California HR Compliance: Complete Employer Guide

California has the most complex employment law framework of any state in the US. This guide covers everything a California employer needs to know: the documents required at hire, how wages and overtime actually work, what leave you must provide, how to run a compliant termination, and which statutes have changed most recently.

The state runs on different rules than federal law in almost every category: overtime, meal breaks, sick leave, termination pay, background checks, non-competes, and worker classification. For a small business owner with no HR background, the gap between what you think the rules are and what they actually are can cost you tens of thousands of dollars in penalties, lawsuits, and back pay.

I built FirstHR partly because I watched too many small business owners discover California compliance the hard way. The goal here is to make sure that does not happen to you.

California Employment Law Fundamentals Every Employer Must Know

Before getting into the specifics of hiring, wages, and leave, three foundational legal concepts shape almost every employment decision you will make in California: at-will employment, the ABC test for classifying workers, and the state WARN Act. Understanding these upfront prevents the most expensive mistakes. A fourth term, right-to-work, gets confused with at-will so often that it is settled here too.

At-Will Employment and Its Four Exceptions

California Labor Code Section 2922 establishes at-will employment as the default: when a job has no specified term, either party can end it at any time and for any lawful reason. Most employers know this part.

What many do not know is that California recognizes four exceptions to at-will employment:

• Implied contract: If your handbook, offer letter, or verbal statements suggest job security, a court may find an implied promise of continued employment. This is why vague language like "we only let people go for cause" in a handbook is dangerous.
• Public policy exception: An employee cannot be fired for reasons that violate public policy, such as refusing to commit an illegal act or filing a workers' comp claim.
• Implied covenant of good faith and fair dealing: According to the Bureau of Labor Statistics' Monthly Labor Review (January 2001), California was one of only 11 states recognizing this doctrine. It can come into play when an employer acts in bad faith, such as terminating an employee right before they earn a large commission. The landmark California case defining the limits of this exception is Guz v. Bechtel National Inc. (2000).
• Fraud: Misrepresentations made during hiring (for example, promises about job security or compensation that were never honored) can constitute fraudulent inducement.

The ABC Test: How California Classifies Workers

Under AB 5 (Labor Code §§ 2775-2787), California presumes every worker is an employee. The burden is on you, the hiring entity, to prove a worker is an independent contractor. To do that, you must satisfy all three prongs of the ABC test.

Prong B is where most small businesses fail. If someone is doing core work for your business (a marketing agency hiring a graphic designer, a restaurant hiring a cook, a law firm hiring a paralegal), that worker is almost certainly an employee under California law, regardless of what your contract says.

Some industries have specific exemptions or use the older, multi-factor Borello test instead: licensed professionals such as doctors, dentists, insurance agents, real estate agents, certain hairstylists, and others named in AB 2257. If you hire in these categories, verify current exemption status at labor.ca.gov.

Two more classification rules are worth knowing. Proposition 22 (2020) created a separate category for app-based drivers (rideshare and delivery platforms) with limited benefits. Consultants who advise a business to misclassify workers also face joint liability under Labor Code § 2753.

California WARN Act: 75 Employees, Not 100

The federal WARN Act requires 60 days of advance notice before a plant closing or mass layoff, but only applies to employers with 100 or more employees. California's version (Labor Code §§ 1400-1408) applies at a lower threshold of 75 employees, counting both full-time and part-time workers.

A mass layoff under California WARN is the layoff of 50 or more employees within any 30-day period. A relocation or a closure triggers the notice requirement regardless of the number of workers affected.

Skipping the notice is expensive. Under Labor Code 1402 an employer that fails to give it owes each affected employee back pay and the value of lost benefits for the violation period, capped at 60 days, and Labor Code 1403 adds a civil penalty of up to $500 for each day of the violation.

The required notice content changed on January 1, 2026. According to the EDD (Workforce Services Information Notice 25-14), SB 617 makes the notice state whether you will coordinate services through the Local Workforce Development Board, through another entity, or not at all. Coordination, where you elect it, has to happen within 30 days of the notice.

