MEMO TO:
Alexsei Demo US
RESEARCH ID:
#40005304762abd
JURISDICTION:
State
STATE/FORUM:
California, United States of America
ANSWERED ON:
December 28, 2021
CLASSIFICATION:
Labour and employment law

Issue:

Does California employment law apply to an employee who lives and works from another state for a California-based employer?

Facts:

John began working for Company XYZ in 2010. From 2010 until March 2020, he lived in Oakland and commuted to XYZ’s offices in San Francisco. In March 2020, due to COVID, he began working remotely. XYZ subsequently announced that it will not require employees to return to the office. As a result, John relocated to Arizona, where he could afford a bigger house. He now works remotely from his home office in Arizona. John is seeking reimbursement of his home office expenses (internet, printer, cell phone, etc.) from XYZ under Cal. Lab. Code § 2802.

Conclusion:

Subdivision (a) of Cal. Lab. Code § 1171.5 provides that all protections, rights, and remedies available under state law are available to all persons who are employed "in this state".

California's employment laws extend to employment occurring within its state law boundaries, regardless of the residence or domicile of the worker. (Tidewater Marine Western, Inc. v. Bradshaw, Sullivan v. Oracle Corp.)

It is possible that there is limited extraterritorial application of California's employment laws, balanced by interstate comity. For example, California law might follow California resident employees of California employers who leave the state temporarily during the course of the normal workday. (Sullivan v. Oracle Corp.)

However, for work performed outside of California, employees must overcome the presumption against extraterritorial application of California laws. To determine extraterritoriality, California courts consider whether the conduct which gives rise to liability occurred in California. (Bernstein v. Virgin Am., Inc.)

In Bernstein v. Virgin Am., Inc., a group of flight attendants brought a class action against their employer for various violations of California labor laws. The plaintiffs were residents of California and the employer was based in California but the nature of flight attendant work brought the plaintiffs all over the country. The United States District Court for the Northern District of California concluded that the violations that the flight attendants suffered while they were physically outside of California had actually occurred "in" California because the employer's policies that resulted in the violations were devised in California. Therefore, the presumption against extraterritorial application did not apply.

However, in Cotter v. Lyft, Inc. the United States District Court for the Northern District of California held that the court should focus on the location of the work rather than the location of the company or its decision-makers.

There is no indication in the leading state-level caselaw that California's wage and hour laws could apply to employees who work exclusively in other states, even if the employer is based in California. (Cotter v. Lyft, Inc.)

Other Labor Code provisions explicitly provide for extraterritorial application, but Cal. Lab. Code § 2802 does not. Given the structure and history of California's Labor Code, this reinforces the presumption against extraterritoriality. Therefore, section 2802 cannot apply to employees who work in states other than California. (O'Connor v. Uber Technologies, Inc.)

Requiring an employer to indemnify nonresidents who work from their homes outside California for home office expenses is not within the scope of Cal. Lab. Code § 2802. However, it could apply to necessary expenses that a nonresident employee incurs during periods of work performed in California. (Campagna v. Language Line Servs., Inc.)

Law:

Subdivision (a) of Cal. Lab. Code § 1171.5 provides that all protections, rights, and remedies available under state law are available to all persons who are employed "in this state":

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.

[...]

The California Supreme Court noted that California's employment laws extend to employment occurring within its state law boundaries in Tidewater Marine Western, Inc. v. Bradshaw, 59 Cal.Rptr.2d 186, 14 Cal.4th 557, 927 P.2d 296 (Cal. 1996) ("Tidewater Marine"), which was a case addressing whether federal or state employment law applied in maritime employment, given that federal and state laws define California's water boundaries differently (at 190-191):

In Weeren, we considered the applicability of California's criminal laws in the territory beyond California's federal law boundaries but within its state law boundaries. We stated the federal law boundaries apply "when the extent of a state's territorial jurisdiction is relevant to the operation of federal law." (Weeren, supra, 26 Cal.3d at p. 660, 163 Cal.Rptr. 255, 607 P.2d 1279.) Thus, federal law defines "the state's 'boundaries' for all purposes, political and proprietary, 'as between Nation and State.' " (Id. at p. 663, 163 Cal.Rptr. 255, 607 P.2d 1279.) On the other hand, where state criminal law does not conflict with federal law, "the state

Page 191

[927 P.2d 301] boundaries as defined by our state Constitution and statutes ... are the limits to which the Legislature implicitly intended to extend California's criminal laws...." (Id. at p. 669, 163 Cal.Rptr. 255, 607 P.2d 1279.) Thus, we did not interpret the federal law boundaries as limiting the state's power to regulate conduct outside those boundaries and within broader state law boundaries. Like the criminal laws at issue in Weeren, California employment laws implicitly extend to employment occurring within California's state law boundaries, including all of the Santa Barbara Channel. The federal law boundaries would have precedence only if the operation of federal law were at issue, as for example if federal law conflicted with state law. (Id. at p. 670, 163 Cal.Rptr. 255, 607 P.2d 1279.)

