On December 13, 2011, the Ninth Circuit issued its most recent decision in the Sullivan v. Oracle saga. See Sullivan, D.C. No. CV-05-00392-AHS (9th Cir. Dec. 13, 2011). The decision followed the June 30, 2011 opinion of the California Supreme Court, in which the Court answered a question that the Ninth Circuit had posed to it: whether employees of a California-based employer who worked entirely outside California could sue the employer under the California Unfair Competition Law ("UCL") for the employer's alleged failure to pay overtime to non-California employees as required under the federal Fair Labor Standards Act ("FLSA"). See Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011). Upon remand of the case from the California Supreme Court, the Ninth Circuit held that the state court's opinion was "conclusive" and justified granting summary judgment to Oracle on the UCL claims of these non-California employees. Separately, the Ninth Circuit held that California overtime law applies to non-residents who perform work within the state, another question that it posed to the California Supreme Court to answer. This blog entry, however, focuses solely on the discussion of out-of-state employees' use of the UCL to vindicate FLSA rights.
By way of background, plaintiffs were out-of-state instructors
for Oracle, who resided in Colorado and Arizona, and who brought a
putative class action for overtime pay on behalf of out-of-state
instructors. While Oracle's headquarters are located in
California, Oracle employed Instructors in 20 states, including
California. The parties disputed whether Instructors who worked
entirely outside California and were denied
overtime under FLSA standards could recover FLSA overtime under the
UCL (because the statute of limitations had run on their actual
FLSA claims).
The Central District granted Oracle's motion for summary
judgment based on stipulated facts. On appeal, the Ninth Circuit
initially affirmed that employees who never worked in California
were barred from vindicating their FLSA rights through the UCL. The
Ninth Circuit withdrew that opinion, however, and instead certified
the question for the California Supreme Court to resolve as a
matter of state law.
The Ninth Circuit asked the California Supreme Court to answer the
following specific question: "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?"
On this question, the Court ruled that because the employees at
issue worked out of state, and nothing indicated the employees were
paid in California, there was simply no "unlawful
practice" in California that could support a UCL claim. The
opinion was arguably vague, however, as to whether a court would
need to analyze where an employee was "paid" separate
from the issue of where the employee worked.
On December 13, 2011, the Ninth Circuit applied the California
Supreme Court's decision to its facts and found it controlled
the outcome without need for any further analysis of where
employees were paid (or of any other issues). In affirming the
summary judgment on the issue, the Ninth Circuit rejected the
plaintiffs' argument that the UCL "applies to alleged
violations of the FLSA outside of California," holding that
"the [California Supreme] Court's answer . . . is
conclusive" and affirming dismissal of this claim.
Accordingly, in a typical case where a California company is
alleged to have misclassified out-of-state employees,
Sullivan will almost certainly preclude employees who
never worked or lived in California during the relevant period from
suing under the UCL for alleged FLSA violations.
The very day after the Ninth Circuit issued Sullivan,
Judge Josephine Tucker of the United States District Court for the
Central District of California applied the Sullivan
decisions to grant partial summary judgment to defendant
Countrywide Home Loans in Wallace v. Countrywide Home
Loans. Case No. 8:08-cv-01463-JST-MLG (C.D. Cal. Dec. 14,
2011). Although the district court had previously certified a
nationwide UCL class asserting failure to comply with the FLSA,
Judge Tucker's ruling effectively narrowed the class to those
employees who worked during the relevant period in
California--reducing the class from 4,300 employees to about 900.
See id. The plaintiffs in Wallace argued that their
situation was different from Sullivan because paychecks
were mailed to the class members from California, as opposed to
from outside of the state, which plaintiff argued was "payment
in California" sufficient to anchor the case to California for
UCL purposes. The district court disagreed, concluding that
Sullivan governed the claims and required dismissal, and
that the location of where payroll was processed or mailed was
"irrelevant."
The Wallace decision is a hopeful sign that courts applying
Sullivan will not get bogged down in picayune details, but
will instead follow the plain central holding of the
Sullivan case that employees who work and live entirely
outside California cannot use the UCL as a tool to assert their
FLSA rights. Rather, those rights will have to be vindicated, if at
all, through an actual FLSA claim and will be subject to the
limitations of that statute (e.g., opt-in classes only, shorter
statute of limitations).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.