A federal appeals court on Tuesday revived a class-action lawsuit against Oracle Corp, basing its ruling on a state court decision that employers in California must pay nonresident workers for overtime work performed in the state.

The U.S. Court of Appeals for the 9th Circuit reversed a federal district court ruling in favor of Oracle. Under the California's wage and hour laws, the appellate court found, Oracle could be liable for unpaid wages if it did not compensate out-of-state computer trainers for overtime work performed in the state.

Oracle employees who were residents of Arizona and Colorado had sued the company for not paying them overtime for work performed in California. The trial judge granted summary judgment in Oracle's favor.

On appeal, the 9th Circuit asked the California Supreme Court to provide guidance on whether the California labor code applies to nonresident employees when they perform work in the state. In June, the California high court ruled that it did, finding that not applying California law would encourage employers to substitute lower-paid temporary employees from other states for California employees.

The 9th Circuit agreed with the Supreme Court's common sense analysis: If you're a business in California, you will have to comply with California's overtime laws. You can't treat people differently because they live in a different state, said Charles Russell, a lawyer for the employees.

Employment lawyers and business groups argued the ruling would drive business away from California, reduce business travel and lead to a spike in wage-and-hour lawsuits against companies doing business in the state. Such fears have not materialized, Russell said.

Oracle lawyer Stephen Berry did not immediately respond to requests for comment.

While reviving the bulk of the employees' claims, the 9th Circuit rejected their argument that California laws should apply to overtime work performed outside of California under the facts of the case.

The 9th Circuit sent the case back down to the district court for further proceedings. (Reporting by Terry Baynes; Editing by Eileen Daspin and Steve Orlofsky)

Oracle Lawsuit