The Scope of California Law over Out-of-State Employees
California’s principal antidiscrimination law is the Fair Employment and Housing Act (FEHA), Cal. Gov’t Code §§ 12900–12995. Nothing in the act suggests any geographical restrictions on its scope, and how broadly it applies is not clear. The courts have established that it does not protect “nonresidents employed outside the state when the tortious conduct did not occur in California,” even if the plaintiff entered it under his or her employment. Campbell v. Arco Marine, Inc., 50 Cal. Rptr. 2d 626, 633 (Cal. Ct. App. 1996).
But Campbell’s language implies that FEHA does prohibit harassment or discrimination against a nonresident employee while temporarily in California, although no courts have faced that issue. They have held that FEHA protects nonresidents working exclusively in California. Murillo v. Rite Stuff Foods, Inc., 77 Cal. Rptr. 2d 12, 22 (Cal. Ct. App. 1998) (unlawful alien). Federal courts have held that it protects California residents even when the discrimination largely takes place out of state. See Rulenz v. Ford Motor Co., No. 10cv1791-GPC-MDD, 2014 WL 50807, at *5 (S.D. Cal. Jan. 7, 2014).
California’s overtime laws by their terms similarly apply to all employment in the state.Sullivan v. Oracle Corp., 254 P.3d 237, 241 (Cal. 2011). The California Supreme Court has recognized in dictum that an employee who enters the state for the portion of a day does not automatically become subject to California law. But the state’s overtime laws do apply to nonresidents whose employment brings them into the state for entire days or weeks.
The Fair Employment and Housing Act
California antidiscrimination law looks a lot like federal law. California courts often defer to the federal courts’ interpretations of federal law when applying FEHA because they have similar objectives. Reno v. Baird, 957 P.2d 1333, 1337 (Cal. 1998). California courts analyze circumstantial evidence of discrimination with the shifting burdens of McDonnell-Douglas Corp. v. Green, 411 U.S. 792 (1973). See Harris v. City of Santa Monica, 294 P.3d 49, 54 (Cal. 2013). Actionable harassment under FEHA, as under federal law, must be severe or pervasive enough to alter the conditions of employment because of the plaintiff’s membership in a protected class. See Miller v. Dep’t of Corrections, 115 P.3d 77, 87 (Cal. 2005).
But FEHA differs in important ways, beginning with its broader coverage of employers. Title VII and the Americans with Disabilities Act apply only to employers with 15 or more employees, and the Age Discrimination in Employment Act requires 20, but FEHA covers employers with as few as 5. Cal. Gov’t Code § 12926(d) (Deering’s Supp. 2014); cf. 29 U.S.C.S. § 630(b) (2002); 42 U.S.C.S. §§ 2000e(b), 12111(5)(A) (2009). A single employee triggers the statute’s prohibitions against harassment. Cal. Gov’t Code § 12940(j)(1) (Deering’s Supp. 2014).
FEHA’s Broad Prohibition Against Harassment
An employer sending an employee into the state will more likely run afoul of FEHA’s prohibition on harassment than of any other part of it, and in those prohibitions FEHA differs most from federal law. Its prohibits more conduct, including specifically harassment because of “medical condition, genetic information, marital status, . . . gender, gender identity, gender expression, . . . sexual orientation, or military and veteran status.” Cal. Gov’t Code § 12940(j)(1) (Deering’s Supp. 2014). Thus, whereas federal courts have refused to extend Title VII to prohibit sexual-orientation harassment, FEHA prohibits it expressly. Cf. Dawson v. Bumble & Bumble, 398 F. 3d 211, 217–220 (2d Cir. 2005). (Veteran harassment is rare, even in California.)
FEHA imposes broader liability for harassment than its federal counterparts do. It specifically rejects any requirement that sexual desire motivate same-sex harassment. Cal. Gov’t Code § 12940(j)(4)(C) (Deering’s Supp. 2014). Unlike federal law, it imposes liability on the harassers themselves as well as on their employers. See id. § 12940(j)(1); cf. Tomka v. Seiler Corp., 66 F.3d 1295, 1313 (2d Cir. 1995).
