Governor Brown Nominates Goodwin Liu to California Supreme Court

The Los Angeles Times is reporting that Governor Brown has nominated UC Berkeley law professor Goodwin Liu to fill the California Supreme Court vacancy left earlier this year by retired Justice Carlos Moreno. Liu had been nominated by President Obama for a seat on the Ninth Circuit Court of Appeals, but Republican member of the Senate had blocked his nomination, and Professor Liu withdrew his name in May.

The article is here.

Cal. Supremes Grant and Hold in Lamps Plus

The California Supreme Court yesterday granted review in Lamps Plus Overtime Cases (5/10/11) pending its decision in Brinker v. Superior Court. In Lamps Plus, the Second District Court of Appeal held that the trial court (L.A. Superior, Judge West) did not abuse its discretion in denying class certification of a wage and hour action alleging, among other causes of action, violation of California's meal and rest period requirements.

Pearl Law Firm associate Leonard H. Sansanowicz wrote an amicus letter to the California Supreme Court on behalf of the California Employment Lawyers Association (CELA), asking the Court to grant review.

California's Budget Cuts To Worsen California Court Delays, Officials Say

The Los Angeles Times is reporting that the recently passed budget cuts $350 million from court funding -- 10% of its $3.5 billion annual budget. California's courts have seen more than a 30% reduction in state general funds over the last three years. The report is available here.

Review of LACBA Dinner on Dukes and Concepcion

I organized and had the honor of introducing the speakers at last night's Los Angeles County Bar Association program on class action practice after Wal-Mart v. Dukes and AT&T Mobility v. Concepcion: Nancy Abell of Paul Hastings, Brad Seligman of The Impact Fund, and our moderator, Aaron Cole of Irell & Manella. 158 people attended, making it the most successful dinner that the Labor and Employment Law Section has presented.

Wal-Mart v. Dukes: Aaron did a nice job of explaining the decision. Not surprisingly, Nancy and Brad disagreed strongly on its impact going forward. Brad emphasized that the theory of the case -- that a company policy giving discretion to local decision-makers can have a disparate impact on employees -- is very narrow and rarely used, so that the ultimate impact of Dukes may be more narrow than we all may assume. Nancy emphasized more broadly applicable rules found in the decision, such as the limitation on the use of aggregated statistics and the use of Daubert motions on class certification. Brad countered that Daubert challenges have been used for several years and will continue to be used, but whether they will succeed in keeping social scientists out of the certification debate in the future remains to be seen.

Nancy argued that the Hilao v. Estate of Marcos method of trying class actions -- what Justice Scalia referred to as "trial by formula" -- is dead, at least in Title VII cases, and cited Marlo v. UPS II (9th Cir.) and the more recent Cruz v. Dollar Tree (N.D. Cal.). Brad countered that this part of the decision rests on the language of Title VII (limiting its impact in other class cases) and in any case, the plaintiffs never relied on Hilao, which was inserted sua sponte by the Ninth Circuit in its en banc decision. He said that in Dukes, the plaintiffs have full data on the disparate impact of Wal-Mart's policies and can try the case based on that data, rather than on sampling. The Supreme Court, however, did not address this issue.

Brad conceded that the most significant impact of Dukes outside of the Title VII context is that if a plaintiff seeks a monetary recovery, Rule 23(b)(2) is out, and the case will be analyzed under Rule 23(b)(3). Nancy added that plaintiffs likely will seek to work with the EEOC, which may intervene in Title VII cases and which is not bound by Rule 23. Brad said that we likely will see larger cases broken down regionally. "Stay tuned."

AT&T Mobility v. Concepcion: Again, Aaron did a nice job summarizing the case. Nancy argued that along with Discover Bank, Gentry v. Superior Court is dead, and last week's Brown v. Ralph's Grocery is wrongly decided. Brad argued that California courts are going to follow their own line -- as in Brown -- until the Supreme Court says no, and that AT&T's arbitration agreement was unusually generous and that more standard arbitration agreements may not receive such a warm welcome in the courts.

