Sullivan v. Oracle Corp.

Filed 6/30/11

IN THE SUPREME COURT OF CALIFORNIA

DONALD SULLIVAN et al., )
)
Plaintiffs and Appellants, )
) S170577
v. )
) 9th Cir. No. 06-56649
ORACLE CORPORATION et al., )
) C.D. Cal. No.
Defendants and Respondents. ) CV-05-00392-AHS
____________________________________)

In this proceeding we address, at the request of the United States Court of
Appeals for the Ninth Circuit,1 questions about the applicability of California law
to nonresident employees who work both here and in other states for a California-
based employer. We conclude the Labor Code‟s overtime provisions (id., §§ 510,
1194) do apply to plaintiffs‟ claims for compensation for work performed in this
state, and that the same claims can serve as predicates for claims under
California‟s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.).
We also conclude that plaintiffs‟ claims for overtime compensation under the
federal Fair Labor Standards Act of 1938 (FLSA) (29 U.S.C. § 201 et seq.; see id.,
§ 207(a)) for work performed in other states cannot serve as predicates for UCL
claims.

1 (See Sullivan v. Oracle Corporation (9th Cir. 2009) 557 F.3d 979, 983
(Sullivan III); Cal. Rules of Court, rule 8.548 (decision on request of a court of
another jurisdiction).)

1
 I. BACKGROUND
Plaintiffs Donald Sullivan, Deanna Evich and Richard Burkow formerly
worked as “Instructors” for defendant Oracle Corporation, a large software
company headquartered in California. As Instructors, plaintiffs‟ job was to train
Oracle‟s customers in the use of the company‟s products. Plaintiffs Sullivan and
Evich reside in Colorado, and plaintiff Burkow resides in Arizona. Required by
Oracle to travel, plaintiffs worked mainly in their home states but also in
California and several other states.2 During the time period relevant to this
litigation (2001-2004), Sullivan worked 74 days in California, Evich worked 110
days, and Burkow worked 20 days.
For years, Oracle did not pay its Instructors overtime. Oracle‟s practice in
this regard followed the company‟s determination that its Instructors were exempt,
as teachers, from California and federal overtime laws. (See generally Industrial
Welf. Com., wage order No. 4-2001, § 1(A)(3)(a), codified as Cal. Code Regs.,
tit. 8, § 11040, subd. (1)(A)(3)(a); 29 C.F.R. § 541.303 (2010).) In 2003, Oracle‟s
Instructors sued the company in a federal class action alleging misclassification
and seeking unpaid overtime compensation. (Gabel and Sullivan v. Oracle Corp.
(C.D.Cal. Mar. 29, 2005, No. CV-03-00348-AHS); see Sullivan III, supra, 557
F.3d 979, 981-982.) Shortly thereafter, Oracle reclassified its Instructors and
began paying them overtime under the Labor Code (in 2003) and the FLSA (in
2004). In 2005, the federal action was settled and the claims of the plaintiff class
dismissed with prejudice, except for the present claims concerning nonresident
Instructors. (See Sullivan III, supra, 557 F.3d at p. 982.)

2 Including Alabama, Colorado, Florida, Georgia, Illinois, Indiana, Kansas,
Maryland, Massachusetts, Minnesota, New Mexico, New York, Ohio, Oklahoma,
Oregon, Texas, Utah, Virginia and Washington.

2
 The present claims are three: First, plaintiffs claim overtime compensation
under the Labor Code for days longer than eight hours, and weeks longer than 40
hours, worked entirely in California. (See Lab. Code, §§ 510, subd. (a), 1194.)
Second, plaintiffs restate the same claim as one for restitution under the UCL.
(Bus. & Prof. Code, § 17203.) Plaintiffs contend, in other words, that Oracle‟s
failure to pay overtime for work performed in California was an “unlawful [or]
unfair . . . business act or practice” (id., § 17200) for purposes of the UCL. Third,
and again under the UCL, plaintiffs claim restitution in the amount of overtime
compensation due under the FLSA (29 U.S.C. § 207(a)) for weeks longer than 40
hours worked entirely in states other than California. Plaintiffs thus seek to use
Oracle‟s alleged violation of the FLSA in other states as the predicate unlawful act
for a UCL claim under California law.
Plaintiffs pled the claims just described in a complaint filed in the United
States District Court for the Central District of California. That court granted
Oracle‟s motion for summary judgment based on stipulated facts. (Sullivan v.
Oracle Corp. (C.D.Cal. Oct. 18, 2006, No. CV-05-00392 AHS) (Sullivan I).) On
appeal, the Ninth Circuit affirmed in part and reversed in part. (Sullivan v. Oracle
Corp. (9th Cir. 2008) 547 F.3d 1177, 1187 (Sullivan II).) Reversing on the first
and second claims, the court held the Labor Code and the UCL did apply to
plaintiffs‟ claims for overtime days and weeks worked entirely in California.
Affirming on the third claim, the court held the UCL did not apply to plaintiffs‟
claims under the FLSA for overtime worked in other states. Subsequently,
however, the Ninth Circuit withdrew its opinion and asked us to decide the
underlying questions of California law, on which it had found no directly
controlling precedent. (Sullivan III, supra, 557 F.3d 979, 983.) The court noted
the answers to its questions would have both “considerable practical importance”
because “[a] large but undetermined number of California-based employers

