Seyfarth Summary: Like the singers in “California Dreamin,” many out-of-state employers—on a winter’s day and otherwise—might dream of operating in California. California is an attractive market for out-of-state companies. But employers who hire employees in California or send employees to work there face a unique set of challenges. Below are some key areas of employment law these companies should consider if they want to be “safe and warm in L.A.”
Access to the California market—the sixth largest economy in the world—is irresistible for many companies. But doing business there entails a unique set of risks. California confronts employers with an often hostile combination of regulatory oversight, complex employment laws (creating draconian penalties for failure to comply), and employee-friendly courts and administrative agencies. Before dipping a toe onto California’s shores, out-of-state businesses should understand whether and when California’s peculiar (and often unique) employment laws apply to their employees.
California judicial decisions have made clear that even employers who are primarily based out-of-state and have only a few employees in California must comply with California employment law. In a 2011 decision, Sullivan v. Oracle, the California Supreme Court held that non-California residents working in California for a California-based employer were subject to California’s daily overtime laws when they worked in California for a whole work day. Oracle left employers up in the air as to whether California law would apply in other contexts, such as when non-California residents work partial days in California and such as when other issues other than overtime pay are involved.
In 2018, the Ninth Circuit requested the California Supreme Court to address some of these outstanding questions in cases against United Airlines and Delta Airlines. The Supreme Court has not yet ruled.
Meanwhile, out-of-state employers are well-served by seeking counsel before hiring employees in California or even sending employees to the Golden State to conduct business on a temporary basis. Some of the California peculiarities facing out-of-state employers are:
- Minimum Wage—As of January 2019, the minimum wage for larger employers (having more than 26 employees) rose to $12. (And California’s minimum wage for all employers will incrementally increase to $15 an hour over the next few years.) Meanwhile, California has no shortage of progressive jurisdictions (safe and warm LA among them) that have their own special minimum-wage laws.
- Daily Overtime—California non-exempt employees must be paid at one and one-half times the regular rate for all hours worked over eight in a day (and any hours worked on a seventh consecutive workday during a workweek) and must be paid doubletime for all hours worked over twelve in a day (and any hours worked over eight on a seventh consecutive day during a workweek). These rules contrast sharply with federal law, which requires overtime pay only when employees work more than forty hours during a workweek.
- Itemized Wage Statements—California employers must provide hyper-specific items of information on wage statements. Failure to do so can result in the imposition of hefty penalties. These requirements include, among other things, gross wages earned, total number of hours worked, net wages earned, the period during which the wages were earned, all deductions, and all hourly rates applicable during the pay period.
- Meal and Rest Periods—Non-exempt employees working in California must be provided certain meal and rest periods (and recovery periods). Moreover, employers must keep accurate records of employee meal periods and pay a penalty when either meal or rest or recovery periods are not provided.
- Independent Contractors—California is peculiarly if not uniquely hostile to businesses that classify workers as independent contractors instead of employees. Misclassifications can trigger substantial liability for missed meal and rest periods, unpaid overtime and unpaid expenses, and even massive civil penalties, among other consequences.
- Discrimination and Harassment—California recognizes many “protected characteristics” that do not appear in federal law anti-discrimination laws, characteristics such as sexual orientation and gender identity or expression.
- Local Ordinances—As noted already (but worth repeating), many California local governments, including the Cities of San Francisco and Los Angeles, boast of their own special laws on subjects such as minimum wage and paid sick leave.
While the Oracle case left many unanswered questions, employers are well-served by understanding when they need to apply California law, and how to correctly implement it. Feel free to contact your favorite Seyfarth attorney if you would like to discuss.
Edited By: Elizabeth Levy