FEHA specifically holds employers liable if the employer, or its agent or supervisor, “knows or should have known of the conduct and fails to take immediate and appropriate corrective action.” Cal. Gov’t Code § 12940(j)(4) (Deering’s Supp. 2014). This provision imposes liability for negligently allowing harassment by someone other than the harassed employee’s supervisor. Myers v. Trendwest Resorts, Inc., 56 Cal. Rptr. 3d 501, 512 (Cal. Ct. App. 2007). More importantly, the “supervisor” whom the statute includes as knowing about the harassment includes a harassing supervisor, making employers strictly liable for supervisors’ harassing subordinates. Deference to federal courts is not complete: Under FEHA, the employee’s unreasonable failure to take advantage of the employer’s anti-harassment measures will not relieve it of all liability. Dep’t of Health Servs. v. Super. Ct. of Sacramento Cnty., 79 P.3d 556, 565; cf. Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 765 (1998); see also Faragher v. City of Boca Raton, 524 U.S. 775, 807 (1998).
FEHA’s Broad Understanding of Disability
Although less likely to affect out-of-state employers, some other differences between FEHA and federal law deserve mention. Under the Americans with Disabilities Act, a disability must “substantially limit  one or more major life activities. . . .” 42 U.S.C.S. § 12102(1)(A) (2009) (emphasis added). But a FEHA disability need only “limit  a major life activity.” Cal. Gov’t Code § 12926(j)(1) (physical disability), (m)(1)(B) (mental disability) (emphasis added) (Deering’s Supp. 2014). This distinction between “limit” and “substantially limit” “is intended to result in broader coverage . . . than under th[e] federal act.” Id. § 12926.1(c). (Deering’s Supp. 2014).
An impairment thus need only limit the employee’s ability to do a particular job rather than a class or wide range of jobs. Cal. Gov’t Code § 12926.1(c); cf. Thompson v. Holy Family Hosp., 121 F.3d 537, 540 (9th Cir. 1997). A transitory or temporary condition may be disabling. Diaz v. Fed. Express Corp., 373 F. Supp. 2d 1034, 1047–48 (C.D. Cal. 2005). Even mental distress from a supervisor’s “relentless complain[ts]” may be a disability, reasonably accommodated by a transfer to a different supervisor. Id. at 1040–41, 1053, 1061.
Any employer considering basing employees in California should consult counsel regarding FEHA’s other particularities. It has a longer statute of limitations: one year to file an administrative complaint and another to bring suit. Cal. Gov’t Code §§ 12960(d), 12965(b) (Deering’s 2010 & Supp. 2014); cf., e.g., 42 U.S.C.S. § 2000e-5(e)(1), (f)(1) (2005 & Supp. 2014). Employees disabled by pregnancy get up to 4 months’ leave; after giving birth, those employees may take up to 12 weeks more to care for the child under California’s version of the Family and Medical Leave Act. Cal. Gov’t Code §§ 12945, 12945.2 (Deering’s Supp. 2014); Cal. Code Regs. tit. 2, § 11046(c) (2013). An employer of 50 or more must provide training in prevention of sexual harassment to all supervisors. Cal. Gov’t Code § 12950.1(a) (Deering’s Supp. 2014).
Wages and Hours
Employers do not want to test California’s wage-and-hour laws. Not paying overtime has consequences far beyond the unpaid half of time-and-a-half. A prudent employer pays overtime to all but obviously exempt employees.
Like California’s antidiscrimination laws, its wage-and-hour laws resemble their federal counterpart enough to bring trouble to an employer who misses their differences. For example, California does not recognize the Portal-to-Portal Act’s restrictions on compensable hours worked. Morillion v. Royal Packing Co., 995 P.2d 139, 147–151 (Cal. 2000); cf. 29 U.S.C.S. §§ 251–262 (2010). California employees have a right to overtime wages after 8 hours in a day as well as after 40 in a week. Cal. Lab. Code § 510. They get double time after 12 hours in a day and after 8 on the seventh day in a week.
Computing Overtime under Skyline Homes
Overtime is computed differently in California. The hourly rate for a salaried employer is determined by dividing the weekly salary by 40 hours, not, as under the Fair Labor Standards Act (FLSA), by the total hours worked. Skyline Homes, Inc. v. Dep’t of Indus. Relations, 211 Cal. Rptr. 792, 796–800 (Cal. Ct. App. 1985), overruled on other grounds byTidewater Marine W., Inc. v. Bradshaw, 927 P.2d 296, 306 (Cal. 1996); cf. 29 C.F.R. § 778.114 (2014). The employer then owes one and a half times that amount for every overtime hour. As a result, California overtime generally well exceeds FLSA overtime.