3
employ out-of-state residents to perform work in California,” and possibly also
“an appreciable economic impact on the overall labor market in California, given
the competitive cost advantage out-of-state employees may have over California-
resident employees if overtime pay under California law is not required for work
they perform in California.” (Ibid.)
We granted the Ninth Circuit‟s request. Accordingly, the following certified
questions are now before us:
“First, does the California Labor Code apply to overtime work performed in
California for a California-based employer by out-of-state plaintiffs in the
circumstances of this case, such that overtime pay is required for work in excess of
eight hours per day or in excess of forty hours per week? Second, does [Business
and Professions Code section] 17200 apply to the overtime work described in
question one? Third, does [section] 17200 apply to overtime work performed
outside California for a California-based employer by out-of-state plaintiffs in the
circumstances of this case if the employer failed to comply with the overtime
provisions of the FLSA?” (Sullivan III, supra, 557 F.3d 979, 983.)
We note that, while plaintiffs‟ complaint contains class action allegations, the
federal district court has not yet certified a class, and no question concerning class
certification is before us. Also not before us is the question whether Oracle
properly classified plaintiffs as exempt from the overtime laws during the relevant
time period.
II. DISCUSSION

A. Do the Labor Code’s Overtime Provisions Apply to Work
Performed in California by Nonresidents?
The question whether California‟s overtime law applies to work performed
here by nonresidents entails two distinct inquiries: first, whether the relevant
provisions of the Labor Code apply as a matter of statutory construction, and

4
second, whether conflict-of-laws principles direct us to apply California law in the
event another state also purports to regulate work performed here. These inquiries
lead to the conclusion that California law does apply.

1. Statutory Construction.
California‟s overtime laws apply by their terms to all employment in the
state, without reference to the employee‟s place of residence. The overtime statute
declares simply that “[a]ny work in excess of eight hours in one workday and . . .
40 hours in any one workweek . . . shall be compensated at the rate of no less than
one and one-half times the regular rate of pay . . . .” (Lab. Code, § 510, subd. (a),
italics added.) The civil enforcement provision provides that “any employee
receiving less than . . . the legal overtime compensation applicable to the employee
is entitled to recover in a civil action the unpaid balance . . . .” (Id., § 1194,
subd. (a), italics added.) Moreover, a preambular section of the wage law (Lab.
Code, div. 2, pt. 4, ch. 1, §1171 et seq.) confirms that our employment laws apply
to “all individuals” employed in this state (id., § 1171.5, subd. (a), italics added).3

3 “The Legislature finds and declares the following: [¶] (a) All protections,
rights, and remedies available under state law, except any reinstatement remedy
prohibited by federal law, are available to all individuals regardless of immigration
status who have applied for employment, or who are or who have been employed,
in this state.” (Lab. Code, § 1171.5, subd. (a), added by Stats. 2002, ch. 1071,
§ 4.)
The immediate impetus for Labor Code section 1171.5‟s enactment was the
Legislature‟s desire to protect undocumented workers from sharp practices in the
wake of Hoffman Plastic Compounds, Inc. v. NLRB (2002) 535 U.S. 137, in which
the high court held the National Labor Relations Board could not award backpay
to a foreign national not legally entitled to work in the United States. (See, e.g.,
Sen. Rules Com., Off. of Sen. Floor Analyses, 3rd reading analysis of Sen. Bill
No. 1818 (2001-2002 Reg. Sess.) as amended Aug. 22, 2002, pp. 2-6; Assem.
Com. on Lab. & Employment, Analysis of Sen. Bill No. 1818 (2001-2002 Reg.
Sess.) June 22, 2002, pp. 2-3.) Section 1171.5, however, cannot reasonably be
read as speaking only to undocumented workers, given that it was drafted and
(footnote continued on next page)

5
 That the overtime laws speak broadly, without distinguishing between
residents and nonresidents, does not create ambiguity or uncertainty. The
Legislature knows how to create exceptions for nonresidents when that is its
intent. The Legislature has, for example, exempted certain out-of-state employers
who temporarily send employees into California from the obligation to comply
with the workers‟ compensation law (Lab. Code, § 3200 et seq.), on the conditions
of compliance with the home state‟s compensation laws and interstate reciprocity
(see id., § 3600.5, subd. (b)). In contrast, the Legislature has not chosen to
authorize an exemption from the overtime law on the basis of an employee‟s
residence, even though it has authorized exemptions on a variety of other bases.
(See id., §§ 510, subd. (a)(1) -(3), 511, 514, 515.)
That California would choose to regulate all nonexempt overtime work
within its borders without regard to the employee‟s residence is neither improper
nor capricious. As a matter of federal constitutional law, “[s]tates possess broad
authority under their police powers to regulate the employment relationship to
protect workers within the State. Child labor laws, minimum and other wage laws,
laws affecting occupational health and safety, and workmen‟s compensation laws
are only a few examples.” (De Canas v. Bica (1976) 424 U.S. 351, 356.)
Furthermore, the overtime laws serve important public policy goals, such as
protecting the health and safety of workers and the general public, protecting
employees in a relatively weak bargaining position from the evils associated with

(footnote continued from previous page)

codified as a general preamble to the wage law and broadly refers to “all
individuals” employed in the state. (Id., subd. (a).) More importantly, no reason
exists to believe the Legislature intended to afford stronger protection under the
employment laws to persons working illegally than to legal, nonresident workers.

