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Transportation Brief: Key Cases Addressing the Reach of California’s Strict Wage and Hour Laws

by Christopher J. Eckhart, Gregory M. Feary, James H. Hanson, Adam C. Smedstad

August 6, 2020

The California Supreme Court recently decided a pair of cases addressing critical questions facing out-of-state companies operating in California.

In Oman v. Delta Air Lines, Inc. and Ward v. United Airlines, Inc., the Court concluded that California’s wage statement and wage payment laws only apply when the employee’s principal place of work is in California. For interstate workers whose work is not primarily performed in any single state (i.e., more than 50%), the Court held these laws will only apply if the workers have their base of work operations in California. The Court did not specifically define what constitutes “base of work operations,” but suggested that designating an employee as assigned to or associated with a particular terminal or location in California would suffice.

Notably, the Court did not create any exceptions for nonresident employees or companies based outside California. Therefore, all employers must provide California-compliant wage statements and wage payments to any employee whose principal place of work is California.

The Court’s analysis could also help carriers avoid the application of California’s misclassification laws to independent contractors based outside of California. The Court decided to limit the application of California’s wage statement and payment laws to workers who principally work in California based, in part, on its desire to avoid conflicts with other states’ laws. Imposing California’s misclassification law on an independent contractor’s work that is not principally performed inside California would arguably create the conflict the Court sought to avoid in the Airline cases.

The Court also provided helpful guidance on when an activity-based pay system complies with California’s minimum wage laws. Importantly, the Court held that California’s minimum wage laws gave employers and employees the flexibility to broadly define the work covered by the piece-rate pay, subject to two requirements. First, the average rate for the piece-rate work must meet or exceed the minimum wage. Second, under California Labor Code § 226.2, the employer must still pay piece-rate employees separate wages for “non-productive time” (i.e., work that is not directly related to the activity paid by the piece). Carriers that pay drivers on a piece-rate basis and dispatch those drivers to and from California should review their compensation policies to ensure they comply with the Court’s interpretation of how California’s minimum wage laws may apply to those drivers.

Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
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