California law for work done while they were visiting.
Overall, the ruling makes it mandatory for any California-based company to pay its nonexempt workers from any U.S. state according to California overtime regulations for any overtime worked in the state.
This ruling is a big deal because California companies have generally paid overtime according to the states in which the employees live.
And California’s overtime regulations are considered generous – companies must pay time-and-a-half for every hour worked over 40 hours per week, and double time for every hour in excess of eight hours on the seventh workday. This is compared to neighboring states such as Arizona, which has no overtime law at all.
Plus, unlike many other states, California calculates overtime daily instead of weekly.
“To permit nonresidents to work in California without the protection of our overtime law would completely sacrifice, as to those employees, the state’s important public policy goals of protecting health and safety and preventing the evils associated with overwork,” Justice Kathryn Werdegar wrote in the court’s unanimous opinion.
However, it’s fairly clear that there’s more behind the ruling than health, safety and overwork.
Werdegar also wrote: “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.”
While the stated intent of the decision is to protect out-of-state workers in California, its detractors point out that the state could now be wide open for lawsuits by other non-California companies who claim their employees have been underpaid and/or falsely classified as nonexempt.
This controversial decision comes on the heels of the passage of the “Amazon Tax bill.”
In that one, the California legislature decided that affiliates – or independent businesses which collect small fees for referring online customers to out-of-state company websites – now count as physical in-state presences of Amazon and other online retailers. The online giants must therefore add on sales taxes to its prices for sales through these affiliates.
Rather than comply, Amazon.com quickly terminated its contracts with all of its California affiliates, as did Overstock.com. The fate of these affiliates – an estimated 25,000 – remains uncertain, but it looks pretty grim for many of them.
Is California trying to tell us something?