The same amendment adds three more elements: a description of Rapid Response activities, an overview of CalFresh with its benefits helpline and website, and a working email address and phone number for the employer. Full guidance sits on the EDD WARN page and in the information notice announcing the change.

Is California a Right-to-Work State?

No. California has never passed a right-to-work law, which means a private employer and a union may lawfully negotiate a union security clause requiring employees covered by the contract to pay dues or agency fees as a condition of employment. At-will and right-to-work get mixed up constantly. California is the first and not the second.

Public sector work is the exception. After the US Supreme Court decision in Janus v. AFSCME (2018), a public employer cannot require agency fees from an employee who has not joined the union. If you run a small private business with no union contract, nothing here touches your day, but the term is worth getting right before you use it in a policy.

Hiring and Onboarding: Required Documents and Reporting

California piles far more paperwork onto a hire than federal law does. In addition to the two federal forms (I-9 and W-4), you must provide seven California-specific notices and complete new hire reporting with the state within 20 days. Missing any of these creates compliance exposure from day one.

Required Documents at Hire

The Notice to Employee (LC § 2810.5) deserves special attention. It is required for nearly every non-exempt employee and carries ten items. The first six are pay rates and their basis, any allowance claimed against the minimum wage, the designated payday, the employer's name including any DBA, the physical and mailing address of the main office, and the phone number.

The remaining four are the workers' compensation carrier's name, address and phone, the employee's sick leave rights, any federal or state emergency or disaster declaration issued for that county in the 30 days before the start date, and anything else the Labor Commissioner deems material.

A template is available free from the Department of Industrial Relations (DIR) at dir.ca.gov. If any of the information changes, a new pay rate or a new comp carrier for instance, you have 7 calendar days to notify the employee in writing, unless the change already shows up on a timely wage statement.

New Hire Reporting: 20-Day Deadline

Every California employer must report new hires and rehires (any employee returning after 60 or more days off payroll) to the Employment Development Department (EDD) within 20 calendar days of their first day of work. The rule applies regardless of employer size.

You report using Form DE 34, which can be submitted online through the EDD e-Services portal, by fax, or by mail. The required information includes: employee's name, Social Security number, address, start date, and your EDD account number and federal employer identification number (FEIN).

According to the EDD, penalties are modest but cumulative: $24 for each unreported employee, and $490 where the failure comes from an agreement between employer and employee not to report or to file something false. The bigger risk is that unreported hires create audit exposure and slow down the child support enforcement the registry exists to serve.

E-Verify, Background Checks, and Drug Testing

E-Verify, the federal online check of a new hire's work authorization, is voluntary for private California employers under AB 1236 (2011). Labor Code 2812 goes further and bars the state and local governments from mandating E-Verify participation for private companies, except where federal law or federal funding requires it. Federal contractors whose contracts carry the E-Verify clause of the Federal Acquisition Regulation (FAR) must use it regardless of state law.

Background checks are governed by the Fair Chance Act (AB 1008, Government Code § 12952), which according to the California Civil Rights Department (CRD) applies to employers with 5 or more employees. The key rule: you cannot ask about criminal history on a job application or during an interview. You may only conduct a background check after you have made a conditional offer of employment.

Government Code § 12952 sets the order in five steps. Make the conditional offer first. Then run the check and, if a conviction makes you consider withdrawing the offer, conduct an individualized assessment of whether it has a direct and adverse relationship with the specific duties of the job. Next, send a pre-adverse action notice naming the disqualifying conviction, with a copy of the background report.

Give the candidate at least 5 business days to respond, plus 5 more if they dispute the report in writing and are gathering evidence. Only then reassess in light of what they provide and make the final decision. A final denial goes to the candidate in writing, along with any procedure you have for challenging it and their right to file a complaint with the CRD.

Some records are off-limits at every stage of the process. You may never consider arrests without conviction, participation in diversion programs, juvenile records, and sealed or expunged records.

California drug testing rules changed significantly with AB 2188 (effective January 1, 2024). You may not discriminate against an applicant or employee because a test found nonpsychoactive cannabis metabolites in their urine, hair, or other bodily fluids. Those metabolites show past use, not impairment, which is the whole point of the statute.