6
overwork, and expanding the job market by giving employers an economic
incentive to spread employment throughout the workforce. (Gentry v. Superior
Court (2007) 42 Cal.4th 443, 456.) The Legislature has considered these purposes
sufficiently important to make the right to overtime compensation unwaivable
(Lab. Code, § 1194) and the failure to pay overtime a crime (id., § 1199; see
Gentry, at p. 456). To exclude nonresidents from the overtime laws‟ protection
would tend to defeat their purpose by encouraging employers to import
unprotected workers from other states. Nothing in the language or history of the
relevant statutes suggests the Legislature ever contemplated such a result. A
contrary conclusion would be difficult, if not impossible, to reconcile with the
Legislature‟s express declaration that “[a]ll protections, rights, and remedies
available under state law . . . are available to all individuals . . . who are or who
have been employed, in this state.” (Lab. Code, § 1171.5, subd. (a).)
Oracle, arguing that California‟s overtime law does exclude nonresidents,
relies not on the language or history of the relevant statutes but on a misreading of
our decision in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th
557 (Tidewater). Oracle reads Tidewater as holding that California overtime law
follows California residents wherever they go throughout the United States; based
on that premise, Oracle contends that other states‟ overtime laws must be allowed
to follow their own residents into California to avoid an offense to interstate
comity. The argument fails because the premise is incorrect: Tidewater says no
such thing.
At issue in Tidewater, supra, 14 Cal.4th 557, was whether wage orders
promulgated by the Industrial Welfare Commission (IWC) applied to California
residents who worked for California employers on boats that transported workers
and supplies from the California coast to oil-drilling platforms stationed offshore
within California‟s state law boundaries, between the Santa Barbara coast and the

7
Channel Islands.4 When the boats‟ crew members sued their employers for
overtime, the employers sued for an injunction to prohibit the wage orders‟
enforcement. We held the wage orders did apply. Federal law, we explained, did
not preclude California‟s assertion of jurisdiction, and “California employment
laws implicitly extend to employment occurring within California‟s state law
boundaries, including all of the Santa Barbara Channel.” (Id., at p. 565; see Gov.
Code, § 110 [“The sovereignty and jurisdiction of this State extends to all places
within its boundaries as established by the Constitution.”].)
Our opinion in Tidewater, supra, 14 Cal.4th 557, includes language intended
to caution against overly broad conclusions about the extraterritorial application of
employment laws. Ironically, this is the language Oracle reads as holding that a
state‟s employment laws follow its residents wherever they go. In fact, our
remarks were more limited. We wrote: “In some circumstances, state
employment law explicitly governs employment outside the state‟s territorial
boundaries. (Lab. Code, §§ 3600.5, 5305 [California workers‟ compensation law
applies to workers hired in California but injured out of state].) The Legislature
may have similarly intended extraterritorial enforcement of IWC wage orders in
limited circumstances, such as when California residents working for a California
employer travel temporarily outside the state during the course of the normal
workday but return to California at the end of the day. On the other hand, the
Legislature may not have intended IWC wage orders to govern out-of-state
businesses employing nonresidents, though the nonresident employees enter
California temporarily during the course of the workday. Thus, we are not

4 The question arose because state and federal law defined California‟s
boundaries in the Santa Barbara Channel differently. (See Tidewater, supra, 14
Cal.4th 557, 564.)

8
prepared, without more thorough briefing of the issues, to hold that IWC wage
orders apply to all employment in California, and never to employment outside
California.” (Tidewater, at pp. 577-578.)
We thus foresaw in Tidewater, supra, 14 Cal.4th 557, as a possibility, only
limited extraterritorial application of California‟s employment laws, precisely
balanced by interstate comity: California law, we suggested, might follow
California resident employees of California employers who leave the state
“temporarily . . . during the course of the normal workday” (id., at p. 578), and
California law might not apply to nonresident employees of out-of-state businesses
who “enter California temporarily during the course of the workday” (ibid., italics
added). In contrast, plaintiffs here claim overtime only for entire days and weeks
worked in California, in accordance with the statutory definition of overtime.
(See Lab. Code, § 510.)5 Nothing in Tidewater suggests a nonresident employee,
especially a nonresident employee of a California employer such as Oracle, can
enter the state for entire days or weeks without the protection of California law.
Oracle attempts to bolster its argument with a Washington decision, Bostain
v. Food Exp., Inc. (Wn. 2007) 153 P.3d 846, but the case offers Oracle no
assistance. Bostain involved a claim for unpaid overtime brought by an interstate
truck driver hired in Washington and based at the Washington terminal facility of
a California motor carrier. The court held the plaintiff was entitled to overtime
compensation under Washington law for the time he spent driving outside that

5 “Any work in excess of eight hours in one workday and any work in excess
of 40 hours in any one workweek and the first eight hours worked on the seventh
day of work in any one workweek shall be compensated at the rate of no less than
one and one-half times the regular rate of pay for an employee.” (Lab. Code,
§ 510, subd. (a).)

