Written by Jeremy Mittman and Stephen Franz

The California Supreme Court recently issued two companion decisions – Ward v. United Airlines, Inc. and Oman v. Delta Air Lines, Inc. – clarifying the application of certain California wage and hour laws to employees who may work both in and out of California during a single pay period.

New Rule for Applying California’s Wage Statement and Timing-of-Payment Laws to Interstate Workers

Specifically at issue in Ward and Oman were the application of California’s wage statement (Labor Code section 226) and timing-of-payment laws (Labor Code section 204) to pilots and flight attendants, who could cross into and out of California (and possibly other states) during any given workday.  The court held both of these California laws applied to interstate employees if either of two conditions are met: (1) if the employee’s principal place of work (the majority of his or her working hours) during the relevant pay period is in California; or (2) the employee does not perform the majority of his or her work during the relevant pay period in any state, but has his or her base of operations (where the worker presents himself or herself to begin work, e.g. a designated home-base airport) in California.  This means some short periods of work in California will not be covered by these laws if the employee works primarily outside California during the relevant pay period.  Conversely, some periods of work outside California will be covered by California law if they occur as part of an overall period in which most work occurs in California.  The court further observed that factors like the location of an employee’s employer, residence, wage receipt, or tax payments, are not relevant in this analysis.

Additional Holdings Regarding the Transportation Industry and Wage Averaging

The court also made two further rulings that may apply to certain businesses.  First, California Wage Order No. 9 (applying to the transportation industry) exempts from its wage statement requirements an employee who has entered into collective bargaining agreement (“CBA”) in accordance with the provisions of the Railway Labor Act (“RLA”).  However, the court in Ward concluded that transportation industry employees are still subject to the wage statement requirements of Labor Code section 226, even if they are covered by a CBA under the RLA.  Second, the court found in Oman that California’s prohibition of “wage borrowing” (taking compensation contractually due for one set of hours and spreading it over other, otherwise un- or undercompensated hours to satisfy the minimum wage) still permits compensation schemes that promise to compensate all hours worked at a level at or above the minimum wage, even if particular components of those schemes fail to attribute to each and every compensable hour a specific amount equal to or greater than the minimum wage.

Takeaways for All California Employers

The conclusions reached in Ward and Oman are consistent with earlier cases holding that various provisions of the California Labor Code do not apply extraterritorially to specific employees.  Nonetheless, the conclusions in Ward and Oman are not necessarily overarching pronouncements about the reach of California wage and hour law beyond the state’s borders.  Notably, the court expressly declined to address the extraterritorial application of California’s minimum wage laws to interstate workers.  Nonetheless, if employees work at least part of the pay period in California, employers should carefully scrutinize whether these employees should receive California-compliant wage statements and be paid pursuant to the timing requirements of California law. Employers should consult these decisions, or their trusted employment counsel, for further guidance.