When California Labor Law Applies Out-of-State – the Ninth Circuit’s Virgin America Decision

On February 23, 2021, the Ninth Circuit tackled the difficult issue of when California’s labor laws apply to employees whose duties take them into other states.  The case involved a class of California-based flight attendants alleging that Virgin had failed to pay them minimum wage and overtime, provide them with meal and rest breaks, and provide them accurate wage statements and pay them all wages due at the time of discharge.  Although class members spent only an average of 31.5% of their time in California, the vast majority of Virgin’s flights (as high as 99% in some years) either took off from or landed in California, and the Company is based here.  Defendant took the difficult position that California labor law did not apply, but that no other state’s law did either.  The trial court certified the class, held that California law applied, rejected the argument that the Federal Aviation Act preempted the claims, and granted summary judgment in favor of the class. 
 
The Ninth Circuit’s ruling was generally but not entirely favorable to the class.  After affirming on the preemption issue, the Court applied a recent California Supreme Court decision involving United Airlines flight attendants and noted that each of the class’s claims had to be examined separately to determine whether California law applies.  (This seems to present employers with the same daunting task in attempting to comply with the law.) 
 
With respect to the minimum wage claim, the Court applied California law but held that Virgin’s pay methodology did not necessarily result in minimum wage violations, and reversed the grant of summary judgment.  With respect to overtime and meal and rest breaks, the Ninth Circuit held that California law applied, given Virgin’s status as a California employer and “the circumstances of this case.”  Citing the landmark decision in Sullivan v. Oracle Corp., 51 Cal. 4th 1191 (2011), the Court held that the public policy goals behind the overtime and break laws would be thwarted by holding that Virgin was not required to comply when sending its workers across the border.  The Court also found that California’s law governing wage statements and payment of wages owed at time of discharge applied, noting that the connections between the class’s work and California sufficed under the prior United Airlines case.
 
Lastly, in a potentially important win for employers, the Ninth Circuit weighed in on the calculation of penalties under the Private Attorneys General Act (“PAGA”).  PAGA, which allows employees to recover penalties on behalf of the state, couches penalties in terms of a smaller penalty (often $100) for each “initial violation” and a larger penalty (often $200) for each “subsequent violation.”  The California Supreme Court has yet to rule on what constitutes an “initial” versus a “subsequent” violation.  The Ninth Circuit held that because Virgin had not been found by a court or the Labor Commissioner to be subject to California law prior to the district court’s decision, all of the PAGA violations were “initial” violations.  This potentially has a large impact on penalty exposure in PAGA cases generally, although in other factual circumstances there will be room to argue that employers were on notice of violations even if they had not been held to be in violation by a court or the Labor Commissioner.
 
The decision, Bernstein v. Virgin America, No. 19-15382 (9th Cir. 2021), is available here.

Posted by Ally Girouard