9
state. (Id., at pp. 851-854.) The question before the court was not whether another
state‟s overtime law applied, but whether the plaintiff would be paid overtime
under Washington law, or not at all. Bostain says nothing about a case such as
this, in which nonresident employees seek to apply the overtime law of the state in
which they worked and in which the employer is based, and the employer seeks to
avoid that law by applying the less favorable law of plaintiffs‟ home states. Such
disputes are resolved under the applicable conflict of laws analysis, which we
address below. (See post, at p. 12 et seq.)
Speaking further to the issue of statutory construction, Oracle contends the
Legislature would not likely have intended that California‟s wage law apply to
visiting, nonresident employees if compliance imposed practical burdens on
employers. Such burdens, Oracle suggests, might arise not just from the effort and
expense of complying with the overtime law, but from complying as well with
other provisions of California wage law governing such matters as the contents of
pay stubs, meal periods, the compensability of travel time, the accrual and
forfeiture of vacation time, and the timing of payment to employees who quit or
are discharged. Because the laws on these subjects vary from state to state, Oracle
argues, to require an employer to comply with the laws of every state in which its
employees work might amount to an undue burden on interstate commerce and,
thus, violate the commerce clause. (U.S. Const., art. I, § 8, cl. 3.) Oracle
analogizes the situation to that of a trucking company required to comply with the
conflicting laws of various states governing such matters as trailer length and mud
flaps. (See generally, e.g., Raymond Motor Transportation, Inc. v. Rice (1978)
434 U.S. 429; Bibb v. Navajo Freight Lines (1959) 359 U.S. 520.) We should,
Oracle contends, construe the overtime statutes to avoid any such constitutional
problem. We find the argument unpersuasive for several reasons:

10
 First, the case before us presents no issue concerning the applicability of any
provision of California wage law other than the provisions governing overtime
compensation. While we conclude the applicable conflict-of-laws analysis does
require us to apply California‟s overtime law to full days and weeks of work
performed here by nonresidents (see post, at p. 12), one cannot necessarily assume
the same result would obtain for any other aspect of wage law. California, as
mentioned, has expressed a strong interest in governing overtime compensation
for work performed in California. In contrast, California‟s interest in the content
of an out-of-state business‟s pay stubs, or the treatment of its employees‟ vacation
time, for example, may or may not be sufficient to justify choosing California law
over the conflicting law of the employer‟s home state. No such question is before
us.
Second, the asserted burdens on out-of-state businesses to which Oracle
refers are entirely conjectural. The stipulated facts contain nothing supporting
Oracle‟s assertions, and no out-of-state employer is a party to this litigation;
Oracle itself is based in California.
Third, the Ninth Circuit has not asked us to address, nor do we address, any
question concerning the commerce clause. (U.S. Const., art. I, § 8, cl. 3.) This
does not mean, of course, that in reaching our decision we would ignore any
constitutional ramifications. Certainly we would not construe a statute in a
manner that raised serious constitutional questions if the statute‟s language
reasonably permitted any other construction. (See People v. Engram (2010) 50
Cal.4th 1131, 1161.) Oracle, however, has raised no constitutional question of
sufficient gravity to require us to undertake the exercise of determining whether
California‟s overtime statutes might bear a restrictive, nonliteral interpretation.
Challenges to state statutes under the commerce clause are typically addressed
under the test set out in Pike v. Bruce Church, Inc. (1970) 397 U.S. 137, 142:

11
“Where [a challenged] statute regulates even-handedly to effectuate a legitimate
local public interest, and its effects on interstate commerce are only incidental, it
will be upheld unless the burden imposed on such commerce is clearly excessive
in relation to the putative local benefits.” California‟s overtime law, applying to
all work performed in the state, regulates even-handedly to effectuate the
legitimate local public interests we have previously identified, namely, protecting
health and safety, expanding the job market, and guarding against the evils of
overwork. (See Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.) Oracle‟s
argument that California‟s overtime laws might burden interstate commerce more
than incidentally, by imposing onerous regulations on businesses that bring or
send employees to work temporarily in California, is based in large part on the
assumption that, if out-of-state employers must pay overtime under California law,
they must also comply with every other technical aspect of California wage law.
The assumption, as noted, is of doubtful validity. (See ante, at p. 10.) In any
event, to the extent other states have legitimate interests in applying their own
wage laws to their own residents for work performed in California, the applicable
conflict-of-laws analysis takes those interests into account. We turn to that
analysis now.