Justice Moreno then asked what impact AT&T might have on the California Supreme Court's decision in Sonic-Calabasas A, Inc. v. Moreno, which he authored. Nancy stated, no offense to Justice Moreno, that it is dead. Brad countered that enforcement actions before the DLSE or under PAGA may not be subject to arbitration under the Supreme Court's EEOC v. Waffle House decision.

Asked whether a class action ban might violate the National Labor Relations Act by interfering with concerted activity, Brad responded that at least one such case is under consideration by the NLRB.

All in all, a very interesting night for us class action wonks. Thank you to Nancy, Brad, Aaron, and everyone else involved for making it such a success.

Brown v. Ralphs Grocery: Court of Appeal Says Concepcion Does Not Apply in PAGA Actions

Brown v. Ralphs Grocery Company (July 12, 2011) --- Cal.App.4th ----, 2011 WL 2685959, mod. July 20, 2011 at 2011 WL 2892118, is the first California case that I'm aware of dealing with a class arbitration waiver in the wake of the Supreme Court's ruling in AT&T Mobility v. Concepcion.

The plaintiff brought a putative class and representative action under the Private Attorney General Act of 2004 (PAGA) against her employers (Ralphs) for alleged Labor Code violations. Ralphs petitioned to compel individual arbitration under its arbitration policy, which provided:

This Arbitration Policy applies to any and all employment-related disputes that exist or arise between Employees and Ralphs [Grocery Company] (or any of them) that would constitute cognizable claims or causes of action in a federal, state or local court or agency under applicable federal, state or local laws (referred to in this Arbitration Policy as ‘Covered Disputes').... “[T]here is no right or authority for any Covered Disputes to be heard or arbitrated on a class action basis, as a private attorney general, or on bases involving claims or disputes brought in a representative capacity on behalf of the general public, of other Ralphs [Grocery Company] employees (or any of them), or of other persons alleged to be similarly situated.... [T]here are no judge or jury trials and there are no class actions or Representative Actions permitted under this Arbitration Policy.

Ibid. (emphasis in original). The trial court (Los Angeles Superior, Judge Richard Rico) denied the petition, finding that the agreement was unconscionable and unenforceable, and Ralphs appealed. After submission of the appeal, the Supreme Court of the United States issued its decision in AT & T. The Court of Appeal affirmed in part, reversed in part, and remanded for further consideration.

The Court first considered the trial court's ruling that the arbitration waiver was unconscionable under Gentry v. Superior Court (2007) 42 Cal.4th 443 (invalidating class arbitration waiver in wage and hour class action):

Contrary to plaintiff's assertion, the court in Gentry, supra, 42 Cal.4th at page 446, required a factual showing under the four-factor test established in that case ["the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members' rights ... through individual arbitration"]. Plaintiff, however, made no such showing in opposing the petition to compel arbitration. Thus, there was no evidence, much less substantial evidence, supporting the trial court's finding that under Gentry, plaintiff had established a basis not to enforce the class action waiver. As a result, we reverse the trial court's ruling invalidating the class action waiver.

Accordingly, we do not have to determine whether, under AT & T, supra, 131 S.Ct. 1740, the rule in Gentry, supra, 42 Cal.4th 433 concerning the invalidity of class action waivers in employee-employer contract arbitration clauses is preempted by the FAA. (See Arguelles–Romero v. Superior Court (2010) 184 Cal.App.4th 825, 836 [“while Discover Bank is a case about unconscionability, the rule set forth in Gentry is concerned with the effect of a class action waiver on unwaivable rights regardless of unconscionability”]; People v. Landry (1996) 49 Cal.App.4th 785, 791 [California Supreme Court interpretation of federal law binding when there is “no contrary United States Supreme Court decision” on the issue]; see also Perry v. Thomas (1987) 482 U.S. 483, 489–491 [FAA preempted former § 299, which permits wage claims to be brought in court even though the parties had an arbitration agreement].)

Slip op. at 6-7. Having disposed of that issue without discussion, the Court next considered whether Ralphs could enforce the agreement's apparent waiver of plaintiff's right to bring a PAGA representative action.

The representative action authorized by the PAGA is an enforcement action, with one aggrieved employee acting as a private attorney general to collect penalties from employers who violate the Labor Code. “Such an action is fundamentally a law enforcement action designed to protect the public and penalize the employer for past illegal conduct. Restitution is not the primary object of a PAGA action, as it is in most class actions."

