California Court Rules: FEHA May Reach Employees Working Outside the State
[Law Clerk Caroleen Bitar contributed.]
Can an out-of-state employee bring a claim under the California Fair Employment and Housing Act (FEHA)? A recent Court of Appeal decision suggests they might.
In Civil Rights Department v. Space Exploration Technologies Corp., 2026 Cal. App. LEXIS 554 (2026), the Court of Appeal rejected the notion that FEHA could never apply to out-of-state workers.
What Happened?
In April 2024, a SpaceX employee filed a complaint with the California Civil Rights Department (CRD), alleging discrimination and retaliation claims under California’s FEHA.
The key complication was that the employee lived and worked in Washington state, not California. This raised an important question: Did the CRD have the authority to investigate her claims?
The CRD argued it did. To support its position, the CRD pointed out that, despite the employee’s physical location:
- She reported to a SpaceX vice president, her direct manager since 2021, who lived in California.
- Her pay statements were issued from California and listed a California facility as her employer.
- Her new-hire paperwork included California employment law documents as SpaceX had its headquarters in California at the time.
What the Court Decided
The Court determined that nothing categorically prohibited the CRD from seeking information relating to the employee’s complaints. That determination has important implications for employers.
Investigatory Authority vs. Substantive Protections: Two Different Questions
SpaceX argued that FEHA’s anti-discrimination rules do not cover out-of-state employees and that the CRD had no authority to investigate the complaint. The Court rejected that logic. It drew a distinction between the connections needed for the CRD to investigate a complaint and the connections needed for FEHA’s protections to actually apply.
These are “separate issues requiring separate analyses,” the Court explained, and the potential for conflict with other states is “far less” when the CRD is simply exercising its investigative authority than when it attempts to enforce FEHA’s substantive provisions (i.e., the provisions prohibiting unlawful employment practices). Accordingly, fewer California connections may be enough to trigger the CRD’s investigatory authority than to trigger FEHA itself.
In other words, the CRD can knock on your door to investigate a complaint from an out-of-state employee, even before it’s clear whether FEHA’s protections actually apply to that employee.
No Categorical Rule Against FEHA’s Extraterritorial Application
SpaceX tried to establish a bright-line rule: if the employee worked outside California, FEHA simply does not apply. The Court rejected that approach, emphasizing that “[t]here is no single, all-purpose answer to the question of when state law will apply to an interstate employment relationship.” The Court will consider each statute on its own terms.
But here’s the key problem for SpaceX: the Court found SpaceX’s assertions were “conclusory” – meaning SpaceX simply declared that FEHA doesn’t apply without providing the evidence or legal analysis to back it up. It asserted that an adverse employment action “necessarily occurs where the employment occurs,” but cited no authority for that proposition. These bare assertions weren’t enough.
As the Court put it: “[W]e reject SpaceX’s suggestion that the cases compel a categorical rule that FEHA does not apply under any circumstances to any employee working outside California.”
The bottom line: the Court did not hold that FEHA affirmatively applies to a non-resident’s claims – that question remains open. But SpaceX failed to show it doesn’t apply. Whether there are sufficient connections to California to apply FEHA is still an open question, and one of the primary purposes of the subpoena was to help determine that.
Practical Considerations for Employers
Don’t assume geography is a safe harbor. The employee in this case lived and worked in Washington. SpaceX argued that this should have concluded the analysis. It didn’t.
If your company has headquarters in California or significant operations in the state, employees in other states may still fall within FEHA’s reach (at least for purposes of a CRD investigation), particularly if they report to California-based managers, receive pay from California, or have other meaningful ties to the state.
Take CRD investigations seriously, even for out-of-state employees. This decision makes clear that the CRD’s authority to investigate a complaint is broader than its authority to enforce FEHA’s substantive protections. Stonewalling an investigation on jurisdictional grounds creates risk, especially when the parties haven’t fully sorted out the connections to California.
Pay attention to California connections. Think about where employers make employment decisions, where managers are located, where pay is issued from, and what state’s employment documents an employee receives.
Don’t treat all California employment laws the same. The Court was clear that decisions limiting the out-of-state reach of California’s wage and hour laws don’t necessarily apply to FEHA. Different statutes have different purposes and different geographic scopes. Employers who assume a one-size-fits-all rule could face unexpected consequences.
The Bottom Line
The Court of Appeal in Civil Rights Department v. Space Exploration Technologies Corp. did not answer every question about FEHA’s geographic reach. But it made clear that the answer is not as simple as “the employee didn’t work in California.”
For employers with multi-state workforces, the safest approach is to evaluate potential FEHA exposure on a case-by-case basis, paying close attention to the employee’s connections to California. And when the CRD comes knocking with a subpoena, think carefully before refusing to open the door.
Molly K. Thorpe is an Employment Attorney at Lewitt Hackman.