2. Conflict of Laws.
Plaintiffs, as mentioned, contend California‟s overtime law governs their
work in this state, while Oracle contends the laws of plaintiffs‟ home states
(Colorado and Arizona) govern. For over four decades, California courts have
resolved such conflicts by applying governmental interest analysis. (See, e.g.,
McCann v. Foster Wheeler LLC (2010) 48 Cal.4th 68, 83, 87-88; Kearney v.
Salomon Smith Barney, Inc. (2006) 39 Cal.4th 95, 100 (Kearney); Offshore Rental
Co. v. Continental Oil Co. (1978) 22 Cal.3d 157, 163-170; Bernhard v. Harrah’s

12
Club (1976) 16 Cal.3d 313, 320-321; Reich v. Purcell (1967) 67 Cal.2d 551, 554-
556.) Section 196 of the Restatement Second of Conflict of Laws, which Oracle
suggests might also be relevant, has nothing to do with this case. Section 196
identifies the state whose law governs the validity of an employment contract.
The right to overtime under California law is unaffected by contract. (See Lab.
Code, § 1194, subd. (a) [“Notwithstanding any agreement to work for a lesser
wage, any employee receiving less than . . . the legal overtime compensation . . . is
entitled to recover . . . the unpaid balance . . . .” (italics added); see also Gentry v.
Superior Court, supra, 42 Cal.4th 443, 456 [statutory right to overtime
compensation is unwaivable].)
We typically summarize governmental interest analysis as involving three
steps: “First, the court determines whether the relevant law of each of the
potentially affected jurisdictions with regard to the particular issue in question is
the same or different. Second, if there is a difference, the court examines each
jurisdiction‟s interest in the application of its own law under the circumstances of
the particular case to determine whether a true conflict exists. Third, if the court
finds that there is a true conflict, it carefully evaluates and compares the nature
and strength of the interest of each jurisdiction in the application of its own law „to
determine which state‟s interest would be more impaired if its policy were
subordinated to the policy of the other state‟ [citation], and then ultimately applies
„the law of the state whose interest would be the more impaired if its law were not
applied.‟ ” (Kearney, supra, 39 Cal.4th 95, 107-108, quoting Bernhard v.
Harrah’s Club, supra,16 Cal.3d 313, 320.)

a. Do the relevant laws differ?
We determine, first, “whether the relevant law of each of the potentially
affected jurisdictions with regard to the particular issue in question is the same or

13
different.” (Kearney, supra, 39 Cal.4th 95, 107.) California‟s overtime law
clearly differs from that of Colorado and Arizona, plaintiffs‟ home states.
California law requires overtime compensation at the rate of one and one-half
times the regular rate of pay for work in excess of eight hours in one workday, 40
hours in one workweek, and the first eight hours on the seventh workday in one
week. Overtime compensation increases to twice the regular rate for work in
excess of eight hours on the seventh workday. (Lab. Code, § 510, subd. (a).) In
contrast, Colorado requires pay at one and one-half times the regular rate for work
in excess of 40 hours in one workweek, 12 hours in one workday, and 12
consecutive hours without regard to when the workday starts and ends. (7 Colo.
Code Regs. § 1103-1(4) (2011).) Arizona has no overtime law, so the federal
FLSA applies by default, requiring overtime compensation at one and one-half
times the regular rate for hours worked in excess of 40 hours in one workweek.
(29 U.S.C. § 207(a)(2)(C).) Unlike California law, neither Colorado law nor the
FLSA requires double pay for any work.6

b. Does a true conflict exist?
Because the relevant laws differ, we next “examine[] each jurisdiction‟s
interest in the application of its own law under the circumstances of the particular
case to determine whether a true conflict exists.” (Kearney, supra, 39 Cal.4th 95,
107-108.) In conducting this inquiry, “we may make our own determination of
[the relevant] policies and interests, without taking „evidence‟ as such on the

6 Differences also exist in the way California law, Colorado law and the
FLSA determine whether an employee is exempt from the requirement of
overtime compensation. These additional differences do not, however, affect our
analysis or conclusion.

14
matter.” (Offshore Rental Company, Inc. v. Continental Oil Co., supra, 22 Cal.3d
157, 163, fn. 5.)
Whether a true conflict exists under the circumstances of this case is
doubtful, at best. California has, and has unambiguously asserted, a strong interest
in applying its overtime law to all nonexempt workers, and all work performed,
within its borders. (See Lab. Code, § 1171.5, subd. (a) [“All protections, rights,
and remedies available under state law . . . are available to all individuals . . .
employed, in this state.”]; see also id., §§ 510, subd. (a) [“[a]ny work”], 1194,
subd. (a) [“any employee”], 1199 [criminal sanctions]; see also discussion ante, at
p. 6 et seq.) California‟s interests, as this court has identified them, are in
protecting health and safety, expanding the labor market, and preventing the evils
associated with overwork. (Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.)
Similar interests underlie the FLSA‟s overtime provisions (Barrentine v.
Arkansas-Best Freight System (1981) 450 U.S. 728, 739) and, we may assume,
Colorado law as well. Neither Arizona nor Colorado, however, has asserted an
interest in regulating overtime work performed in other states. Arizona, as
mentioned, has no overtime law at all, and Colorado‟s overtime law purports to
govern only “work performed within the boundaries of the state of Colorado . . .”
(7 Colo. Code Regs. § 1103-1(1) (2011)). These circumstances reveal no genuine
basis for concluding a true conflict exists.
Arguing against this conclusion, Oracle points out that Colorado‟s and
Arizona‟s workers’ compensation statutes, like California‟s, expressly have
extraterritorial effect for certain resident employees who suffer industrial injuries
outside their home states. (See Colo. Rev. Stat. § 8-41-204 [discussed in
Hathaway Lighting v. Indus. Claim App. Off. (Colo.Ct.App. 2006) 143 P.3d 1187,
1189]; Ariz. Rev. Stat. § 23-904.A [discussed in DiMuro v. Industrial Com’n of
Arizona (Ariz.Ct.App. 1984) 688 P.2d 703, 707]; cf. Lab. Code, § 3600.5,