In Sullivan v. Oracle Corp., 547 F.3d 1177 (9th Cir. 2008), the United States Court of Appeals for the Ninth Circuit relied on Tidewater Marine for the principle that California's employment laws govern all work performed within the state, regardless of the residence or domicile of the worker. This was in the context of an employer's argument that the California Labor Code did not apply to work done in California by non-residents (at 1183):

Contrary to Oracle's assertions, the California Labor Code is clearly intended to apply to work done in California by nonresidents. The California Supreme Court has concluded that California's employment laws govern all work performed within the state, regardless of the residence or domicile of the worker. In Tidewater Marine Western, Inc. v. Bradshaw, 14 Cal.4th 557, 59 Cal.Rptr.2d 186, 927 P.2d 296, 301 (1996), the Court wrote, "Like the criminal laws . . ., California employment laws implicitly extend to employment occurring within California's state law boundaries[.]" Oracle relies on two cases to argue that the Labor Code should not be construed to extend to Plaintiffs' work in California. We find Oracle's arguments unconvincing.

The Court declined to read in a negative inference that a non-resident is not subject to California employment laws within the meaning of the California Labor Code. The Court instead inferred that an in-state employer's non-resident employees who come into California for entire workdays and workweeks do come within the Labor Code's coverage (at 1183):

First, Oracle quotes a sentence from Tidewater Marine. The Court wrote, "If an employee resides in California, receives pay in California, and works exclusively, or principally, in California, then that employee is a `wage earner in California' and presumptively enjoys the protection of . . . regulations [promulgated under the Labor Code]." Id. at 309. Oracle asks us to read into this sentence a negative inference that a nonresident is not a "wage earner" within the meaning of the Labor Code. But the status of a non-resident was not the issue in Tidewater Marine. Rather, the issue was whether California residents working outside California were covered by the Labor Code. The Court answered that they were covered.

To the degree that any inference can be drawn from Tidewater Marine, it is the opposite from that drawn by Oracle. Two sentences before the sentence quoted by Oracle, the Court speculated that the legislature "may not have intended" the Labor Code to apply to "out-of-state businesses employing nonresidents, though the nonresident employees enter California temporarily during the course of the workday." Id. (emphasis added). If the Court described an out-of-state employer's employees coming into California temporarily during the course of a workday as the marginal case for Labor Code coverage, there is an inference that an in-state employer's employees coming into California for entire workdays and workweeks is not a marginal case. That is, there is an inference that such a case comes within the Code's coverage.

The Ninth Circuit Court of Appeals later requested the California Supreme Court's opinion on the issue of whether California overtime laws apply to nonresident employees who work both in California and in other states for a California-based employer. In Sullivan v. Oracle Corp., 51 Cal.4th 1191, 254 P.3d 237, 127 Cal.Rptr.3d 185 (Cal. 2011) ("Sullivan"), the California Supreme Court concluded that California overtime laws applied to work performed in California by nonresidents. The Court first noted that California's overtime laws apply to all employment in the state, without reference to the employee's place of residence (at 241):

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).

The Court explained that Tidewater Marine was intended to caution against overly broad conclusions about the extraterritorial application of employment laws. The Tidewater Marine court was not prepared to hold that wage orders never apply to employment outside California. It is possible that there is limited extraterritorial application of California's employment laws, balanced by interstate comity. California law might follow California resident employees of California employers who leave the state temporarily during the course of the normal workday. The Court emphasized, however, that nothing in Tidewater Marine suggests that a nonresident employee of a California employer can enter the state for entire days or weeks without the protection of California law (at 242-243):

Our opinion in Tidewater, supra, 14 Cal.4th 557, 59 Cal.Rptr.2d 186, 927 P.2d 296, 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 [127 Cal.Rptr.3d 192] 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 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, 59 Cal.Rptr.2d 186, 927 P.2d 296.)

We thus foresaw in Tidewater, supra, 14 Cal.4th 557, 59 Cal.Rptr.2d 186, 927 P.2d 296, 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”

[254 P.3d 243]

(id., at p. 578, 59 Cal.Rptr.2d 186, 927 P.2d 296), 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 [51 Cal.4th 1200] 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.