What stays legal is scientifically valid preemployment screening that does not test for those metabolites. The statute's own findings name the alternatives: impairment tests and tests that detect THC itself in bodily fluids. You can also keep testing for other substances and maintain drug-free workplace policies for safety-sensitive roles.

The statute carves out employees in the building and construction trades, along with positions requiring a federal background investigation or clearance. It also does not displace federal rules, so testing regulated by the US Department of Transportation (DOT) continues unchanged.

Hiring Minors: Work Permits and Hour Limits

California child labor law requires a permit before a minor under 18 who has not graduated from high school starts work. You and the minor complete the Statement of Intent to Employ a Minor and Request for a Work Permit (Form B1-1), and the school issues the Permit to Employ and Work (Form B1-4), which you keep on file.

According to the Labor Commissioner's child labor law digest, permits expire five days after the next school year begins, so a summer hire who stays into the fall needs a new one. Entertainment work runs through the Labor Commissioner rather than the school district.

Hours are capped by age. According to the Labor Commissioner's summary chart for minors, a 16- or 17-year-old may work 4 hours on a school day, 8 hours on a non-school day or the day before one, and up to 48 hours a week, between 5 a.m. and 10 p.m., extending to 12:30 a.m. on nights before a non-school day.

A 14- or 15-year-old is limited to 3 hours on a school day outside school hours, 8 hours on a non-school day, 18 hours in a school week, and 40 hours in a week when school is out. Their window is 7 a.m. to 7 p.m., extending to 9 p.m. from June 1 through Labor Day, under both state and federal rules.

Minors get the same minimum wage, overtime, and break rights as everyone else. Employing one without a valid permit is a violation on its own, whatever the hours worked.

Wages, Hours, and Overtime

California's wage and hour rules are significantly stricter than federal law in almost every dimension. Violations get expensive fast, because many of the penalties apply per pay period, per employee.

Minimum Wage Rates and Local Ordinances

The statewide minimum wage is $17.40 per hour from January 1, 2027, for employers of every size, according to the Department of Industrial Relations (announcement of August 13, 2026). Through December 31, 2026 it is $16.90, per the Labor Commissioner (DIR, minimum wage FAQ). That is the floor, not the full picture:

• Fast food workers (limited-service chains with more than 60 locations nationwide): $20.00/hour under AB 1228, since April 1, 2024
• Health care workers (SB 525): $19.28 to $25.00 per hour from July 1, 2026, depending on the facility, per the DIR health care wage FAQ. Large systems and dialysis clinics sit at the top, safety net and small-county hospitals at the bottom
• Local ordinances: according to the UC Berkeley Labor Center inventory, Emeryville ($20.34 from July 1, 2026), West Hollywood ($20.25 from January 1, 2026), San Francisco ($19.61 from July 1, 2026), Los Angeles ($18.42 from July 1, 2026), and dozens of other cities and counties sit above the state figure

Rates move, and local ordinances move separately from the state figure. The California minimum wage page carries the current rate, the next scheduled increase, the tipped and youth rates, and any city or county rate that applies.

Tips and gratuities do not count toward the minimum wage in California. Unlike some states, California has no tip credit that reduces the employer's wage obligation. Always apply the highest rate that reaches the employee, whether it comes from the state, the city, or the industry order. The DIR minimum wage page links the current list of city and county rates.

Overtime: California vs. Federal

California's overtime rules differ from federal law in ways that consistently surprise employers coming from other states. The differences are not minor, and the Labor Commissioner sets them out in its overtime FAQ.

The practical implication: a California employee who works 10-hour shifts four days a week (40 hours total) is owed 8 hours of daily overtime (2 hours per day at 1.5x) even though they have not exceeded 40 weekly hours. Federal law would owe zero overtime for that same schedule.

The exempt salary threshold in California is also much higher than the federal one. It is $72,384 a year ($1,392 per week) from January 1, 2027 ($70,304 during 2026), against a federal threshold of $684 per week. An employee paid below the California figure is non-exempt regardless of job title or duties, which means every overtime rule applies to them.

