How to Hire Employees in California: The Complete Compliance Sequence

The first California hire I ever helped with had the offer signed on a Friday and a start date on Monday. By Monday afternoon we were still missing the workers' compensation certificate, the written wage notice, three state pamphlets, and a withholding form the founder had never heard of. The employee worked her first day on optimism. That is a bad way to start a job and a worse way to start a company.

California does not ask more of employers by accident. It has a separate state withholding form, mandatory injury coverage with criminal penalties attached, a written notice of pay terms handed over at hire, a retirement mandate, a harassment training clock, and a written violence prevention plan. Almost all of it applies from your very first employee, with no headcount grace period.

This guide runs the sequence in the order the work actually happens, from the federal EIN through day 90. Every deadline below is either a statute or an agency rule, with the dollar figure attached where one exists. I built FirstHR because this stack is exactly what a small business without an HR department drops, not from carelessness, but because the deadlines land in the same week as everything else.

California Hiring at a Glance: Every Deadline in One Place

Every California hiring obligation has a named agency, a fixed deadline, and in most cases a dollar penalty. The table below is the whole sequence in one view, and the rest of this guide expands each row with the form numbers and the official source.

Two of these deadlines are the ones small employers miss most often: the 15-day registration window with the state tax agency, and the workers' compensation policy that has to be in force before anyone performs work. Both are easy to satisfy in advance and expensive to fix afterward.

Step 1: Get Your Federal Employer Identification Number

The federal Employer Identification Number is the first item in the chain because everything else depends on it. The state registration form asks for it, payroll tax deposits are filed under it, and the new hire report identifies your business by it. Apply online with the IRS and the number is issued immediately.

If you formed an LLC or corporation and already hold an EIN, you do not need a second one. If you have been operating as a sole proprietor and filing under your Social Security number, get an EIN now. You cannot report employment taxes under a personal SSN once you have employees.

Step 2: Register for a California Payroll Tax Account Within 15 Days

The Employment Development Department is the agency that handles employer registration in California, and the deadline is 15 days after you pay more than $100 in wages in a calendar quarter. Register online through e-Services for Business, as described on the EDD page for registering as an employer. You receive an eight-digit employer payroll tax account number.

The trigger is a dollar amount, not a headcount. A single part-time employee working one week clears $100 in wages, which is why the practical answer is to register as soon as the offer is accepted rather than waiting to see whether the threshold is crossed.

One registration covers all four state payroll taxes. There is no separate unemployment insurance sign-up and no separate withholding account. That single account number is what your payroll system needs before the first run.

Two of those rates surprise employers arriving from other states. The unemployment insurance rate for a new employer is 3.4 percent for the first two to three years, applied only to the first $7,000 of each employee's wages. Disability insurance, by contrast, applies to every dollar with no ceiling at all, which the SDI tax breakdown covers in more depth.

Step 3: Put Workers' Compensation Coverage in Force Before Day One

Workers' compensation is mandatory in California from the first employee, with no headcount threshold and no elective opt-out. Labor Code 3700 requires every employer to provide benefits, and the Division of Workers' Compensation states the rule plainly in its employer FAQ: if a business employs one or more employees, it must satisfy the requirement.

This is the single largest structural difference between California and the states that make coverage optional. In California, going without a policy is not a risk calculation. It is a crime.

Buy the policy through a licensed carrier or broker, and confirm the effective date lands on or before the start date. Ask for the certificate of insurance in writing. If you are weighing coverage design, workers compensation insurance explains what the policy does and does not cover.

Step 4: Post the Job With a Pay Scale and a Clean Application

California regulates the job posting itself, not just the hire. Labor Code 432.3 requires employers at or above the statutory 15-employee threshold to include the pay scale in any job posting, and the Labor Commissioner reads that as applying whenever the position could ever be filled in California, in person or remotely.

The pay scale is the salary or hourly range you reasonably expect to pay. It has to appear in the posting itself. A link, a QR code, or a line saying the range is available on request does not satisfy the statute. Piece rate and commission ranges count as pay scale when that is how the role is paid.

Two more rules shape the application form. Salary history questions are prohibited statewide, though asking about salary expectations is allowed. And any applicant or employee can request the pay scale for their position, which you must provide. The pay transparency laws overview maps how California compares with the other disclosure states.

Step 5: Make the Offer, Then Run the Background Check

Order of operations matters here. The California Fair Chance Act prohibits employers with five or more employees from asking a candidate about conviction history before making a conditional job offer, a rule the Civil Rights Department has enforced since it took effect. The conviction question comes after the offer, never on the application.