However, the Court was careful to circumscribe these comments to overtime laws specifically (at 243-244):

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, 127 Cal.Rptr.3d at pp. 193–194, 254 P.3d at p. 244), 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

[254 P.3d 244]

the employer's home state. No such question is before us.

In Bernstein v. Virgin Am., Inc., 227 F.Supp.3d 1049 (N.D. Cal. 2017) ("Bernstein"), the United States District Court for the Northern District of California held that Tidewater Marine set out three conditions for an employee to be protected by California employment law: residence in California, receiving pay in California, and working exclusively or principally in California. However, the Court held that Tidewater Marine does not require employees to satisfy all three of these conditions. Rather, the Court noted that in Sullivan the California Supreme Court endorsed a multi-faceted approach. The three factors listed in Tidewater Marine are sufficient but not necessary conditions for an individual to benefit from the protections of California law. The employer's residency and whether the employee's absence from the state was temporary are also relevant factors (at 1059-1060):

Virgin relies primarily on Tidewater Marine W., Inc. v. Bradshaw, 14 Cal.4th 557, 577, 59 Cal.Rptr.2d 186, 927 P.2d 296 (1996) for the proposition that an employee must work "exclusively or principally" in California to benefit from California law. See id. But that is not what Tidewater says. The Tidewater court simply explained that an employee who "resides in California, receives pay in California, and works exclusively, or principally, in California," presumptively enjoys the protections of California's wage orders. Tidewater, 14 Cal.4th at 578, 59 Cal.Rptr.2d 186, 927 P.2d 296. That court did not hold that an employee must necessarily satisfy all three of those conditions to be protected by California law. See id. In fact, because the Tidewater court ultimately found that the plaintiffs worked within California's territorial boundaries, it "express[ed] no opinion as to whether the trial court can enjoin the application of IWC wage orders to crew members who work primarily outside California's state law boundaries." Tidewater, 14 Cal.4th at 578–79, 59 Cal.Rptr.2d 186, 927 P.2d 296. The Court also left room for the possibility that California's labor laws may apply extraterritorially "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." Id. at 577–78, 59 Cal.Rptr.2d 186, 927 P.2d 296. Despite the Tidewater court's explicit refusal to decide the precise issue presented here, Virgin relies on that case to argue that Plaintiffs' can only enjoy the protections of the California Labor Code if they worked exclusively or principally in California. Tidewater simply cannot bear the weight Virgin asks of it.

Lacking sufficient support from the California Supreme Court, Virgin again turns to three federal district court cases to find support for its dispositive "job situs" test. Because the Court has already explained at length why those cases are factually distinguishable and legally erroneous, it does not address them again here. See ECF No. 104 at 14–17.

Instead of considering principal "job situs" in a vacuum, the California Supreme Court has endorsed a multi-faceted approach. The California Supreme

[227 F.Supp.3d 1060]

Court's later decision in Sullivan confirms that the three factors listed in Tidewater —i.e. California residency, receipt of pay in California, and exclusive or principal "job situs" in California—are sufficient, but not necessary, conditions for an individual to benefit from the protections of California law. After all, the Sullivan court's central holding was that non-residents (who do not presumptively enjoy the protections of California's labor laws) are nonetheless protected by those laws in certain circumstances. Sullivan v. Oracle Corp., 51 Cal.4th 1191, 1194, 127 Cal.Rptr.3d 185, 254 P.3d 237 (2011). The court also suggested that other factors were relevant to this inquiry, such as the employer's residency and whether the employee's absence from the state was temporary in nature. See id. at 1199–1200, 127 Cal.Rptr.3d 185, 254 P.3d 237 ("California law ... might follow California resident employees of California employers who leave the state ‘temporarily ... during the course of the normal workday’ ... [n]othing 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.") (emphasis added). Sullivan therefore flatly rejects the simplistic test proposed by Virgin.

However, the Court noted that for work performed outside of California, employees must overcome the presumption against extraterritorial application of California laws (at 1062):

Still, the Plaintiffs must overcome the presumption against extraterritorial application to the extent they seek to recover based on work performed outside of California. California law presumptively does not apply to conduct that occurs outside of California. See N. Alaska Salmon Co. v. Pillsbury, 174 Cal. 1, 4, 162 P. 93 (1916) (internal quotation marks omitted) ("Ordinarily, the statutes of a state have no force beyond its boundaries."). To overcome that presumption, the Plaintiffs must show that a contrary intent "is clearly expressed or reasonably to be inferred from the language of the act or from its purpose, subject-matter, or history." Id.

