In the Farmer v. Arabian American Oil Co. case of 1964, the U.S Supreme Court ruled on a dispute involving an employment contract between an American citizen and a foreign corporation operating in Saudi Arabia. The plaintiff, Mr. Farmer, alleged that his employer had wrongfully terminated him and sought compensation for damages under both Saudi Arabian law and California law where he was hired initially by the company's agent. The court held that since all significant aspects of employment took place outside of California (in Saudi Arabia), it would be inappropriate to apply Californian laws to this case as per 'lex loci delicti' principle which applies local jurisdictional laws based on where the act or harm occurred. Therefore, only Saudi Arabian labor laws were applicable in this instance. Moreover, it was also decided that federal courts did not have jurisdiction over such cases because they involved interpretation and application of foreign law rather than federal or state law within United States territory.

In the dissenting opinion for Farmer v. Arabian American Oil Co., Justice Goldberg argued that the majority's interpretation of Section 4 of the Portal-to-Portal Act was too narrow and failed to consider Congress' intent when enacting it. He believed that Congress intended to protect employees from unexpected liabilities, not limit their rights under existing laws. According to him, this case should have been decided based on whether or not travel time constituted work under state law rather than federal law because states traditionally regulate employment relationships more closely than the federal government does. Therefore, he disagreed with the majority's decision to dismiss Farmer’s claim for overtime compensation due his overseas travel time as a violation of Fair Labor Standards Act (FLSA).