Once a conditional offer is out and a conviction record surfaces, you cannot simply withdraw. The Fair Chance Act requires an individualized assessment of whether the conviction has a direct and adverse relationship with the duties of the job, followed by written preliminary notice, a chance for the candidate to respond with evidence, and a final written decision.

Several cities layer their own fair chance ordinances on top of the state law with additional notice steps. If your worksite is in Los Angeles or San Francisco, check the local ordinance before you build the process. The general mechanics are covered in ban the box and background checks.

E-Verify has its own California-specific limit. Labor Code 2814 makes it unlawful to run E-Verify on an existing employee or on an applicant who has not been offered employment, at a time or in a manner not required by federal law, with a civil penalty up to $10,000 for each unlawful use. Federal Form I-9 is still required for every hire.

Step 6: Collect the Day-One Paperwork Stack

California day-one paperwork is a stack, not a form. Four items are mandatory for every hire: Form I-9, federal Form W-4, California Form DE 4, and the written wage notice required by Labor Code 2810.5. On top of those sit the state pamphlets and notices that the employer hands over rather than collects.

Form I-9 carries the hardest federal deadline in the sequence. The employee completes Section 1 on or before the first day of work, and the employer completes Section 2 by the end of the third business day after work begins, examining original documents from the USCIS Form I-9 lists of acceptable documents. You cannot tell the employee which documents to bring.

The Labor Code 2810.5 notice is the one most often skipped, because no other state issues quite the same document. It states the rate or rates of pay, the basis of payment (hourly, shift, day, week, piece), any overtime rates, the designated payday, any allowances claimed against the minimum wage, and employer contact and insurance details.

The Workplace Know Your Rights Act, at Labor Code sections 1550 to 1559, added a further notice effective January 1, 2026. Employers give it to each new employee at hire and to all employees annually by February 1, covering workers' compensation benefits, notice of immigration agency inspections, protection against unfair immigration-related practices, the right to organize and act together, and constitutional rights during interactions with law enforcement. The Labor Commissioner publishes a model notice.

Step 7: File the New Hire Report Within 20 Calendar Days

California gives employers 20 calendar days to report each new or rehired employee to the EDD New Employee Registry, measured from the start-of-work date, which is the first day services were performed for wages. The report is Form DE 34, filed most easily through e-Services for Business, as the EDD explains on its new hire reporting page.

The penalty for missing the deadline is $24 per unreported employee. An enhanced penalty of $490 applies when the employer and employee intentionally agree not to report or to submit false information. The registry feeds child support enforcement, which is why the state follows up on it.

Independent contractors run on a parallel track. Form DE 542 is due within 20 days of paying or contracting for $600 or more with an individual, sole proprietor, or single-member LLC you will report on a 1099. Corporations and partnerships are not reportable service providers.

Step 8: Set Up the Standing Obligations

Five obligations begin with your first employee and never end: workplace posters, paid sick leave, a retirement plan or CalSavers registration, harassment prevention training, and written safety plans. None of them are triggered by growth. They all start at one employee.

Posters and Notices

California requires state postings alongside the federal set: the applicable Industrial Welfare Commission wage order, state minimum wage, paid sick leave, payday notice, safety and health protection, notice of workers' compensation carrier, whistleblower protections in type larger than 14 point, plus Civil Rights Department postings on discrimination, transgender rights, pregnancy disability leave, and family care leave. EDD posts the benefits notice. Federal posters come from the Department of Labor and the EEOC. Download them free rather than buying a kit, and see workplace safety posters for the federal set.

Paid Sick Leave

Employees accrue at least one hour of paid sick leave for every 30 hours worked, with a minimum entitlement of 40 hours or five days per year. Usage can be capped at 40 hours or five days annually, and total accrual can be capped at 80 hours or ten days. Employees become eligible after 30 days of work and can use leave after 90 days of employment.

Retirement, Training, and Safety Plans

CalSavers now reaches employers with one or more eligible employees, and the final registration deadline for the smallest employers was December 31, 2025. Sponsor a qualifying plan or register, then certify. Ignoring notice costs $250 per eligible employee after 90 days and another $500 after 180. The California retirement mandate covers the exemption process.

Harassment prevention training under Government Code 12950.1 applies at five or more employees: two hours for supervisors, one hour for everyone else, delivered within six months of hire or promotion and repeated every two years. The Civil Rights Department publishes free courses that satisfy the requirement. Details sit in California harassment training.