The Court explained that California courts consider whether the conduct which gives rise to liability occurred in California to determine whether a state law is being applied extraterritorially (at 1063):

To determine whether a state law is being applied extraterritorially, courts consider "whether ‘the conduct which gives rise to liability ... occurs in California.’ " Leibman v. Prupes, No. 2:14–CV–09003–CAS, 2015 WL 3823954, 2015 U.S. Dist. LEXIS 80101 (C.D. Cal. June 18, 2015) (emphasis in original) (quoting Diamond Multimedia, 19 Cal.4th at 1059, 80 Cal.Rptr.2d 828, 968 P.2d 539 ). For example, the presumption against extraterritoriality did not bar the plaintiff's breach of contract claim where "the actions which gave rise to liability—that is, the alleged breach—occurred in California" when the business manager made the " ‘core decision’ to wrongfully terminate [the plaintiff]" and terminated the plaintiff via email from his business in California. No. 2:14–CV–09003–CAS, 2015 WL 3823954, at *7, 2015 U.S. Dist. LEXIS 80101, at *17–18 (C.D. Cal. June 18, 2015). Similarly, the presumption against extraterritorial application did not bar the out-of-state plaintiffs' consumer protection and false advertising claims under California law where the plaintiffs "alleged that [defendant's] purportedly misleading marketing, promotional activities and literature were coordinated at, emanate from and are developed at its California headquarters, and that all ‘critical decisions' regarding marketing and advertising were made within the state." In re iPhone 4S Consumer Litig., No. C 12–1127 CW, 2013 WL 3829653, 2013 U.S. Dist. LEXIS 103058 (N.D. Cal. July 23, 2013). Likewise, there was no extraterritorial application of California's consumer protection statutes where the plaintiffs alleged "that the misrepresentations were developed in California, contained on websites and an application that are maintained in California, and that billing and payment of services went through servers located in California." Ehret v. Uber Techs., Inc., 68 F.Supp.3d 1121, 1132 (N.D. Cal. 2014). Therefore, the key question is whether the alleged wrongful conduct that gave rise to liability occurred within California. If so, the presumption against extraterritorial application does not apply.

Bernstein was a class action lawsuit brought by flight attendants against their employer for various violations of California labor laws. The plaintiffs were residents of California and the employer was based in California but the nature of flight attendant work brought the plaintiffs all over the country. The Court concluded that the violations that the flight attendants suffered while they were physically outside of California had actually occurred "in" California because the employer's policies that resulted in the violations were devised in California. Therefore, the presumption against extraterritorial application did not apply (at 1063-1064):

The Court concludes that the wrongful conduct giving rise to liability occurred in California such that the Plaintiffs' claims do not constitute an attempt to apply the law to occurrences outside of the state. Plaintiffs challenge Virgin's centrally devised compensation policies, such as its policies of not compensating flight attendants for non-block duty time and paying flat rates for drug testing and training activities. See generally ECF No. 32; ECF Nos. 45, 46, 47–3 (outlining Virgin's detailed compensation policies for flight attendants). As in the above cases, Virgin made these critical decisions regarding how it would pay its flight attendants, and proceeded to pay its flight attendants in accordance with those decisions, from its headquarters in Burlingame, California. Therefore, the very actions giving rise to potential liability—that is, the failure to pay for all hours worked, the failure to pay overtime, the failure to provide accurate wage statements, and the failure to pay waiting time penalties to discharged employees—occurred in California. Because the Plaintiffs' proposed application of the law would not impermissibly operate to reach conduct occurring outside of the state, the presumption against extraterritorial application does not apply and the Plaintiffs do not have to overcome it.

The only wrongful conduct that could have potentially occurred outside of California, at least in some instances, is Virgin's

[227 F.Supp.3d 1064]

alleged failure to provide meal periods and rest breaks. Virgin does not have a centralized policy regarding the provision of such breaks; instead, Virgin's policies simply provide that team leaders are responsible for scheduling breaks for flight attendants. ECF No. 50–13 at 22. Therefore, any failure to provide meal and rest breaks did not originate at Virgin's headquarters in California, but rather occurred wherever the flight attendant was deprived of that break. In some instances, the Plaintiffs might have been deprived of such breaks outside of California, for example while they were working on flights between California and the East coast. See id. ¶ 23. To the extent the Plaintiffs seek to recover for such break violations that occurred outside of California, they must overcome the presumption against extraterritorial application. Because the Plaintiffs have not attempted to do so, they cannot recover for that extraterritorial conduct under California law.