Slip op. at 8, citing Franco v. Athens Disposal Co., Inc. (2009) 171 Cal.App.4th 1277, and Arias v. Superior Court (2009) 46 Cal. 4th 969, 986. The Court then held that PAGA representative actions, unlike individual actions, are not subject to the rule in AT&T, supra,which held that because “it ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress’ [citation], California’s Discover Bank rule is preempted by the FAA.” The Court reasoned:

AT & T does not purport to deal with the FAA's possible preemption of contractual efforts to eliminate representative private attorney general actions to enforce the Labor Code. As noted, the PAGA creates a statutory right for civil penalties for Labor Code violations “that otherwise would be sought by state labor law enforcement agencies.” (Amalgamated Transit Union, Local 1756, AFL–CIO v. Superior Court (2009) 46 Cal.4th 993, 1003.) The “aggrieved employee acts as the proxy or agent of state labor law enforcement agencies, representing the same legal right and interest as those agencies, in a proceeding that is designed to protect the public, not to benefit private parties.” (Ibid.) This purpose contrasts with the private individual right of a consumer to pursue class action remedies in court or arbitration, which right, according to AT & T may be waived by agreement so as not to frustrate the FAA—a law governing private arbitrations. AT & T does not provide that a public right, such as that created under the PAGA, can be waived if such a waiver is contrary to state law.

Slip op. at 9. Applying a relatively narrow reading of AT & T, the Court concluded:

United States Supreme Court authority does not address a statute such as the PAGA, which is a mechanism by which the state itself can enforce state labor laws, for the employee suing under the PAGA “does so as the proxy or agent of the state's labor law enforcement agencies.” ( Arias, supra, 46 Cal.4th at p. 986, 95 Cal.Rptr.3d 588, 209 P.3d 923.) And, even if a PAGA claim is subject to arbitration, it would not have the attributes of a class action that the AT & T case said conflicted with arbitration, such as class certification, notices, and opt-outs. Until the United States Supreme Court rules otherwise, we continue to follow what we believe to be California law.

Slip op. at 13.

In a separate opinion concurring in part and dissenting in part, Justice Kriegler wrote:

I respectfully dissent, however, from the majority's further conclusion that Brown's waiver of the right to file a representative action under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab.Code, § 2698 et seq.) was unenforceable. The preemptive effect of the Federal Arbitration Act (FAA) requires enforcement of the PAGA waiver in the employment arbitration agreement in this case under the holding of AT & T Mobility LLC v. Concepcion et ux. (2011) ––– U.S. ––––, 131 S.Ct. 1740, 179 L.Ed.2d 742 (AT & T).

Slip op. at 16.

I assume that the defense will petition the Supreme Court for review. It will be interesting to see whether the Court takes it up. My guess is that it will not do so.

The opinion is available here.

Fairbanks v. Farmers New World Life: Court Affirms Denial of Class Cert. in Universal Life Insurance Class Action

In Fairbanks v. Farmers New World Life Insurance Co. (July 13, 2011) --- Cal.App.4th ----, 2011 WL 2714173, the Court of Appeal affirmed a trial court (Los Angeles Superior, Judge Mohr) denying class certification:

Plaintiffs and appellants Pauline Fairbanks and Michael Cobb appeal from an order denying their motion for class certification in their action against Farmers New World Life Insurance Company and Farmers Group, Inc. (collectively, Farmers). Plaintiffs' action alleges violations of the Unfair Competition Law (Bus. & Prof.Code, § 17200, henceforth UCL) in connection with Farmers' marketing and sale of universal life insurance policies. The trial court denied the motion for class certification on the basis that common issues did not prevail, specifically concluding that Farmers did not use a common marketing strategy with respect to the policies. As such, the trial court concluded that whether any proposed class member actually heard any alleged misrepresentation was an issue incapable of common proof, requiring denial of the class certification motion.

As substantial evidence supports the trial court's factual finding, we affirm. On appeal, plaintiffs argue that the order denying class certification can be reversed on bases other than those argued to the trial court below. Specifically, although they argued before the trial court that a class action should be certified on the basis of the common marketing of the policies in combination with certain other allegedly improper practices of Farmers, plaintiffs now argue that the other allegedly improper practices standing alone support class certification. As this argument was not made before the trial court, we need not reach or consider it.