15
subd. (a).) Broadly extrapolating from these statutes, Oracle argues that Colorado
and Arizona have an interest in extending the protection of their employment laws
to their residents who work in other states. Certainly a state has such an interest,
at least in the abstract, when the traveling, resident employee of a domestic
employer would otherwise be left without the protection of another state‟s law.
(Cf. Tidewater, supra, 14 Cal.4th 557 [California overtime law protects residents
working offshore within California‟s state law boundaries]; Bostain v. Food Exp.,
Inc., supra, 153 P.3d 846 [Washington overtime law protects resident interstate
truck driver; no other state‟s law claimed to apply].) But the statutes on which
Oracle relies speak narrowly to the subject of workers‟ compensation.
Accordingly, those statutes for present purposes show only that Colorado and
Arizona know how to assert an interest in applying their laws extraterritorially,
and thus highlight the same states‟ failure to assert any extraterritorial interests
with respect to overtime compensation. In any event, Colorado and Arizona have
expressed no interest in disabling their residents from receiving the full protection
of California overtime law when working here, or in requiring their residents to
work side-by-side with California residents in California for lower pay. (Cf.
Phillips Petroleum Co. v. Shutts (1985) 472 U.S. 797, 822 [as a matter of due
process, a state “ „may not abrogate the rights of parties beyond its borders having
no relation to anything done or to be done within them‟ ”].)
Oracle next posits that Colorado and Arizona have an interest in providing
hospitable regulatory environments for their own businesses and, based on that
premise, argues those states also have an interest in shielding their own businesses
from more costly and burdensome regulatory environments in other states. We do
not doubt the premise that a state can properly choose to create a business-friendly
environment within its own boundaries. “[T]he federal system contemplates that
individual states may adopt distinct policies to protect their own residents and

16
generally may apply those policies to businesses that choose to conduct business
within that state.” (Kearney, supra, 39 Cal.4th 95, 105.) However, every state
enjoys the same power in this respect. Therefore, “[i]t follows from this basic
characteristic of our federal system that, at least as a general matter, a company
that conducts business in numerous states ordinarily is required to make itself
aware of and comply with the law of a state in which it chooses to do business.”
(Ibid.) The federal Constitution does not require a state “ „to substitute for its own
[laws], applicable to persons and events within it, the conflicting statute of another
state‟ ” (Phillips Petroleum v. Shutts, supra, 472 U.S. 797, 822 [discussing the full
faith and credit and due process clauses (U.S. Const., art. IV, § 1 & 14th
Amend.)]) or permit one state to project its regulatory regime into the jurisdiction
of another state (Healy v. The Beer Institute (1989) 491 U.S. 342, 336-337
[discussing the commerce clause (U.S. Const., art. I, § 8, cl. 3)]). Consequently,
neither Colorado nor Arizona has a legitimate interest in shielding Oracle from the
requirements of California wage law as to work performed here.

c. Which state’s interest would be more impaired?
The final step in governmental interest analysis requires us “ „to determine
which state‟s interest would be more impaired if its policy were subordinated to
the policy of the other state‟ ” and to apply “ „the law of the state whose interest
would be the more impaired if its law were not applied.‟ ” (Kearney, supra, 39
Cal.4th 95, 108, quoting Bernard v. Harrah’s Club, supra, 16 Cal.3d 313, 320.)
Assuming for the sake of argument a genuine conflict does exist (see ante, at
p. 15), to subordinate California‟s interests to those of Colorado and Arizona
unquestionably would bring about the greater impairment. 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

17
protecting health and safety and preventing the evils associated with overwork.
(Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.) 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. (Ibid.) By way of
comparison, not to apply the overtime laws of Colorado and Arizona would
impact those states‟ interests negligibly, or not at all. Colorado overtime law
expressly does not apply outside the state‟s boundaries, and Arizona has no
overtime law. (See ante, at p. 14.) Alternatively, viewing Colorado‟s and
Arizona‟s overtime regimens as expressions of a general interest in providing
hospitable regulatory environments to businesses within their own boundaries, that
interest is not perceptibly impaired by requiring a California employer to comply
with California overtime law for work performed here.
For these reasons, we answer the first of the certified questions as follows:
The California Labor Code does apply to overtime work performed in California
for a California-based employer by out-of-state plaintiffs in the circumstances of
this case, such that overtime pay is required for work in excess of eight hours per
day or in excess of forty hours per week. (See Sullivan III, supra, 557 F.3d 979,
983.)