In Cotter v. Lyft, Inc., 60 F.Supp.3d 1059 (N.D. Cal. 2014) ("Cotter"), the United States District Court for the Northern District of California held that there was no indication in Tidewater Marine or Sullivan that California's wage and hour laws could apply to employees who work exclusively in other states, even if the employer is based in California. Cotter was a nationwide class action of Lyft drivers against the company, which was based in California. The drivers argued that because the company's principal place of business was in California and it made certain decisions in California, that California wage and hour laws applied to work performed by drivers exclusively in other states. The Court rejected this argument, holding that California wage and hour laws simply do not apply to employees who work exclusively in another state. In contrast to the District Court's holding in Bernstein, the Court held that Sullivan stood for the proposition that the court should focus on the location of the work rather than the location of the company or its decision-makers (at 1061-1063):

There are several problems with this argument. As a preliminary matter, the plaintiffs are wrong that California's wage and hour laws are the most worker-protective. Washington and Oregon, for example, both have higher minimum wages than California. See United States Dep't of Labor, Minimum Wage Laws in the States (Jan. 1, 2014), available at http:// www.dol.gov/whd/minwage/america.htm. Therefore, pursuit of claims under California law on behalf of people in those states appears against their interest. Moreover, even if California law were most protective of workers, each state has the right (subject to federal law, of course) to regulate the work performed within its own borders without regard to another state's approach to regulating the employer-employee relationship. But most importantly, by jumping straight to a conflict of laws analysis, the plaintiffs skip an important analytical step. A court conducts a conflict of laws analysis only where the laws of multiple states could conceivably apply to the same claim. Where only one state's law applies, no such analysis is necessary. And as explained below, the California wage and hour laws asserted here simply do not apply to employees who work exclusively in another state. Therefore, regardless of the connection between Lyft and California, Lyft drivers who worked in other states cannot bring claims under California's wage and hour statutes.

State statutes are presumed not to have extraterritorial effect. See, e.g., North Alaska Salmon Co. v. Pillsbury, 174 Cal. 1, 4, 162 P. 93 (1916) (“Ordinarily the statutes of a state have no force beyond its boundaries.... Although a state may have the power to legislate concerning the rights and obligations of its citizens with

[60 F.Supp.3d 1062]

regard to transactions occurring beyond its boundaries, the presumption is that it did not intend to give its statutes any extraterritorial effect.”). This presumption is rebutted only where a contrary intent is “clearly expressed or reasonably to be inferred from the language of the act or from its purpose, subject-matter, or history.” Id. (internal quotation marks omitted). In North Alaska Salmon Co., the California Supreme Court considered whether a worker injured outside of California could seek compensation under the state's workers' compensation statute. 174 Cal. 1, 162 P. 93 (1916). The statute “define[d] the conditions upon which the right to compensation rest[ed], [and] simply declare[d] that liability for the compensation provided shall exist where the given conditions concur.” Id. at 4, 162 P. 93. At the time, there was nothing in the law “to indicate that the compensation provisions were intended to apply to injuries occurring in foreign jurisdictions.” Id. The statute contained nothing about “the place of injury,” nor did it contain any other “language from which the intention to extend [its] operation ... beyond the territorial limits of the state [could] be inferred.” Id. at 4–5, 162 P. 93. Therefore, the Court held, the statute was limited to injuries that occurred within California. See id. at 6, 162 P. 93 (explaining that because “there is nothing in the act which by express words or clear implication manifests an intent to have it operate extraterritorial ly, ... the settled rules of interpretation prohibit our giving it any such effect.”).

More recently, California's Supreme Court has explained that an employee may be understood to be a “wage earner of California,” and therefore subject to the state's wage orders, if the “employee resides in California, receives pay in California, and works exclusively, or principally, in California.” Tidewater Marine W., Inc. v. Bradshaw, 14 Cal.4th 557, 578, 59 Cal.Rptr.2d 186, 927 P.2d 296 (1996). The Court left open the possibility that the state's wage orders—and, presumably, other labor provisions—“may” be enforced outside of California “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.” Id. But there is no hint that the wage and hour laws could apply to people who work exclusively in other states.

