Oracle Labor Law Class Action Defense Cases–Sullivan v. Oracle: Ninth Circuit Reverses Summary Judgment In Favor Of Defense In Labor Law Class Action Holding California Labor Code Applies To Work Performed In The State By Nonresidents

Nov 19, 2008 | By: Michael J. Hassen

Class Action Against Oracle Alleging Failure to Pay Overtime Pursuant to State and Federal Laws Survives Summary Judgment as to California Law Claims because Nonresidents are Protected by California Labor Code for Work Performed within California, but District Court Properly Granted Summary Judgment as to Class Action Claim Alleging Violation of California’s Unfair Business Practices Act (UCL) for Failure to Pay Overtime under Federal Fair Labor Standards Act (FLSA) because California’s UCL “does not have Extraterritorial Application” Ninth Circuit Holds

Plaintiffs filed a class action against their employer, Oracle, alleging labor law violations; specifically, the class action complaint asserted that Oracle failed to pay employees overtime under either the federal Fair Labor Standards Act (FLSA) or California state law. Sullivan v. Oracle Corp., ___ F.3d ___ (9th Cir. November 6, 2008) [Slip Opn., at 15261]. According to the class action, Oracle hired hundreds of employees “to train Oracle customers in the use of its software” but “classified these workers as teachers who were not entitled to compensation for overtime work under either federal or California law.” Id. The putative class was not limited to California residents, and the three putative class representatives were nonresidents of California who “performed only some of their work for Oracle in California,” id. The class action complaint contained three claims for relief – two of them sought recovery for work performed in California, and one for work performed “anywhere in the United States.” Id. Each of the claims, however, was premised on California law; specifically, either the California Labor Code, or California Business & Professions Code section 17200 (unfair business practices). Id., at 15264-65. Defense attorneys moved for summary judgment on all claims in the class action; the district court granted the motion “on the ground that the relevant provisions of California law did not, or could not, apply to the work performed by Plaintiffs.” Id., at 15261. The district court reasoned that California’s Labor Code “do[es] not apply to nonresidents who work primarily in other states,” and that it would violate the Due Process Clause of the Fourteenth Amendment to construe the Labor Code so as to apply to work performed primarily outside of California, id., at 15265. Similarly, the federal court concluded that California’s unfair business practices statute does not apply to work performed outside of California, id. The Ninth Circuit affirmed as to the class action’s unfair business practices claim premised on work performed outside of California, but reversed as to the first two claims for relief.

Briefly, Oracle’s principal place of business is California, and it hires “instructors” on a contract basis to travel throughout the U.S. and for the purpose of training its customers in the use of Oracle software. Sullivan, at 15261-62. Three individuals – two of them residents of Colorado, and the third a resident of Arizona – worked as Oracle Instructors; they each spent a limited amount of time in California, though not necessarily each calendar year. See id., at 15262-63. None of the plaintiffs worked more than 36 days in California during a calendar year, and one of the plaintiffs did not work in California at all one year. Id. Oracle originally classified its instructors as “teachers” and did not pay them overtime; however, in 2003 Oracle reclassified its California instructors and began paying them overtime under California law, and in 2004 it reclassified its remaining instructors and began paying them overtime under the FLSA. Id., at 15263.

The Ninth Circuit addressed first whether California’s Labor Code applies to nonresidents, and concluded that “the California Labor Code is clearly intended to apply to work done in California by nonresidents.” Sullivan, at 15268. The Circuit Court also concluded that “California has a strong interest in applying its Labor Code to the work performed by Plaintiffs in California,” while “Colorado and Arizona have no interest in applying their minimum wage laws…to Plaintiffs’ work in California.” Id., at 15274. Further, the Ninth Circuit found no constitutional impediment to applying California’s Labor Code laws to nonresidents performing work within the State, see id., at 15274-75. For the same reasons, then, the Circuit Court held further that the class action’s unfair business practices act claim premised on the Labor Code violation also applies to work performed within the State of California by nonresidents, id., at 15276. For these reasons, the Ninth Circuit reversed the district court order granting summary judgment as to the first two claims in the class action complaint, see id., at 15277.

However, the Ninth Circuit reached a different conclusion with respect to the class action’s unfair business practices act claim premised on violations of the FLSA for work performed outside of California. California law holds that section 17200 does not apply beyond the boundaries of the state, Sullivan, at 15277 (citing Norwest Mortgage, Inc. v. Superior Court, 72 Cal.App.4th 214 (Cal.App. 1999)). Accordingly, the Circuit Court affirmed the district court’s order to the extent it granted summary judgment on the class action’s third claim for relief, id.

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