Slip op. at 1. I wanted to note this case, but it seems to me to be of limited usefulness, particularly because the plaintiffs failed to preserve their arguments for appeal. Frankly, I'm a little surprised the Court chose to publish the decision, which is available here.

Zullo v. Superior Court: Court Invalidates Arbitration Agreement as Unconscionable

Since the SCOTUS decision in AT&T Mobility v. Concepcion, attorneys on both sides of the bar have wondered whether California courts would entirely abandon unconscionability analysis of arbitration agreements. If the Sixth District Court of Appeal's decision in Zullo v. Superior Court (Inland Valley Publishing Co.) (June 21, 2011, pub. July 12, 2011) is any indicator, the answer is no.

In Zullo, the plaintiff filed a FEHA discrimination and retaliation action. The trial court (Santa Clara Superior, Judge Elfving) granted the defendant's motion to compel arbitration, and the plaintiff filed for writ of mandate. The Court of Appeal reversed, holding that the agreement was unconscionable.

Relying on Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114, the Court found that the agreement was procedurally unconscionable as a contract of adhesion, implemented on a take-it-or-leave-it basis. Slip op. at 4. The Court also noted that the agreement called for the use of AAA rules, but the defendant did not provide the rules to the plaintiff. Id. at 5.

The Court also found the agreement substantively unconscionable:

As to substantive unconscionability, the arbitration policy is one-sided and harsh. Inland insists that the policy imposes a mutual obligation to arbitrate but the argument does not square with the language of the policy. Inland is right that the first paragraph expressly applies to any dispute arising out of the termination; but disputes “arising out of the termination” of an employee are the very claims that “are virtually certain to be filed against, not by [the employer].” Indeed, the arbitration policy adds a nonexclusive list of the statutes and laws to which it applies, all are of equal employment and nondiscrimination laws. Employees bring actions under these laws. Furthermore, what is implicit in the first paragraph of the arbitration policy is explicit in the second, where it states that “no other action will be brought by any employee,” that “Employees shall not have the right to raise any claim” other than by arbitration, and that “Employee agrees” to make a written request for arbitration within a year of when the dispute arises. And finally, in the acknowledgment of receipt the employee confirms that the handbook contains “an arbitration policy requiring me to submit any and all disputes” to arbitration and that “ I cannot pursue such claims before a judge or a jury.” There is nothing about the policy to support Inland's contention that it would be bound to arbitrate any claim it might have against an employee.

The instant policy also lacks mutuality in that it requires the employee, but not the employer, to respond to any communications regarding the arbitration proceedings within 10 days or forfeit her claim. This requirement is indisputably one-sided and unfairly prejudicial to petitioner. Under the plain terms of the arbitration policy Inland may delay the selection of an arbitrator, or any other action that might be needed to move the process along, without risking a penalty of any kind. The employee, on the other hand, is bound to respond to any communication within 10 days or lose her claim altogether. A fair agreement would impose the same time constraints upon both parties.

Id. at 5-6 (citations omitted).

Finally, the Court declined to excise the unconscionable provisions from the agreement. "The illegality cannot be excised here. Striking the forfeiture provision would not cure the other problem, which is that the agreement applies only to the petitioner. There is no single provision we can strike in order to remove that unconscionable taint." Id. at 6.

The opinion is available here.

Securitas v. Superior Court: Court of Appeal Affirms Judgment on Split Shift Issue

Securitas Security Services USA, Inc. v. Superior Court (Holland) (July 7, 2011) --- Cal.App.4th ----, 2011 WL 2641699, presents a discrete split shift issue. The plaintiffs are security guards. They allege failure to pay split shift pay, among other violations. The defendant moved for summary adjudication on the split shift cause of action:

Securitas moved for summary adjudication of the second count only, arguing that plaintiffs are not entitled to split-shift pay because they do not work “split shifts” as defined in Wage Order No. 4. Securitas argued that an uninterrupted work shift that spans midnight and falls in two calendar days and two workdays is not a split shift, and that a split shift does not occur if an employee ends such an overnight shift in the morning and begins another overnight shift late in the evening of the same workday. Plaintiffs argued in opposition that a split shift occurs whenever an employee works two nonconsecutive periods in the same workday, such as when a shift begins on one workday and ends on another and the employee then returns to work several hours later on the second workday. Plaintiffs also argued that Securitas had failed to pay split-shift pay not only where the employee worked shifts spanning midnight on consecutive days, but also where the employee worked nonconsecutive periods in the same workday without working through midnight.