B. Does the UCL Apply to Violations of the Labor Code in California?
With the second certified question, the Ninth Circuit asks us in effect to
decide whether Oracle‟s alleged violations of the overtime provisions of California
law (Lab. Code, §§ 510, 1194) constitute unlawful acts potentially triggering
liability under the UCL (Bus. & Prof. Code, § 17200 et seq.). We have already
decided that the failure to pay legally required overtime compensation falls within
the UCL‟s definition of an “unlawful . . . business act or practice” (Bus. & Prof.

18
Code, § 17200; see Cortez v. Purolator Air Filtration Products Co. (2000) 23
Cal.4th 163, 177 [UCL authorizes, as restitution, order for payment of unlawfully
withheld wages]), and the parties offer no argument on the point.
Accordingly, we answer the second certified question as follows: Business
and Professions Code section 17200 does apply to the overtime work described in
question one. (See Sullivan III, supra, 557 F.3d 979, 983.)

C. Does the UCL Apply to Claims Under the FLSA for Overtime Work
Performed by Nonresidents in Other States?
Our discussion thus far has exclusively concerned Oracle‟s alleged failure to
compensate plaintiffs according to California law for overtime worked in this
state. We turn now to the third certified question, which concerns plaintiffs‟ claim
that Oracle has also failed to compensate them according to the FLSA (29 U.S.C.
§ 207(a)) for overtime worked in other states.7 This claim, despite its reference to
the FLSA, arises under California and not federal law. In the prior class action
(see ante, at p. 2), plaintiffs settled their timely claims under the FLSA, which
were subject to a limitation period of two or three years, depending on the
circumstances. (29 U.S.C. § 255(a).) Now, in this action, plaintiffs attempt to
restate time-barred FLSA claims, which were excluded from the prior settlement,
as UCL claims based on the predicate “unlawful . . . act” (Bus. & Prof. Code,
§ 17200) of violating the FLSA.8 (See Korea Supply Co. v. Lockheed Martin

7 Plaintiffs do not specifically identify the states in which they performed the
overtime work relevant to this claim. As noted, plaintiffs worked in several states
other than California and their home states. (See ante, at p. 2 & fn. 2.)
8 Plaintiffs candidly explained at oral argument in the Ninth Circuit that their
reason for suing under the UCL is to obtain recovery for a year the FLSA no
longer reaches by invoking the UCL‟s four-year statute of limitations. (Bus. &
Prof. Code, § 17208.)

19
Corp. (2003) 29 Cal.4th 1134, 1143 [UCL borrows violations from other laws,
making them independently actionable as unfair practices].) The question before
us is whether the UCL reaches plaintiffs‟ FLSA claims under the circumstances of
this case. We conclude it does not.
Plaintiffs‟ claim implicates the so-called presumption against extraterritorial
application.9 (See generally Diamond Multimedia Systems, Inc. v. Superior Court
(1999) 19 Cal.4th 1036, 1059.) However far the Legislature‟s power may
theoretically extend, we presume the Legislature did not intend a statute to be
“ „operative, with respect to occurrences outside the state, . . . unless such
intention is clearly expressed or reasonably to be inferred “from the language of
the act or from its purpose, subject matter or history.” ‟ ” (Ibid., quoting North
Alaska Salmon Co. v. Pillsbury (1916) 174 Cal. 1, 4.) Neither the language of the
UCL nor its legislative history provides any basis for concluding the Legislature
intended the UCL to operate extraterritorially. Accordingly, the presumption
against extraterritoriality applies to the UCL in full force. (See, e.g., Norwest
Mortgage, Inc. v. Superior Court (1999) 72 Cal.App.4th 214, 222-225.) We thus
proceed to consider whether plaintiffs‟ proposed application of the UCL would
cause it to operate, impermissibly, with respect to occurrences outside the state.
The Ninth Circuit has asked us to decide whether the UCL applies to
plaintiffs‟ FLSA claims “in the circumstances of this case” (Sullivan III, supra,
557 F.3d 979, 983), which we understand to mean in accordance with the same

9 Plaintiffs‟ claim also potentially implicates the due process clause of the
United States Constitution (14th Amend.), which places additional limitations on
the extraterritorial application of state law. (See, e.g., Phillips Petroleum Co. v.
Shutts, supra, 472 U.S. 797, 818.) We need not address any such constitutional
issue, however, given our conclusion that the UCL does not apply.

