The Ninth Circuit Court of Appeals recently vacated its prior ruling in Sullivan v. Oracle Corp., which had held that the California Labor Code applies to work performed in California by non-residents of California. The Ninth Circuit has now decided to withhold any ruling pending the California Supreme Court’s decision on three questions.

Specifically, the Ninth Circuit has asked the California Supreme Court to opine on the following:

(1) Does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

(2) Does California’s Unfair Competition Law (commonly referred to as § 17200) apply to the overtime work described in question 1?

(3) Does § 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs if the employer failed to comply with the overtime provisions of the Fair Labor Standards Act?

The Ninth Circuit has indicated that it will accept and rely on the California Supreme Court’s decision on these questions in any further proceedings.

The relevant facts in this case are as follows: Oracle Corporation, a large software company, employed hundreds of workers to train Oracle customers in the use of its software. During the relevant period, Oracle classified these workers as teachers who were not entitled to compensation for overtime work under either federal or California law. Three California non-residents (who lived in Colorado and Arizona, respectively) brought a class action against Oracle seeking damages under California law for failure to pay overtime.

Plaintiffs performed only some of their work for Oracle in California. Plaintiffs sought to apply the Labor Code to a day’s work when that work was performed entirely in California, and to a week’s work when that work was performed entirely in California. (Plaintiffs did not seek to apply the Labor Code to a day’s or week’s work when only part of that day’s or week’s work was performed in California.) On the other hand, Oracle argued that the overtime provisions of Colorado law should apply to work performed in California by the two Colorado residents, and similarly, that the overtime provisions of the Fair Labor Standards Act should apply to work performed in California by the Arizona resident (because Arizona has no overtime law of its own).

Applying California’s choice-of-law rules, the Ninth Circuit had previously concluded that a California court would apply California’s Labor Code and that the California Labor Code is clearly intended to apply to work done in California by non-residents.

However, by vacating its prior decision, the Ninth Circuit has now left it to the California Supreme Court to decide these important issues. We will continue to monitor this important case and provide you with updates accordingly. In the meantime, employers should consult their labor counsel as needed.