Slip op. at 1. The trial court (Los Angeles Superior, Judge Jones) denied the motion, holding that a split shift occurs "whenever an employee works two nonconsecutive periods of time in the same workday." Slip op. at 2. Securitas filed a writ petition. The Court of Appeal reversed the trial court on the split shift issue:

Wage Order No. 4 defines a “split shift” as “a work schedule” that “is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal breaks.” (Cal.Code Regs., tit. 8, § 11040, subd. 2(Q).) The term “work schedule” is not defined in either the wage order or the Labor Code. In the context of a provision establishing minimum wages to compensate employees who are required to return to work after an interruption in their “work schedule,” we believe that a “work schedule” simply means an employee's designated working hours or periods of work. In our view, this is so irrespective of the “workday” established by the employer. A “split shift” occurs only when an employee's designated working hours are interrupted by one or more unpaid, nonworking periods established by the employer that are not bona fide rest or meal periods. The fact that a single continuous shift happens to begin during one “workday” and end in another does not result in a “split shift.” Thus, employees working uninterrupted overnight shifts on consecutive days do not work a split shift and are not entitled to split-shift pay under the wage order.

Slip op. at 4. Regardless, the Court found that summary adjudication was not appropriate and denied the writ:

Plaintiffs' second count for failure to pay split-shift premiums ... is not limited to purported split shifts created by consecutive overnight shifts, but also encompasses other instances in which they allegedly worked split shifts. Securitas made no effort to show that plaintiffs have not worked split shifts in other circumstances that might fall within the wage order definition for which they may be entitled to split-shift pay. We therefore conclude that Securitas failed to sustain its burden as the party moving for summary adjudication to show that plaintiffs cannot establish an element of their cause of action and are not entitled to summary adjudication.

Slip op. at 5.

The opinion is available here.

Soderstedt v. CBIZ: Court of Appeal Affirms Denial of Class Certification

Will Soderstedt v. CBIZ Southern California, LLC (6/7/11, pub. 7/7/11) --- Cal.App.4th ----, 2011 WL 2186435, be the next case that the Supreme Court agrees to review and hold pending Harris v. Superior Court? If I were a betting man, I would have to say yes.

CBIZ is a public accounting firm. The plaintiffs sought to represent a class of individuals who: "(1) assisted certified public accountants in the practice of public accountancy, (2) worked as associates or senior associates in the assurance or tax lines of service, (3) were not licensed by the State of California as certified public accountants during some or all of this time period, and (4) were classified as exempt employees." Slip op. at 1. As in the recent 9th Circuit case of Campbell v. PricewaterhouseCoopers (blogged here), the plaintiffs alleged that they were not licensed as CPAs and could not be deemed exempt professionals.

The trial court (Los Angeles Superior, Judge Fahey) denied the plaintiffs' motion for class certification. "More particularly, the trial court ruled that there was no competent evidence of numerosity; the representatives' declarations were insufficient to show adequacy of representation; while common issues existed, they did not predominate; and class treatment would not be superior." Slip op. at 4. The Court of Appeal affirmed, finding that the trial court did not abuse its discretion in denying cert.

First, the Court held that substantial evidence supported the trial court's finding that common issues did not predominate. Slip op. at 7. Specifically, the Court held that application of the administrative exemption turns on individualized evidence. Slip op. at 8.

Addressing the disputed elements of the administrative exemption, the evidence showed individual differences in whether Associates and Senior Associates perform non-manual work directly related to management policies or general business operations.

***

The evidence likewise showed that Associates and Senior Associates regularly exercised varying levels of discretion and independent judgment, depending on a number of factors including their level of experience and the nature of the engagement.