20
stipulated facts on which the federal courts have based their decisions. Those
stipulated facts identify only a single instance of relevant conduct occurring in
California: “The decision-making process to classify Instructors as exempt from
the requirement to be paid overtime wages under the FLSA occurred primarily
from within the headquarters offices of Oracle Corporation located in Redwood
Shores, California.” Certainly the UCL reaches any unlawful business act or
practice committed in California. (See Bus. & Prof. Code, § 17200 [“As used in
this chapter, unfair competition shall mean and include any unlawful, unfair or
fraudulent business act or practice . . . .”].) But for an employer to adopt an
erroneous classification policy is not unlawful in the abstract. (Cf. Walsh v. IKON
Office Solutions, Inc. (2007) 148 Cal.App.4th 1440, 1462 [addressing California
wage law].) What is unlawful, and what creates liability under the FLSA, is the
failure to pay overtime when due. (See 29 U.S.C. § 207(a)(1) [“no employer shall
employ any of his employees . . . for a workweek longer than forty hours unless
such employee receives [overtime] compensation”].) Accordingly, that Oracle‟s
decision to classify its Instructors as exempt was made in California does not,
standing alone, justify applying the UCL to the nonresident plaintiffs‟ FLSA
claims for overtime worked in other states.10 Nor does any other basis for
applying the UCL to those claims appear in the stipulated facts.

10 The decisions on which plaintiffs rely in arguing to the contrary, Wershba
v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, and Clothesrigger, Inc. v.
GTE Corp. (1987) 191 Cal.App.3d 605, are inapposite. In each case, the unlawful
conduct that formed the basis of the out-of-state plaintiffs‟ claims (i.e., fraudulent
misrepresentations made to induce consumer transactions), and that justified the
application of California law to resolve those claims, occurred in California. (See
Wershba v. Apple Computer, Inc., supra, at pp. 241-242; Clothesrigger, Inc. v.
GTE Corp., supra, at p. 613.)

21
 In contrast to the abstract classification decision, the failure to pay legally
required overtime compensation certainly is an unlawful business act or practice
for purposes of the UCL. (Bus. & Prof. Code, § 17200; see Cortez v. Purolator
Air Filtration Products Co., supra, 23 Cal.4th 163, 177 [UCL authorizes, as
restitution, order for payment of unlawfully withheld wages].) Thus, the UCL
might conceivably apply to plaintiffs‟ claims if their wages were paid (or
underpaid) in California, but the stipulated facts do not speak to the location of
payment. The parties invite us to speculate about the place of payment as a basis
for holding the UCL does, or does not, apply. We decline to do so. Whether the
parties are entitled to rely on facts or assertions beyond the stipulated facts to
support or defeat the motion for summary judgment is a question of federal
procedure for the federal courts. Given the limitations of the certified question
procedure, which does not confer on us plenary jurisdiction over cases pending in
the courts of other sovereign entities, our answer must be confined to the
circumstances of this case as established by the stipulated facts.

22
 Accordingly, we answer the third certified question as follows: Business
and Professions Code section 17200 does not apply to overtime work performed
outside California for a California-based employer by out-of-state plaintiffs in the
circumstances of this case based solely on the employer‟s failure to comply with
the overtime provisions of the FLSA.
WERDEGAR, J.
WE CONCUR:
CANTIL-SAKAUYE, C.J.
KENNARD, J.
BAXTER, J.
CHIN, J.
CORRIGAN, J.
BOREN, J.*

* Presiding Justice of the Court of Appeal, Second Appellate District,
Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.

23
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Sullivan v. Oracle Corporation
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding XXX on request pursuant to rule 8.548, Cal. Rules of Court
Review Granted
Rehearing Granted

__________________________________________________________________________________

Opinion No. S170577
Date Filed: June 30, 2011
__________________________________________________________________________________

Court:
County:
Judge:

__________________________________________________________________________________

Counsel:

Callahan, Thompson, Sherman & Caudill, Robert W. Thompson and Charles S. Russell for Plaintiffs and
Appellants.

Law Offices of Jeffrey K. Winikow and Jeffrey K. Winikow for California Employment Lawyers
Association as Amicus Curiae on behalf of Plaintiffs and Appellants.

Paul, Hastings, Janofsky & Walker, Paul W. Cane, Jr., and Stephen L. Berry for Defendants and
Respondents.

Steinbrecher & Span, Robert S. Span and Alan K. Steinbrecher for Air Transport Association of America,
Inc., California Hotel & Lodging Association and California Restaurant Association as Amici Curiae on
behalf of Defendants and Respondents.

Mitchell Silberberg & Knupp, Lawrence A. Michaels and Adam Levin for Employers Group as Amicus
Curiae on behalf of Defendants and Respondents.

Gibson Dunn & Crutcher, Pamela L. Hemminger, Gail E. Lees, Elisabeth C. Watson and Christopher
Chorba for California Employment Law Council as Amici Curiae on behalf of Defendants and
Respondents.
Counsel who argued in Supreme Court (not intended for publication with opinion):

Charles S. Russell
Callahan, Thompson, Sherman & Caudill
2601 Main Street, Suite 800
Irvine, CA 92614
(949) 261-2872

Paul W. Cane, Jr.
Paul, Hastings, Janofsky & Walker
55 Second Street, 24th Floor
San Francisco, CA 94105-3441
(415) 856-7000