My Business Doesn't Have to Follow California Law...Does it?

By Rex P. Fennessey - McMahon Berger, PC

July 25, 2018

California Supreme Court Cases All Employers Should Be Watching

On July 12, the California Supreme Court agreed to answer several questions about whether California’s wage and hour laws apply to employees of Delta and United Airlines.  If your business does not already have offices or facilities in California (or is not an airline), you could be forgiven for thinking the California high court’s decision is irrelevant to your operations.  But you might find out the hard way that you were wrong.

California Law is Often Unique

California’s employment laws are notoriously complicated and frequently impose requirements that do not exist under federal law or the laws of other states.  For example, California Labor Code § 226 imposes very specific requirements for what must be contained on employee wage statements that accompany paychecks.

California also has a significantly higher minimum wage for most employees (currently $10.50-$11.00 per hour depending on the number employed) than the federal minimum wage established by the federal Fair Labor Standards Act (FLSA) (currently $7.25 per hour.)  California also interprets its minimum wage requirements differently.  The difference in interpretation matters where, for instance, an employee is paid a set “piece rate” or “job rate” for accomplishing certain tasks, but there is idle time between jobs.  Under federal law and the laws of most states, an employer is permitted to add up the piece-rate compensation earned during the week, to divide that sum by the number of hours that the employee was required to be at work during the week, and to pay nothing extra if the result equals more than the minimum wage.  This practice often is referred to as pay averaging.  Most California courts have concluded that “pay averaging” is not permitted under California law.  Instead, in California, for each hour of work that is not compensated by a piece-rate wage (such as time spent waiting for work), the employee must receive additional compensation of no less than the minimum wage.

Other differences abound. Suffice it to say that the foregoing is just the tip of the iceberg when it comes to the differences between California labor laws and those in the rest of the country.

Non-California Companies Sued Under California Law

Neither Delta Airlines nor United Airlines are based in California. Delta is based in Chicago, Illinois; United’s headquarters are in Atlanta, Georgia.  But both airlines are currently fighting class action lawsuits based on the California laws described above brought by pilots and flight-attendants who periodically fly into and out of the Golden State.  In these lawsuits, the flight attendants were often in California only for a few hours; and their total time spent in California (and California airspace) often amounted to no more than 20 percent of their total working time.  Nevertheless, the lawsuits allege the airlines violated California labor laws when they issued non-California-compliant wage statements and engaged in pay averaging not generally permitted under California’s wage and hour laws.

The airlines have raised the defense one would expect, arguing that California’s labor laws do not apply to them because they are not California employers and their pilots and flight attendants work only a small portion of their time in California.  But attorneys for the pilots and flight attendants have argued that California law applies any time an employee performs any work within the state, no matter how small.  The federal appeals court handling these cases – the U.S. Court of Appeals for the Ninth Circuit – has asked the California Supreme Court to give its opinion as to when and to what extent these California laws apply to non-California employers whose employees only periodically work in California.  On Thursday, the California Supreme Court agreed to do just that.

What the California Supreme Court’s Decision Might Mean for Your Business

The California Supreme Court’s interpretation of the reach of California law may have an impact that goes well beyond the airline industry.  If the California Supreme Court rules that the state’s labor laws apply to any employee who performs any work in the state, almost any business sending employees to California for work would be required to comply with California’s myriad labor rules or risk a lawsuit (sometimes a class-action) brought under California law.

There are numerous scenarios where out-of-state employers could find themselves unintentionally subject to California law.  Take salespeople who periodically visit California for sales calls or meetings, or employees sent to California for a training seminar.  In each case, the employee is performing compensable work in California.  Complying with California law is not for the faint-of-heart.  These are California Supreme Court cases every employer should be watching:

Vidrio et al. v. United Airlines Inc. et al., (Case No. 17-55471);

Ward v. United Airlines Inc., (Case No. 16-16415);

Oman v. Delta Air Lines Inc., (Case No. 17-15124).

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.