***

Finally, the evidence established that the level of general supervision provided to Associates and Senior Associates varied depending on the individuals involved and the type of engagement, as well as the location of the CBIZ office.

Slip op. at 9. T he Court held that this evidence was sufficient to support the trial court's ruling. Slip op. at 10.

The Court also held that the trial court did not employ improper criteria in denying certification and that substantial evidence supported the trial court's findings that the plaintiffs failed to submit competent evidence of numerosity, adequacy of representation, and superiority. Slip op. at 14-16.

The opinion is available here.

Sullivan v. Oracle: Non-CA Residents Working in CA Are Subject to CA Overtime and the UCL; Those Working in Other States Are Not

The California Supreme Court yesterday issued its opinion in Sullivan v. Oracle Corp. (6/30/11) --- Cal.4th ---, 2011 WL 2569530. Sullivan raised three issues:

First, does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for work in excess of eight hours per day or in excess of forty hours per week?

Second, does § 17200 apply to the overtime work described in question one?

Third, does § 17200 apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case if the employer failed to comply with the overtime provisions of the FLSA?

In my original post on the case (here), I said issues one and two were "gimme's" for the plaintiffs, but issue number three was more complex and uncertain. Turns out I do a pretty good job predicting the Cal. Supremes.

Here are the underlying facts:

Plaintiffs Donald Sullivan, Deanna Evich and Richard Burkow formerly worked as “Instructors” for defendant Oracle Corporation, a large software company headquartered in California. As Instructors, plaintiffs' job was to train Oracle's customers in the use of the company's products. Plaintiffs Sullivan and Evich reside in Colorado, and plaintiff Burkow resides in Arizona. Required by Oracle to travel, plaintiffs worked mainly in their home states but also in California and several other states. During the time period relevant to this litigation (2001–2004), Sullivan worked 74 days in California, Evich worked 110 days, and Burkow worked 20 days.

Slip op. at 2. Oracle treated its Instructors as exempt employees. The plaintiffs filed a class action alleging three causes of action: (1) California Labor Code claim for overtime hours worked in California; (2) Unfair Competition Law (UCL) claim for overtime hours worked in California in violation of the Labor Code; and (3) UCL claim for overtime hours worked outside of California in violation of the federal Fair Labor Standards Act ("FLSA"). The plaintiffs filed their case in the Northern District of California, and the Court (Judge Stotler) granted summary judgment for Oracle. The Ninth Circuit affirmed in part and reversed in part, then decided to ask the Cal. Supremes to decide the issues. The Supremes issued a unanimous decision, authored by Justice Werdegar.

On the first issue, the Court held that California's overtime requirements do apply to work performed in California by non-residents. First, as a matter of statutory construction, "California's overtime laws apply by their terms to all employment in the state, without reference to the employee's place of residence." Slip op. at 5. The Court held that the Legislature's intent to encompass all work done in California does not create ambiguity or uncertainty and is neither improper nor capricious. Slip op. at 6. The Court reaffirmed language from its decision in Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557.

We thus foresaw in Tidewater, 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” (id., at p. 578), 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 statutory definition of overtime. (See Lab. Code, § 510.) 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.

Slip op. at 9 (emphasis in original). This is an important point. Counsel representing employees should not assume that California's overtime laws apply to partial days worked in California.

Next, the Court conducted a conflict-of-laws analysis. The Court held that California overtime law differs from that of the plaintiffs' home states, Colorado and Arizona, but there is no "true conflict":

California has, and has unambiguously asserted, a strong interest in applying its overtime law to all nonexempt workers, and all work performed, within its borders. (See Lab. Code, § 1171.5, subd. (a) [“All protections, rights, and remedies available under state law . . . are available to all individuals . . . employed, in this state.”]; see also id., §§ 510, subd. (a) [“[a]ny work”], 1194, subd. (a) [“any employee”], 1199 [criminal sanctions]; see also discussion ante, at p. 6 et seq.) California's interests, as this court has identified them, are in protecting health and safety, expanding the labor market, and preventing the evils associated with overwork. (Gentry v. Superior Court, supra, 42 Cal.4th 443, 456.) Similar interests underlie the FLSA's overtime provisions (Barrentine v. Arkansas-Best Freight System (1981) 450 U.S. 728, 739) and, we may assume, Colorado law as well.

