Oracle Overtime Case Spells Trouble for California Tech Companies

California's Supreme Court recently ruled against Oracle in an overtime case that may have far-reaching implications for employees and employers across the U.S., especially other California-based tech companies.

Mon, July 11, 2011

CIO — On June 30, 2011, California's Supreme Court closed the books on Sullivan vs. Oracle, an overtime pay case that had been winding its way through California's justice system in various forms since it was first introduced as Gabel and Sullivan vs. Oracle Corp. (ORCL) in 2003.

In Sullivan vs. Oracle, the plaintiffs, a group of Oracle employees who are residents of Colorado and Arizona, argued that they should be entitled to overtime pay according to California's wage and hour laws. The plaintiffs are instructors who travel around the U.S. training Oracle customers on how to use the company's various software applications.

They maintained that they were misclassified as teachers under federal law for the purposes of applying California law. Being classified as teachers under federal law put them in the category of "exempt" workers who are not entitled to overtime pay. The plaintiffs argued that they were in fact "non-exempt" employees and thus eligible for overtime pay under applicable laws.

Meanwhile, Oracle contended that California law should not apply to visiting employees for a variety of reasons. One, the company argued that the laws of the employees' home states should follow them wherever they work. Two, Oracle claimed that applying California's wage laws to visiting, non-resident employees would have imposed undue burdens on California employers. And three, the software company maintained that Arizona and Colorado's wage and hour laws conflicted with California's; therefore, Oracle couldn't apply California's laws without infringing on Colorado's and Arizona's.

After a lengthy analysis of California's, Colorado's and Arizona's overtime laws, California's Supreme Court did not find any conflicts among the three states' laws and ruled in favor of the plaintiffs on two claims, according to Laura Maechtlen, a San Francisco-based partner in the law firm Seyfarth Shaw's labor and employment practice.

The court decided that non-exempt employees who are residents of Colorado or Arizona, who work for a company based in California and who spend whole days or whole weeks working in California are in fact eligible for California's overtime pay while they're working in California.

While the ruling only applies to overtime eligible employees who are residents of Colorado and Arizona, says Maechtlen, it may have far-reaching implications for employees and employers across the U.S., especially other California-based tech companies.

"We think that plaintiffs and employees in the future may try to expand the holding in a couple of different ways," she says.

For example, non-exempt employees of California-based companies who live in other states besides Colorado and Arizona and who spend time working in California might also file suit to see if they can obtain California's overtime wages for days or weeks worked in California, if California law is more favorable than the overtime law in their home state, she says.

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