9th Circuit sends out-of-state wage questions to California high court

In two cases brought by airline employees against their employers, a federal appellate panel asked the Supreme Court of California on Wednesday to decide whether California's labor standards can be applied to state residents who work primarily outside the state.

Both lawsuits before the 9th Circuit Court of Appeals have plaintiffs who are California residents, subject to state income taxes, who receive any physical wage statements or paychecks at their in-state addresses.

One of the lawsuits against United Airlines has a certified class of pilots and flight attendants alleging the company violated the California labor code by issuing noncompliant wage statements. The plaintiffs say United does not list its "name and address" on the statements or all applicable pay rates and hours worked at each rate. Ward v. United Airlines Inc., 16-16415.

The United case is comprised of two suits consolidated into one class.

In a second case, against Delta Airlines Inc., four flight attendants, two of them California residents, alleged the company violated California labor law because the airline's payment formula does not pay full wages for all on-duty hours, such as preparatory time or during layovers.

According to the 9th Circuit's order on Wednesday, Delta uses a calculation that pays attendants from gate to gate, a breach of a state mandate to pay for all hours worked. Oman v. Delta Air Lines Inc., 17-15124.

The lawsuit also claims that Delta's policy of choosing the highest pay of four possible rates is the equivalent of the plaintiffs' wages being averaged to meet minimum wage requirements. Though the resultant pay is never below the California minimum for any plaintiff, the 9th Circuit panel noted, averaging wages was determined inappropriate in Gonzalez v. Downtown LA Motors LP. That case said the minimum wage standard has to be applied to each hour individually. The third of the 9th Circuit's questions in Oman v. Delta asks whether this test is applicable even though the supposedly noncompliant formula often awards credit for on-duty hours and pays more when it does not.

"We are pleased with the 9th Circuit's recognition that Delta's pay formula fails to award pay credit for all hours worked by flight attendants. We believe the California Supreme Court will confirm that Delta's pay scheme systematically fails to pay flight attendants for all their work hours," said Matthew C. Helland of Nichols Kaster PLLP, who represents the plaintiffs.

Delta is represented by Thomas M. Peterson of Morgan, Lewis & Bockius LLP, who did not respond to a request for comment.

The 9th Circuit's orders also raise the issue of both employers being out-of-state: Delta is headquartered in Atlanta while United calls Chicago home.

The order for each case cites the other, and the key question concerns the reach of California labor law. Both orders also cite the same precedents, calling them insufficient to inform an answer.

"In short, Tidewater and Sullivan, even informed by the principles of extraterritoriality, do not allow us to confidently resolve the plaintiffs' California law claim," said the order written by a panel including 9th Circuit judges Paul J. Watford and Michelle T. Friedland and U.S. District Judge Jed S. Rakoff of New York, sitting by designation.

"The question is what happens when you have an out-of-state company that hires California citizens to take on routes out of state?" commented Aashish Y. Desai of Desai Law. Desai argued a similar case involving truck drivers, which was not consolidated with the airline lawsuits.

He pointed to the plaintiffs' residency and taxation in California as a reason they should be allowed to apply state labor law. "After all, if the employee gets paid a taxable wage in California, shouldn't he be allowed to challenge the wage in California? This person ought to be able to say these wages are inappropriate," Desai said.

The plaintiffs suing United are represented by Stuart B. Esner of Esner, Change & Boyer, and United is represented by Adam P. KohSweeney of O'Melveny & Myers LLP. Neither responded to requests for comment.