Slip op. at 15. Finally, the Court held that California's interests would be more impaired by the failure to apply California law than would the interests of the other states involved:

To permit nonresidents to work in California without the protection of our overtime law would completely sacrifice, as to those employees, the state‟s important public policy goals of protecting health and safety and preventing the evils associated with overwork. Not to apply California law would also encourage employers to substitute lower paid temporary employees from other states for California employees, thus threatening California‟s legitimate interest in expanding the job market.

Slip op. at 17-18.

Having held that California's overtime law protects these employees, the Court easily resolved the second issue by reaffirming that "the failure to pay legally required overtime compensation falls within the UCL‟s definition of an 'unlawful . . . business act or practice'." Slip op. at 18-19.

On the third point, the Court held that the UCL does not apply to claims under the FLSA for overtime work performed by nonresidents in other states. The section on this point is relatively short, and I find it interesting, so I will quote it in full, omitting citations:

This claim, despite its reference to the FLSA, arises under California and not federal law. In the prior class action, plaintiffs settled their timely claims under the FLSA, which were subject to a limitation period of two or three years, depending on the circumstances. Now, in this action, plaintiffs attempt to restate time-barred FLSA claims, which were excluded from the prior settlement, as UCL claims based on the predicate “unlawful . . . act” of violating the FLSA. The question before us is whether the UCL reaches plaintiffs' FLSA claims under the circumstances of this case. We conclude it does not.

Plaintiffs' claim implicates the so-called presumption against extraterritorial application. 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 its purpose, subject matter or history.” Neither the language of the UCL nor its legislative history provides any basis for concluding the Legislature intended the UCL to operate extraterritorially. Accordingly, the presumption against extraterritoriality applies to the UCL in full force. We thus proceed to consider whether plaintiffs' proposed application of the UCL would cause it to operate, impermissibly, with respect to occurrences outside the state.

The Ninth Circuit has asked us to decide whether the UCL applies to plaintiffs' FLSA claims “in the circumstances of this case”, which we understand to mean in accordance with the same stipulated facts on which the federal courts have based their decisions. Those stipulated facts identify only a single instance of relevant conduct occurring in California: “The decision-making process to classify Instructors as exempt from the requirement to be paid overtime wages under the FLSA occurred primarily from within the headquarters offices of Oracle Corporation located in Redwood Shores, California.” Certainly the UCL reaches any unlawful business act or practice committed in California. But for an employer to adopt an erroneous classification policy is not unlawful in the abstract. What is unlawful, and what creates liability under the FLSA, is the failure to pay overtime when due. Accordingly, that Oracle's decision to classify its Instructors as exempt was made in California does not, standing alone, justify applying the UCL to the nonresident plaintiffs' FLSA claims for overtime worked in other states. Nor does any other basis for applying the UCL to those claims appear in the stipulated facts.

In contrast to the abstract classification decision, the failure to pay legally required overtime compensation certainly is an unlawful business act or practice for purposes of the UCL. Thus, the UCL might conceivably apply to plaintiffs' claims if their wages were paid (or underpaid) in California, but the stipulated facts do not speak to the location of payment. The parties invite us to speculate about the place of payment as a basis for holding the UCL does, or does not, apply. We decline to do so. Whether the parties are entitled to rely on facts or assertions beyond the stipulated facts to support or defeat the motion for summary judgment is a question of federal procedure for the federal courts. Given the limitations of the certified question procedure, which does not confer on us plenary jurisdiction over cases pending in the courts of other sovereign entities, our answer must be confined to the circumstances of this case as established by the stipulated facts.

Accordingly, we answer the third certified question as follows: Business and Professions Code section 17200 does not apply to overtime work performed outside California for a California-based employer by out-of-state plaintiffs in the circumstances of this case based solely on the employer's failure to comply with the overtime provisions of the FLSA.

Slip op. at 19-23.

The decision (available here) thus leaves open the question of whether the UCL would apply to out-of-state work if the alleged underpayment happened in California. It's unfortunate that the Court could not resolve this question. Doing so would have saved people time and money down the road that they now will spend litigating the issue, not only in Sullivan, but undoubtedly in other cases as well.