For example, Stargaze Corp. pays Casey, misclassified as exempt, a $2,000 biweekly salary. Casey works on average 50 hours weekly. Under the FLSA, Stargaze has paid him $20 hourly over 50 hours in the week, and it owes an additional $10 for each overtime hour, a total of $100.00. Add a like amount for liquidated damages, and Casey gets $200.00. See29 U.S.C.S. § 216(b) (2010). But, under California law, Stargaze has paid him $25 hourly for 40 hours. It still owes him for 10 hours’ overtime at $37.50 hourly, or $375.00.
Required Meal and Rest Breaks
California mandates rest and meal breaks for nonexempt employees. The employer must provide one unpaid, off-duty meal break for each five hours of work. Cal. Lab. Code § 512 (Deering’s Supp. 2014). It also must permit a 10-minute paid rest break. E.g., Cal. Code Regs. tit. 8, § 11050(12)(A) (2002). The employer need not police employees to make sure they take breaks, but it must pay employees an additional hour’s wage for any break that was denied. Brinker Rest. Corp. v. Super. Ct. of San Diego Cnty., 273 P.3d 513, 556–57 (Cal. 2012); Cal. Lab. Code § 226.7 (Deering’s Supp. 2014). Stargaze thus owes Casey, our misclassified salaried employee, $25.00, one hour’s wage, for each day on which he is denied a meal break and for each day on which he is denied a rest break.
The Labor Code’s More Stringent Test for Exemption
California law, like the FLSA, exempts executive, administrative, and professional employees, as well as outside salespersons and skilled software employees, from overtime. Cal. Lab. Code §§ 515(a), 515.5, 1171 (Deering’s 2006 & Supp. 2014); see 29 U.S.C.S. § 213(a)(1), (17) (2010). The state and federal tests for exemption are very similar, with some differences. For example, the FLSA generally exempts registered nurses as professionals; California does not. Compare 29 C.F.R. § 541.301(e)(2) (2014) with Cal. Code Regs. tit. 8, § 11050(1)(B)(3)(f) (2002).
The California test for exemption differs from the FLSA’s in one small but critical way. Under the FLSA test the employee’s primary duties must be exempt work, whereas under the California test, the employee must be “primarily engaged in the duties that meet the test of the exemption.” Cal. Lab. Code § 515(a) (Deering’s Supp. 2014) (emphasis added); cf. 29 C.F.R. § 541.700(a) (2014). “Primarily engaged” in exempt duties means employees spend more than half their time at them. Heyen v. Safeway Inc., 157 Cal. Rptr. 3d 280, 296 (Cal. Ct. App. 2013). The test is quantitative, not qualitative. An employee’s every task is either exempt or not exempt, and one who spends more time in nonexempt than in exempt tasks must get overtime.
The working manager who spends most the time on the sales floor is thus not exempt. Id. at 302–3. Nor are the outside salespersons who spend less than half their time directly selling.Ramirez v. Yosemite Water Co., 978 P.2d 2, 10 (Cal. 1999). Time spent, for example, delivering product and collecting bills does not count. Id. at 9–10; cf. 29 C.F.R. 541.5 (2014).
The Wage Orders
This discussion of the differences between California and federal law masks the former’s complexity. Any question about wages and hours must start with consulting the right wage order promulgated by the Industrial Welfare Commission (IWC). The IWC has issued 18 of them, a general minimum wage order and 17 wage orders grouped by industry and occupation. See Cal. Code Regs. tit. 8, §§ 11000–11170. The wage orders have the force of statute. Brinker Rest. Corp., 273 P.3d at 527–28.
And counsel must actually consult the wage orders, which seem designed to inhibit practitioners from developing expertise. Even how they categorize industries is not always intuitive: Wage Order 5, for example, groups bars, hospitals, and boarding schools in the “public housekeeping industry.” Cal. Code Regs. tit. 8, § 11050(2)(P) (2002). The wage orders incorporate some, but nowhere near all, U.S. Department of Labor regulations. Last issued in 2001, they incorporate the then-existing regulations, now obsolete following their 2004 revision.