Two written safety plans round out the list. Cal/OSHA has long required an Injury and Illness Prevention Program, and Labor Code 6401.9, effective July 1, 2024, added a written Workplace Violence Prevention Plan covering hazard identification, reporting procedures, employee training, and incident logs. Cal/OSHA publishes a model plan to adapt.

Step 9: Onboard From Day One Through Day 90

Compliance gets the employee legally on payroll; onboarding decides whether the hire lasts. The first 90 days are where a new hire either reaches full productivity or quietly starts looking, which puts the return on your entire hiring investment inside the window this step covers.

The design principle is simple: everything in steps 6 and 7 should be finished before or on day one, so the first day is about the work and the people rather than a stack of forms. Digital collection with e-signature makes that possible even for a company without an HR department.

The training and break rules deserve a spot on day one rather than week three. California non-exempt employees get a 30-minute unpaid meal period before the end of the fifth hour of work, a second meal period before the end of the tenth hour when the shift runs past 10 hours, and a paid 10-minute rest period per four hours worked. A missed meal period costs one additional hour of pay at the regular rate.

This is the part of the sequence FirstHR was built for. Offer letters and the full California document stack go out with e-signature before day one, the I-9 and DE 4 arrive completed, deadline reminders cover the three-day and 20-day windows, and the AI onboarding wizard turns the job description into a 30-60-90 day plan.

California-Specific Rules That Catch Out-of-State Employers

Six California rules regularly surprise employers whose payroll habits were formed elsewhere: mandatory injury coverage, an indexed minimum wage, daily overtime, universal paid sick leave, final pay measured in hours, and restricted E-Verify use. Each one changes a setting in your payroll or handbook.

The overtime rule is the one that breaks imported payroll configurations most often. A system set up for federal weekly overtime will happily pay straight time for a 10-hour day followed by a 30-hour week, which is a wage violation in California even though total weekly hours never reached 40.

Two of those rows deserve emphasis at hire. The exempt salary floor moves with the minimum wage, so a salaried role priced at the threshold this year sits below it next January unless you adjust. And final pay after a discharge is due at the moment of termination, not on the next payday, which the final paycheck guide walks through.

Classification decisions carry more weight here for the same reason. Misclassifying a non-exempt worker as exempt exposes you to daily overtime, meal premiums, and rest premiums at once. The tests are in exempt vs non-exempt, and the full state picture sits in the California compliance hub.

City and County Rules Layer on Top of State Law

California does not preempt local employment ordinances, so dozens of cities and counties set their own minimum wages above the state rate. The employee is owed whichever rate is highest for the hours worked in that jurisdiction, which matters for remote employees too: the rate follows where the work is performed.

Wages are not the only local layer. San Francisco, Los Angeles, San Diego, Berkeley, and Oakland are among the cities running their own paid sick leave ordinances on top of the statewide entitlement, and where the local rule is more generous the local rule governs. San Francisco adds a health care security ordinance and a family friendly workplace ordinance.

The practical approach for a small employer: identify every city where an employee physically performs work, including home offices, then check that city's labor standards page once a year before the July and January adjustment dates. Local rates for California cities are also tracked in the California payroll guide.

Employee vs Independent Contractor: California Uses the ABC Test

California applies the ABC test codified at Labor Code 2775, and it is the strictest classification standard in the country. A worker is an independent contractor only if the hiring business satisfies all three prongs. Failing any one of them makes the worker an employee, regardless of what the contract says or what both sides prefer.

Prong B is the one that ends most conversations. If your business sells design work and the person you are hiring does design work, no contract language will make them a contractor. That is the deliberate effect of the statute.

The exposure is not theoretical. Labor Code 226.8 sets a civil penalty of $5,000 to $15,000 for each willful misclassification, and $10,000 to $25,000 for each violation once a pattern or practice is found, on top of unpaid wages, overtime, meal and rest premiums, unpaid payroll taxes, and retroactive workers' compensation coverage obligations. The mechanics are laid out in worker misclassification and employee vs contractor.

When the call is close, classify as an employee. The cost of running the nine steps in this guide is always lower than the cost of a reclassification finding that reaches back through every pay period.

The 5 Mistakes That Cost California Employers the Most

Every mistake below is a timing failure rather than a knowledge failure. The employer knew about the requirement. The deadline simply arrived during a busy week and nothing in the process caught it.

The pattern behind all five is the same: each obligation belongs to a different agency, so nothing reminds you except your own system. That is why a task workflow with dated reminders outperforms compliance knowledge at small-company scale, and why the founders who never get fined are rarely the ones who know the law best.

Frequently Asked Questions