And in Sullivan v. Oracle Corp., 51 Cal.4th 1191, 127 Cal.Rptr.3d 185, 254 P.3d 237 (2011), the California Supreme Court considered and rejected an argument similar to the one the plaintiffs make here—that because the company was based in California and because decisions about the workers' employment status were made in California, California law should govern the employer-employee relationship. Rather than focusing on the location of the company or its decisionmakers, the Court focused on the location of the work. The Court held that the California Labor Code applies to overtime work “performed in California,” id. at 1206, 127 Cal.Rptr.3d 185, 254 P.3d 237, but that California law did not, at least on the facts of that case, “apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs.” Id. at 1209, 127 Cal.Rptr.3d 185, 254 P.3d 237.1

Beyond these cases, the idea that the wage and hour provisions do not apply to people who perform work exclusively in other states finds support in the provisions themselves. For example, the California Labor Code directs the Industrial Welfare

[60 F.Supp.3d 1063]

Commission “to ascertain the wages paid to all employees in this state, to ascertain the hours and conditions of labor and employment in the various occupations, trades, and industries in which employees are employed in this state, and to investigate the health, safety, and welfare of those employees.” Cal. Lab. Code § 1173 (emphasis added). And “[o]ne of the functions of the Department of Industrial Relations is to foster, promote, and develop the welfare of the wage earners of California .” Id. § 50.5 (emphasis added). Conversely, where the legislature has intended a Labor Code provision to apply to a broader range of people, it has said so explicitly. The current workers' compensation statute, for example, applies to certain accidents that occur “outside of this state” and characterizes this application as “extraterritorial.” Cal. Lab. Code § 3600.5.

Here, the plaintiffs propose to represent class members who are residents of other states, who drive for Lyft exclusively in those states, and who apparently never set foot in California in furtherance of their work with the company. The California wage and hour laws at issue here do not create a cause of action for people who fit this description, even if they work for a California-based company that makes all employment-related decisions in California.

O'Connor v. Uber Technologies, Inc., 58 F. Supp. 3d 989 (N.D. Cal. 2014) involved a nationwide class action of Uber drivers against Uber. One of the causes of action asserted was that Uber failed to reimburse drivers for expenses in violation of Cal. Lab. Code § 2802. The plaintiffs argued that the provision applies extraterritorially because it does not contain geographical limitations and that the presumption against extraterritorial application was overcome by the choice-of-law provision in the relevant agreement. The District Court for the Nothern District of California rejected both arguments (at 1004-1006):

In its prior order in this matter, the Court rejected Uber's arguments and found that extraterritorial application of California law was proper in this action. While noting the presumption against extraterritorial application, the Court found (1) that there were no “express geographical limitations in the laws at issue which would preclude the parties' agreement to apply California law extraterritorially” and (2) that the Ninth Circuit's decision in Gravquick established that the “the presumption against extraterritorial application of a law is rebutted when there is a choice-of-law clause governing the parties' relationship. O'Connor, 2013 WL 6354534, at *4.

The Court's prior order rested on a fundamental mis-reading of Gravquick. The relevant portion of the Gravquick held:

If a state law does not have limitations on its geographical scope, courts will apply it to a contract governed by that state's laws, even if parts of the contract are performed outside the state. When a law contains geographical limitations on its application, however, courts will not apply it to parties falling outside those limitations, even if the parties stipulate that the law should apply.

Gravquick, 323 F.3d at 1223 (emphases added). It is thus apparent that the court in Gravquick did not hold that a California choice of law provision can overcome the presumption against extraterritorial application of California law. Instead, the court recognized that parties' agreement to apply California law must yield in those circumstances where the law in question contains “geographical limitations.” While Gravquick makes clear one such circumstance is where the legislation contains an explicit limitation, there is no logical reason to reach a different result where that limitation is implicit, especially when the California Supreme Court has made clear that such limitations are presumed to be present unless the legislature's contrary intention “is clearly expressed or reasonably to be inferred from the language of the act or from its purpose, subject matter or history.”

[58 F.Supp.3d 1005]

Sullivan v. Oracle Corp., 51 Cal.4th at 1207, 127 Cal.Rptr.3d 185, 254 P.3d 2377; see also North Alaska Salmon Co. v. Pillsbury, 174 Cal. 1, 6, 162 P. 93 (1916) (“[T]here is nothing in the act which, by express words or clear implication, manifests an intent to have it operate extraterritorially, and ... settled rules of interpretation prohibit our giving it any such effect.”); cf. Morrison v. Nat'l Australia Bank, 561 U.S. 247, 248, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010) (“When a statute gives no clear indication of an extraterritorial application, it has none.”).8

Moreover, a contractual choice of law provision that incorporates California law presumably incorporates all of California law—including California's presumption against extraterritorial application of its law. See Wright v. Adventures Rolling Cross Country, Inc., No. 12–cv–0982–EMC, Docket No. 22, at 6 (N.D. Cal. May 3, 2012) (“[E]ven if the provision identified by Plaintiffs were a choice-of-law provision, there is nothing to indicate that the parties intended to incorporate only portions of California law and exclude the incorporation of California law's presumption against extraterritoriality.”); see also Cotter v. Lyft, Inc., 60 F.Supp.3d 1059, 1065, 2014 WL 3884416, at *4 (N.D.Cal. Aug. 7, 2014) (“Even if the choice of law provision were intended to confer upon out-of-state drivers a cause of action for violation of California's wage and hour laws, it could not do so. An employee cannot create by contract a cause of action that California law does not provide.”).

