Supreme Court Ruling May Impact California Overtime Lawsuits

Washington, DCOn February 23 the Supreme Court ruled that Hertz Corp. should face its California overtime lawsuit in federal court rather than in state court in California. The ruling could have a big impact on future lawsuits regarding California overtime and overtime in other states.

The Supreme Court ruling overturned a previous lower court ruling, which found that Hertz should face the class action lawsuit in state court rather than in federal court. At issue was the site of Hertz's primary place of business. Although Hertz does most of its business in California, the company is headquartered in New Jersey.

According to the 2/23/10 edition of the Wall Street Journal, other large corporations like Starbucks and Target have faced lawsuits in California for the same reason, even though they also have their headquarters elsewhere.

The Supreme Court stated in its ruling that a company should be considered a citizen of the state where its "nerve center" is located—essentially, where the headquarters and executives are. Employees filed the lawsuit in California but Hertz argued the trial should be moved to federal court because the plaintiffs and the defendant are from different states.

Initial rulings from a district court and the US Ninth Court of Appeals agreed with the plaintiffs. The Supreme Court, however, sided with the defendant. Justice Stephen Breyer wrote in the majority opinion that the principal place of business "is best read as referring to the place where a corporation's officers direct, control and coordinate the corporation's activities."

The unanimous ruling may make it more difficult for employees to sue out-of-state corporations in state courts, which are often considered more open than federal courts to class action lawsuits. The ability to file lawsuits in state courts also gives plaintiffs greater freedom to choose courts with more favorable conditions for the lawsuits.

Hertz faces a class action lawsuit filed by employees who say they were not properly paid for overtime and vacations. The lawsuit has now been sent back to the lower courts to sort out other details.