The 9th Circuit withdrew its opinion in Sullivan v. Oracle Corp. on Feb. 17, citing the decision's wide-ranging impact on employers and the unclear precedent behind it. Among several issues covered, its November 2008 panel decision applied California's labor code to out-of-state employees working temporarily in-state at California-based companies (see InsideCounsel's February Circuit story). California's labor laws are notoriously stringent, and the decision alarmed many labor attorneys.
"There's just total confusion," Paul Cane, who represented Oracle in the case, told InsideCounsel in February. Before being withdrawn, both parties had asked for an en banc rehearing of the case.
Along with the withdrawal, the 9th Circuit asked the California Supreme Court for guidance on whether California's Labor Code and Unfair Competition Law (UCL) apply to overtime work that out-of-state employees perform in California for companies based in the state. It also asked whether the UCL applies to overtime work an out-of-state employee performs outside California for a California-based employer that fails to comply with the federal Fair Labor Standards Act.
With the decision withdrawn, Sullivan is no longer binding on employers. But the California Supreme Court does not have to take the case. If it does, it may be more than a year before the court issues any guidance.
If the California Supreme Court does not review the case, the 9th Circuit would reissue an opinion. Whether that new opinion would echo the same ideas as the original or go a different direction is unclear, says Richard Rahm, a shareholder at Littler Mendelson.
Even though the uncertainty surrounding Sullivan will likely remain for some time, Rahm recommends companies act cautiously. "The safest position would be to assume that they're subject to California law," he says. "[Make sure] everything covered by the Labor Code is in compliance."