The California Supreme Court’s 2012 decision in Sullivan v. Oracle signaled, but did not conclusively rule, that no circumstances could support a California Labor Code claim by an employee working outside the State of California. However, a new California federal court decision emphatically holds that the application of California’s Labor Code should end at the state’s borders. Cotter v. Lyft, Inc., 2014 U.S. Dist. LEXIS 109444 (N.D. Cal. Aug. 7, 2014).
In Cotter, plaintiffs sought to represent a class of all individuals who provided driving services as independent contractors for the defendant asserting claims under the California Labor Code, regardless of the states in which they drove. The court sua sponte (i.e., on its own) asked for a briefing on the appropriateness of such claims and ultimately rejected them, ruling “the idea that the wage and hour provisions [of the California Labor Code] do not apply to people who perform work exclusively in other states finds support in the provisions themselves,” as well as in Sullivan and other recent authority. Further, observed Judge Vince Chhabria, California’s labor law did not necessarily provide the most favorable protection to putative plaintiffs, as plaintiffs’ counsel argued, because certain other states’ laws provide for a higher minimum wage rate. Finally, the Judge rejected the notion that the choice-of-law provision in defendant’s contract with its drivers, which designated that California law applied to its terms, provided out-of-state signees with claims under California law, because such an interpretation conflated “statutory claims that exist independent of the contract with claims that arise from the agreement itself.”
Plaintiffs’ counsel continue to push for expansive application of all wage-and-hour laws. Large employers must analyze the scope of potential state labor law coverage of their various operations. Employers also must always consider the unforeseen implications of choice of law provisions in employee agreements.