Accordingly, the Court concludes that the choice-of-law provision in the Licensing Agreement does not overcome the presumption against extraterritorial application of California law absent an indication that such a presumption does not apply. The relevant question, therefore, is whether there is a discernible legislative

[58 F.Supp.3d 1006]

intent not to have “geographic limitations” in the statutes relied upon by the Plaintiffs—specifically Cal. Labor Code Sections 351 (covering gratuities) and 2802 (covering reimbursement for employment related expenses). The Court finds there is no such intent.

The Court found that other Labor Code provisions explicitly provide for extraterritorial application, but Cal. Lab. Code § 2802 does not. Given the structure and history of California's Labor Code, this reinforced the presumption against extraterritoriality. Therefore, section 2802 could not apply to the class members who worked in states other than California (at 1006-1007):

Here, there are indications in the legislative history of the Labor Code which support a finding that the California legislature did not intend Sections 351 or 2802 to apply extraterritorially. First, California's presumption against extraterritorial application of its laws dates back to at least 1916. In North Alaska Salmon Co. v. Pillsbury, the California Supreme Court expressly spoke of the “presumption that [the legislature] did not intend to give its statutes any extraterritorial effect.” 174 Cal. at 4, 162 P. 93. It further stated the rule that has since been consistently applied by California courts ever since—“The intention to make the act operative, with respect to occurrences outside the state, will not be declared to exist 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.’ ” Id. Despite this clear standard, in originally enacting Labor Code Sections 351 and 2802 in 1937, the California legislature failed to specify that either provision should be applied extraterritorially.

Second, the legislature has, in other Labor Code provisions, expressly provided for extraterritorial application. For example, in Tidewater Marine Western, Inc. v. Bradshaw, 14 Cal.4th 557, 59 Cal.Rptr.2d 186, 927 P.2d 296 (1996), the California Supreme Court noted that “[i]n some circumstances, state employment law explicitly governs employment outside the state's territorial boundaries.” Id. at 578, 59 Cal.Rptr.2d 186, 927 P.2d 296. The court cited two statutes in the worker's compensation realm—Cal. Labor Code § 3600.5 (providing protection for injuries suffered by employees who were hired or regularly worked in California but was injured out of state) and § 5305 (providing the Division of Workers' Compensation with jurisdiction over such claims. See Tidewater, 14 Cal.4th at 578, 59 Cal.Rptr.2d 186, 927 P.2d 296; see also Cotter, 60 F.Supp.3d 1059, 1063, 2014 WL 3884416, at *3 (“[W]here the legislature has intended a Labor Code provision to apply to a broader range of people, it has said so explicitly.”). Where it so desired, the California legislature provided for extraterritorial applications; the California legislature did not so provide with respect to Sections 351 and 2802. The structure and history of the Labor Code, therefore, reinforce the presumption against extraterritoriality. This distinguishes this case from Gravquick, where the Ninth Circuit found evidence in the legislative history of the California Equipment Dealers' Act suggesting that the California legislature intended the Act to appear extraterritorial. See Gravquick, 323 F.3d at 1223.

Accordingly, the Court concludes that the Labor Code violations upon which Plaintiffs rely do not apply extraterritorially and, therefore, cannot apply to those Plaintiffs or unnamed class members who worked in states other than California. See, e.g.Cotter, 60 F.Supp.3d 1059, 1063, 2014 WL 3884416, at *3 (“[P]laintiffs propose to represent class members who are residents of other states, who drive for Lyft exclusively in those states, and who apparently never set foot in California.... The California wage and hour laws at issue here do not create a cause of action for people who fit this description, even if they work for a California-based company that makes all employment-related decisions in California.”);

[58 F.Supp.3d 1007]

Campagna v. Language Line Servs., Inc., No. 5:08–CV–02488–EJD, 2012 WL 1565229 (N.D.Cal. May 2, 2012) (“None of the cases read California's wage and hour laws to cover out-of-state work performed by nonresidents who primarily work outside California.”); Sarviss v. General Dynamics Info. Tech., Inc., 663 F.Supp.2d 883, 900 (C.D.Cal.2009) (“Although the cases discussing the extraterritorial application of California's wage and hour law are sparse, those decisions that do discuss it have tended to find that California wage and hour provisions do not apply to non-resident Californians who work primarily outside of California.”).