How to Calculate Overtime and Double Time

Start from the regular rate of pay, not the posted hourly wage. The regular rate includes nondiscretionary bonuses, shift differentials, piece rates, and commissions, so a warehouse worker on a production bonus has a higher overtime rate than their base wage suggests. Once you have that rate, the multipliers stack by day and by week.

A worked example: an employee earning $25 an hour puts in 13 hours on a Tuesday. The first 8 hours pay $200, hours 9 through 12 pay $37.50 each for $150, and the 13th hour pays $50 at double time. The day totals $400 for 13 hours instead of the $325 straight time would produce.

Weekly overtime is then calculated only on hours not already paid at a premium daily rate, which is how California avoids pyramiding. Run the daily calculation first, every day, then check the week. Doing it in the other order is the most common way payroll ends up short.

Exempt vs Non-Exempt: The Salary and Duties Tests

An employee is exempt in California only if they pass both a salary test and a duties test. The salary test is a monthly salary of at least two times the state minimum wage for full-time employment (Labor Code § 515(a)), which is why the California threshold moves every time the minimum wage does.

The duties test is where most misclassification happens. California applies a quantitative standard: the employee must be primarily engaged in exempt work, and Labor Code § 515(e) defines primarily as more than one half of their work time. A shift lead who spends most of the week doing the same tasks as the crew is non-exempt regardless of title.

Being salaried is not the same as being exempt. A salaried employee who fails either test is non-exempt, which means daily overtime, meal and rest break premiums, and hour-by-hour records all apply to them. Salaried non-exempt is a legitimate arrangement here, but only if you actually track the hours and pay the overtime.

Reporting Time Pay: The Two-Hour Minimum

When an employee reports for a scheduled shift and you send them home early or have nothing for them to do, California owes reporting time pay: half the usual or scheduled day, never less than two hours and never more than four, at the regular rate. That floor is what people mean by the two-hour minimum pay rule.

Call the same employee back a second time in one day and give them less than two hours of work on that second trip, and you owe two hours at the regular rate for it. Reporting time pay is a scheduling penalty rather than pay for hours worked, so those hours do not count toward the 40-hour overtime calculation.

Pay Stubs: 9 Required Items

California Labor Code § 226 requires itemized wage statements to include nine specific pieces of information. Missing even one item on any pay stub exposes you to penalties.

For a knowing and intentional failure, penalties run $50 for the initial violation and $100 per employee per pay period for subsequent violations, up to $4,000 per employee. Under Labor Code 246(i), the employee's available paid sick leave also has to appear on the pay stub or in a separate writing issued on payday.

Pay Frequency Requirements

California law requires most wages to be paid at least twice per month on designated paydays. According to the Labor Commissioner (DIR, paydays FAQ), work done in the first half of the month must be paid by the 26th, and work done from the 16th through the end of the month by the 10th of the following month. Any other pay period has to be paid within seven calendar days of its close.

Overtime gets one concession. It may be paid no later than the payday for the next regular payroll period after the one in which it was earned, which is what makes a lagged overtime line on the following check lawful. Executive, administrative, and professional employees may be paid monthly, on or before the 26th, provided the check covers the whole month including the part not yet worked.

Direct Deposit and Alternative Workweek Schedules

California Labor Code § 213(d) prohibits employers from requiring direct deposit as a condition of employment: the statute allows a deposit only where the employee has voluntarily authorized it. You may offer direct deposit and most employees will choose it, but anyone who does not authorize it has to be paid by check or cash.

An Alternative Workweek Schedule (AWS) under Labor Code § 511 lets you schedule up to 10-hour workdays without triggering daily overtime, provided at least two-thirds of the affected work unit approves it in a secret ballot election and you file the results with the DIR.

Hours beyond the scheduled shift still cost daily overtime at 1.5x, so an 11th hour on a 10-hour AWS day is a premium hour. The tool is legitimate for businesses with naturally longer workdays, but the election and filing requirements are strict. Skip the secret ballot, or run it improperly, and the schedule is invalid, which leaves every hour past eight owed at daily overtime rates.

Remote Employees Working in California

A remote employee who works from a California address is covered by California law even when your company sits in another state. Daily overtime, meal and rest breaks, itemized pay stubs, paid sick leave, and the final pay deadlines all follow the employee to the home office, and hiring one person here can pull you into the whole framework.

