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Managing Interstate Employees in California

October 8, 2020 - minute read

California may have some of the most thorough and advanced laws for protecting workers in the United States, but that doesn’t mean they’re easy to comply with. In fact, managing inconsistent compliance standards with the applicability of certain wage and hour laws is a constant struggle for employers in and outside of the state. If you’re managing employees who cross in and out of California’s state borders, you have to exercise particular caution.

Two recent court cases, Ward v. United Airlines and Oman v. Delta Air Lines, have clarified some long-standing questions surrounding wage statement requirements for these types of employees (those moving between state borders as part of their job functions). The rulings have provided much-needed interpretation on how employers should approach their wage and hour compliance moving forward.

If you’re an hourly workforce employer, you’re likely dealing with workforce management along multiple state lines depending on your industry and the locations of your worksites. Let’s discuss the rulings of these two cases and how the latest guidelines could ease your payroll concerns.

The Original Case: Sullivan v. Oracle

In 2011, the California Supreme Court ruled in favor of three employees who did not live in California, but who worked for an employer in California—thereby being eligible for California’s overtime laws. This case, Sullivan v. Oracle, created the foundation for this year’s associated cases. The result of the lawsuit? California overtime laws apply to all employment in the state, without reference to the employer’s place of residence.

Still, this left some complicated questions on whether other wage and hour laws also apply to these employees. Fast forward to 2020—businesses still aren’t totally clear on exactly how to pay these types of ‘interstate’ employees. Luckily, Ward and Oman just provided some more insight.

Base of Operations Matters for Interstate Employees

In Ward v. United Airlines, the California Supreme Court addressed whether California Labor Code section 226 (concerning wage statements information requirements) applies to pilots and flight attendants. Since these employees perform work in airspace, an area outside of California’s jurisdiction, employers were unclear on how this affects regulations. The court’s answer: it depends on whether your employee’s primary place of work is in California.

If your employee's principal place of work is in California, then Section 226 applies and you will be expected to issue compliant wage statements. The Court maintained its position that your employees can establish California as their primary state of operation by showing either:

  • That they work a majority of their time within California; or
  • That they have a primary base of operations in California and perform at least some of their work in the state.

To be clear: for pilots and flight attendants who have a home-base airport, the principal place of work is in California if that airport is in California.

Clarifying Pay Compliance for Interstate Employees

In Oman v. Delta Air Lines, the debate around Labor Code sections 226 and 204 (governing pay) surfaced when two flight attendants were found to be victims of a pay scheme failing to pay them correctly for all their hours. The Court ultimately decided that being a nonresident business impacted the use of the previously established Ward test for applicability.

They determined that if employees are based in California for work in any capacity, it is sufficient to trigger the requirements of section 226, regardless of where the employer resides. This case iterates the need to be vigilant of compensation pitfalls! For example, failing to pay employees during every function of their active work (ex. paying flight attendants for the time they spend on the ground, as well as flying in the air).

What does this mean for your business? You need to analyze employees' time on a pay-period basis when calculating multi-state payroll. If an employee spends the majority of a pay period working in California, Section 226 applies to all work performed during that pay period, including work outside of the state.

Looking for Help with California Compliance?

Again, the state of California has stated that these tests do not perfectly resolve all cases– so consider defining your organization’s bases for each of your employees and weighing section 226 factors when calculating your company’s subsequent wage statements.

EPAY Systems offers an advanced workforce management solution that makes it easy to track hourly, distributed employees as they move between multiple state borders—as well as calculate pay around tricky California compliance elements like overtime and meal breaks with ease.

We offer industry-leading compliance safeguards designed specifically to help employers with an hourly, distributed workforce achieve labor compliance on the federal, state and local levels. Register for a live demo of our solution today! 

Filed Under: Compliance HR News California