In Campagna v. Language Line Servs., Inc., 5:08-CV-02488-EJD (N.D. Cal. 2012), the United States District Court for the Northern District of California addressed whether Cal. Lab. Code § 2802 applied to an employee who worked remotely from his home in Iowa for a California-based employer. He also worked while traveling, including throughout California and at the employer's headquarters in Monterey. Citing Sullivan, the Court held that requiring an employer to indemnify nonresidents who work from their homes outside California for home office expenses is not within the scope of section 2802. However, it could apply to necessary expenses that a nonresident employee incurs during periods of work performed in California (at 5-6):

California courts have long acknowledged a general presumption against the extraterritorial applications of state laws. "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 it's purpose, subject matter or history." Sullivan v. Oracle Corp. (Sullivan IV), 51 Cal. 4th 1191, 1207 (2011) (internal quotations omitted). This presumption is applicable to all manner of wage and hour laws. See Sarviss v. General Dynamics Info. Tech., Inc., 663 F. Supp. 2d 883, 897-901 (C.D. Cal. 2009).

Sullivan IV held that the California Labor Code's overtime provisions cover nonresident employees who work in California for a California-based employer. Other cases consider different permutations of these facts. See Sarviss, 663 F. Supp. 2d at 899-901 (holding Industrial Welfare Commission (IWC) wage orders inapplicable to a California resident who performed most of his work outside California); Priyanto v. M/S Amsterdam, 2009 WL 175739, at *7 (C.D. Cal. Jan. 23, 2009) ("California has little or no interest in applying its wage laws to nonresidents who perform

Page 6

work outside of California."). None of the cases read California wage and hour laws to cover out-of-state work performed by nonresidents who primarily work outside California.

Nothing suggests that Labor Code § 2802 has any greater or lesser extraterritorial influence than the overtime provisions at issue in Sullivan IV or the IWC wage order considered in Sarviss. Each law exists to ensure Californians are fairly compensated for their work. Requiring an employer to indemnify nonresidents who work from their homes outside California for home office expenses is not within the scope of § 2802.

Section 2802 might apply, however, to necessary expenses that a nonresident employee incurs during periods of work performed in California. The complaint hints at but does not expressly claim such expenses: it notes, for example, that Plaintiff Campagna periodically worked from the company's Monterey headquarters but does not identify any particular necessary expenses connected with that trip. Compl. ¶ 13. Any necessary expenses associated with such a visit might fall within the ambit of the statute. Resolving such a question would depend on analysis of specific facts—facts which are not before the court at this time. But the possibility of maintaining an action for indemnification of California-related expenditures on behalf a CAFA-compliant class, however remote, leads the court away from dismissing the action with prejudice for lack of subject matter jurisdiction.

Finding no contrary legislative indication, the California Supreme Court held in Sullivan IV that the presumption against extraterritoriality also applies "in full force" to the UCL. Id. Hence, the UCL claim survives only to the extent it is based on permissible applications of §§ 221 or 2802. There is no reason to believe § 221 has any greater or lesser extraterritorial effect than § 2802, so the UCL claim as pleaded reaches no more conduct than the § 2802 claim.

No state court decisions were identified that discussed whether Cal. Lab. Code § 2802 applies to nonresident employees who work from home for a California-based employer.

Authorities:
Cal. Lab. Code § 1171.5
Tidewater Marine Western, Inc. v. Bradshaw, 59 Cal.Rptr.2d 186, 14 Cal.4th 557, 927 P.2d 296 (Cal. 1996)
Sullivan v. Oracle Corp., 547 F.3d 1177 (9th Cir. 2008)
Sullivan v. Oracle Corp., 51 Cal.4th 1191, 254 P.3d 237, 127 Cal.Rptr.3d 185 (Cal. 2011)
Bernstein v. Virgin Am., Inc., 227 F.Supp.3d 1049 (N.D. Cal. 2017)
Cotter v. Lyft, Inc., 60 F.Supp.3d 1059 (N.D. Cal. 2014)
O'Connor v. Uber Technologies, Inc., 58 F. Supp. 3d 989 (N.D. Cal. 2014)
Campagna v. Language Line Servs., Inc., 5:08-CV-02488-EJD (N.D. Cal. 2012)
Cal. Lab. Code § 2802