Labor Code § 2802 requires reimbursement of necessary business expenses, and for remote staff that usually means a reasonable share of home internet and personal phone use. A flat monthly stipend is the practical approach for a small team. The statute covers all necessary expenditures, though, so the stipend has to be large enough to cover the real cost.

Required notices also have to reach people who never walk into a workplace, so distribute the postings electronically and confirm receipt. Keep non-exempt remote employees on a real timekeeping system too: break premiums apply whether or not anyone is watching the clock, and an untracked home shift is indefensible in a claim.

Meal and Rest Break Rules

California's meal and rest break requirements are stricter than federal law, more specific in their timing, and carry automatic financial penalties for violations. There is no federal equivalent to California's meal and rest break regime.

The number to know is the premium pay: a day with a missed, late, or shortened meal period costs the employer one additional hour of the employee's regular rate of pay (Labor Code § 226.7), and a day with missed rest periods costs one more. According to the Labor Commissioner's rest period FAQ, missing two rest breaks in one day still means one premium hour, not two.

In practice, an employee on $25 an hour who misses both a meal break and a rest break in one shift is owed $50 for that shift, on top of the hours actually worked, and it repeats every day it happens.

Meal Break Waivers and the 10-Minute Rest Rule

The first meal period can be waived by mutual consent only when the total work period for that day is no more than six hours. There is no mandatory state form for a meal break waiver, but put it in writing anyway, keep the signed copy with the employee record, and make clear that either side can revoke it going forward.

A second meal period (after 10 hours) can be waived by mutual agreement if the employee did not waive the first meal period and will work no more than 12 hours total. Rest breaks have no waiver option: the duty is to authorize and permit every one of them.

Rest breaks are also where the myths live. California requires 10 paid minutes for every four hours worked or major fraction of four hours, not 15. A 15-minute break is a policy choice, and if you promise it in the handbook you have to give it, but the legal floor is ten paid minutes, scheduled as close to the middle of each work period as practicable.

Wage Claims and Wage Theft Enforcement

A California wage claim is filed by the employee with the Labor Commissioner's Office rather than in court, and for most small businesses it is the first real encounter with the state's wage and hour rules. Claims can be filed online, by mail, by email, or in person, and you learn about yours when the notice arrives.

What follows is usually a settlement conference where both sides try to resolve the claim, and if that fails, a hearing where an officer takes evidence and issues an order. According to the Labor Commissioner's wage claim guide, the filing deadlines are long: three years for minimum wage, overtime, break premiums, sick leave, and unlawful deductions, two years on an oral promise of higher pay, and four years on a written contract.

Your defense is records. Time records, signed meal period waivers, itemized wage statements, and the Labor Code § 2810.5 notice you gave at hire (often called the Wage Theft Protection Act notice) are what the hearing officer asks for. Missing or incomplete records make an otherwise defensible claim very hard to win.

Leave Entitlements

California layers a long list of leave protections on top of federal law. Half of the entitlements in the table below begin with your very first employee, and most of the rest start at 5 employees.

How CFRA and FMLA Interact

California's Family Rights Act (CFRA) covers employers with 5 or more employees, a much lower threshold than the federal FMLA (50 employees). CFRA also allows employees to designate any individual related by blood or with a family-equivalent relationship as a qualifying "designated person" for leave purposes, which is broader than FMLA's family definition.

CFRA and FMLA leave run concurrently when both laws apply. An employee taking 12 weeks of CFRA leave is simultaneously using their 12 weeks of FMLA entitlement. The net result: at 50+ employees, an employee gets exactly 12 weeks of job-protected leave for most qualifying reasons.

The exception is pregnancy-related disability leave (PDL). It applies before and after childbirth for the period of actual disability, up to 4 months. Unlike CFRA and FMLA, PDL carries no minimum tenure or hours-worked requirement, so an employee qualifies on their first day of work.

CFRA's baby bonding leave then starts after PDL ends. At an employer with 5 or more employees the two can stack to a ceiling of 4 months plus 12 weeks, roughly 7 months of job-protected leave around a pregnancy and birth.