The various wage orders have nearly identical language, with microscopic but essential differences. For example, the orders generally define “hours worked” as “the time during which an employee is subject to the control of an employer, . . . includ[ing] all the time the employee is suffered or permitted to work, whether or not required to do so.” E.g., Cal. Code Regs. tit. 8, § 11020(2)(G) (2002). It includes time when employees have no duty other than remaining on the employer’s premises, even if they may then sleep. Aguilar v. Ass’n for Retarded Citizens, 285 Cal. Rptr. 515, 520–21 (Cal. Ct. App. 1991), rejecting 29 C.F.R. § 785.23 (2014).
But some orders differ. Two adopt the federal definition of “hours worked” for employees in the healthcare industry (otherwise not deemed a single industry under a single wage order). Cal. Code Regs. tit. 8, §§ 11040(2)(K), 11050(2)(K) (2002). These employees on 24-hour shifts may, as under federal law, “agree” to forgo pay for up to 8 hours of on-duty sleep. See29 C.F.R. § 785.22 (2014). Ambulance drivers and attendants—considered part of the “transportation industry”—are subject to this federal sleep-time rule but otherwise fall under the California definition of hours worked. See Cal. Code Regs. tit. 8, §§ 11050(3)(G), 11090(3)(K) (2002). The California Supreme Court is slated to decide early next year whether the federal sleep-time rule applies to all employees, not just those in healthcare.Mendiola v. CPS Sec. Solutions, No. S212704 (Cal. filed Oct. 12, 2013).
Mechanics of Paying Wages under the Labor Code
California has complex statutes regulating not just how much employees receive but how employers are to pay them. See Cal. Lab. Code §§ 200–273. It also has established an agency, the Division of Labor Standards Enforcement (DLSE), to oversee this scheme. Id. § 95(a) (Deering’s 2006). Lest an employer think cutting corners will escape the DLSE’s notice, employees “aggrieved” by an employer’s violation of the law may step into the DLSE’s shoes and recover fines on behalf of all aggrieved coworkers. Id. § 2699(a) (Deering’s 2006). The employees keep one-fourth of those fines and forward the rest to the state. Fortunately for employers who send employees into the state only temporarily, the California Supreme Court has predicted that they would not become subject to the full panoply of California laws regulating payment of wages. Sullivan v. Oracle Corp., 254 P.3d 237, 243 (Cal. 2011).
Stargaze learns this law’s complexity upon terminating Casey after a year. The $375 weekly overtime—$19,500 over a year—and the $25 for denied meal or rest breaks are just the beginning. Misclassifying just Casey for the year could bring $29,675 in penalties, plus attorney fees. If Stargaze doesn’t pay all wages due him immediately upon termination, it owes him his daily wage, $200, for up to 30 days, or $6,000. Cal. Lab. Code §§ 201(a), 203(a) (Deering’s 2006 & Supp. 2014). Stargaze should have paid Casey on its regular payday; omitting his overtime means penalties of $100 for the first payday and $375 for each of the 25 others, or $9,375. Id. §§ 204(a), 210(a) (Deering’s Supp. 2014). The paystubs Casey received, by ignoring his overtime, didn’t state what he actually earned, so Stargaze may have to pay penalties to him personally. See id. § 226(a), (e) (Deering’s Supp. 2014). That error means it also owes the DLSE penalties of $13,000 or $52,000 if it has been caught before. Id. § 226.3 (Deering’s 2006). Finally, Stargaze and any managers who caused Casey’s underpayment get fined $50 for each short check, or another $1,300. Id. § 558 (Deering’s 2006). Stargaze could escape many of the penalties by showing good faith, inadvertence, or just the interests of justice. See Cal. Lab. Code §§ 203(a), 226.3, 2699(e).
Regardless of whether the Labor Code’s payment requirements apply to employees in California temporarily, the state’s discrimination and wage laws are just enough like federal law to trap the unwary. Anyone sending employees into the state should recognize California’s broader protection of employees from harassment and its broader understanding of disabilities entitled to accommodation. An employee exempt from overtime may, upon stepping into California, not still be exempt, and time-and-a-half means something different. Subtle differences among IWC wage orders discourage practitioners from thinking that rules governing one employer govern others. The California legislature has flexed the state’s economic power to ensure that its residents get paid and get fair treatment at work.
Keywords: litigation, employment law, labor relations, wages, hours, California Labor Code
James C. Eschen is an attorney at the Law Office of James C. Eschen in Santa Cruz, California.