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California Supreme Court Clarifies Reach of California Labor Code

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Interstate transportation workers most affected

San Francisco, CA On June 29, the California Supreme Court handed down a pair of opinions that clarify the application of the California labor code to employees who work both within and outside of the state. Ward v. United Airlines, Inc. stands broadly for the proposition that the California labor code applies to employees if the employee works a majority of the time in California or has his or her base of operations in California. Oman v. Delta Airlines, Inc. states the rule in the negative. The California labor code does not apply to workers who work only episodically and for less than a day at a time in California unless the employee works primarily in California during the pay period, or for those who do not work primarily in any state, if the worker has a base of operations in California.

The decisions in both lawsuits may have more limited application than meets the eye because of some peculiarities of wage schemes in the airline industry. The most immediate relevance will be to workers in interstate transportation and those whose negotiated wage formulas are difficult to evaluate for minimum wage compliance.

Ward v. United Airlines, Inc.

Ward involved three employees of United Airlines, a pilot and two flight attendants. All were paid under the terms of a collective bargaining agreement governed by the federal Railway Labor Act (RLA).  In their lawsuits, the plaintiffs claimed that they had not received wage statements as required under Section 226 of the California Labor Code. Section 226 requires that employers give written wage statements, containing specific pieces of information to workers “semimonthly or at the time of each payment.”

It should be noted, by way of background, that the Ninth Circuit has already held that employees covered by a collective bargaining agreement under the RLA are exempt from California’s overtime rules. The same argument has been made about California’s sick leave rules. United Airlines argued that the RLA should preempt California’s rules about the frequency of wage statements. The California Supreme Court, however, found no reason to exclude the pilot and flight attendants from this form of wage protection.

The second issue raised in Ward was whether the same section of the law applied to California residents:
  • who are paid in California; and
  • pay income taxes in California; but
  • work for an out-of- state employer; and
  • do not work principally in California or any other state.
Who does not work principally in any state? That seems to mean interstate transportation workers.

Here, the court drew a distinction between those who have a definite base of operations in California and those who do not. For the relatively small subgroup of workers who have a base of operations in California, the answer is yes. Section 226 does require legally compliant wage statements.

For those who have a base of operations in other states, the answer is no. The labor law provisions of those home base should apply
Oman v. Delta Airlines, Inc.

In Oman, the plaintiffs were a group of current and former Delta flight attendants. The court was asked to determine whether Sections 226 and 204 of the California Labor Code applied to employees who were in a similar situation as that outlined in Ward. Section 204 requires that, with certain exceptions, wages must be paid twice a month.

The court reached conclusion that was similar to its holding in Ward. It found that sections 204 and 226 do not apply to pay periods in which an employee works only episodically and for less than a day at a time in California unless the employee either works primarily in California during the pay period, or does not work primarily in any state but has his or her base of operations in California.    

An additional issue in Oman involves Delta’s complicated pay formula for flight attendants. Under this scheme, flight attendants’ pay was measured by “rotation,” a given sequence of flights over a day or period of days on which the attendant would work.

Compensation for each rotation was calculated according to four different formulas, and flight attendants were paid according to the formula that yielded the largest amount for a complete rotation. Under one of the four formulas, pay was based solely on flight time and did not include the hours flight attendants spent working on the ground.

Plaintiffs argued that the entire scheme, therefore, violated California’s minimum wage laws. The court held that Delta’s four-formula method for calculating compensation did not violate the law because it guaranteed that flight attendants were always paid more than the minimum wage for the hours worked during each rotation.

The upshot?

California’s wage and hour laws are highly protective of employee rights – perhaps the most worker-friendly in the nation. For administrative reasons, multistate employers often find it easier just to adopt California standards, even though some employees have no connection with the state. Alternatively, they may look for ways to limit the application of California law.

In Ward and Oman, the California Supreme Court appears to have tried to balance the interests of employers and employees by limiting the application of California law in some specific circumstances. Except in those circumstances, the reach of California labor law appears to be unaffected.


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