The Answer To A Question You Never Thought To Ask:

"Do I have to pay out-of-state employees overtime under the California Wage Orders when they come to California for brief periods?”

Yes, Virginia.  They’re not in Kansas anymore.

The California Supreme Court last week held, in Sullivan v. Oracle Corp., that non-exempt employees who do not live in California, but who travel to California from time to time on business, must be paid overtime under California's daily overtime laws for the days they perform work in the state.

The case involved instructors, whose job was to train customers in how to use Oracle’s product.  The instructors resided outside California and worked mainly in their home states, but also occasionally in California and other states.  In determining whether the California Labor Code applied, the Court examined the terms used in the overtime statutes.  Because the statute made no reference to residents or non-residents, the Court found an intent to provide broad coverage, dismissing the argument that the lack of such terms created an ambiguity.    

The Court was careful to note that it was only deciding the case before it, in which aCalifornia corporation was the defendant.  Nonetheless, the Court's broad language, and its analysis rejecting a distinction between residents and non-residents, indicates it could apply California's daily overtime laws to a non-California based employer, particularly if the employer has a principal place of business or division in California, or otherwise makes use of the “protections” of California laws.  At the least, the case should operate as a cautionary note. 

For California companies, the message is clear: Pay all non-exempt employees daily overtime when they work in California, no matter where they live.

For those doing substantial business in California: Consider the risks and the cost of providing daily overtime when non-exempt employees travel to California for work.