At 50 or more employees, FMLA runs concurrently with PDL rather than with CFRA bonding, which makes the calculation harder but does not shorten the total. Have an employment attorney check the calculation before you answer the employee.

Intermittent Leave and Medical Certification

CFRA and FMLA leave does not have to be taken in one block. For a serious health condition, an employee may take leave intermittently or on a reduced schedule when it is medically necessary, and you may temporarily move them to an equivalent position that accommodates the schedule better without cutting their pay or benefits.

Bonding leave follows a different rule. Under 2 CCR § 11090, CFRA bonding leave has a minimum duration of two weeks, but you must grant a request for a shorter period on any two occasions, and you may allow more than that. All bonding leave has to be completed within one year of the birth or placement.

On certification, there is no mandatory state form, and the federal FMLA medical certification forms ask for more than California allows: 29 CFR 825.306 lets a federal certification include symptoms and a diagnosis. Under 2 CCR § 11091 you may not ask for either, so strip those fields before you use a federal form for CFRA leave.

Paid Sick Leave: What Changed with SB 616

Effective January 1, 2024, California's paid sick leave minimum increased from 3 days (24 hours) to 5 days (40 hours) per year under SB 616. According to the Labor Commissioner (DIR, paid sick leave FAQ), the accrual rate remains 1 hour for every 30 hours worked, and employers may instead front-load 40 hours at the start of the year or benefit period.

Employers may cap accrued sick leave at 80 hours or 10 days, whichever is more, and may limit use to 40 hours or 5 days a year.

Local ordinances go further. San Francisco lets employees accrue up to 72 hours at employers with 10 or more people, and 40 hours below that. Los Angeles requires 48 hours a year, either awarded up front or accrued at the state rate.

Paid sick leave can be used for the employee's own illness or preventive care, to care for a family member, and when the employee is the victim of a qualifying act of violence. AB 2499, effective January 1, 2025, added jury duty and responding to a subpoena as a witness, and at employers with 25 or more employees it added helping a family member who is a victim.

Newer Leave Requirements: Bereavement and Reproductive Loss

Two relatively new California leave obligations catch small employers off guard.

Bereavement leave (AB 1949) took effect January 1, 2023. Employers with 5 or more employees must provide up to 5 days of bereavement leave for the death of a qualifying family member. The leave does not need to be paid, but employees may use accrued paid sick leave or PTO to cover it.

Bereavement days do not need to be consecutive but must be completed within three months of the qualifying event. Qualifying family members include a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or parent-in-law.

Reproductive loss leave (SB 848, now Government Code § 12945.6) took effect January 1, 2024. Employers with 5 or more employees must grant up to 5 days after a qualifying event: a miscarriage, a failed surrogacy, a failed adoption, a stillbirth, or an unsuccessful assisted reproduction. Eligibility starts at 30 days of employment before the leave begins.

The days can be nonconsecutive and have to be taken within three months of the event, or within three months of the end of another statutory leave the employee was already on. Where more than one loss happens in a 12-month period, the statute caps the total at 20 days.

The leave follows your existing leave policy, and where you have none it may be unpaid, with the employee free to use vacation, sick leave, or PTO. Retaliation for taking it is its own unlawful practice, and so is interfering with the request.

Other Mandatory Leave Types

California requires several more leave types, some from your first employee and some only once you grow. Voting leave applies at any size: up to two paid hours at the beginning or end of a shift for a statewide election, with a notice posted 10 days ahead, available only where the employee does not have enough time to vote outside working hours.

Military leave runs on both the federal Uniformed Services Employment and Reemployment Rights Act (USERRA) and the California Military and Veterans Code, which adds 17 days a year of protected leave for training.

Organ and bone marrow donor leave (Labor Code §§ 1508-1513) starts at 15 or more employees: 30 paid business days in a one-year period for organ donation, plus a further 30 unpaid business days, and 5 paid business days for bone marrow donation. It is job-protected leave, so the donor returns to the same or an equivalent position.

Two more leave types start at 25 employees. You owe up to 10 days of unpaid leave to an employee whose military spouse is home on leave from deployment, and at 25 or more employees in one location, up to 40 hours a year of school activities leave for a parent or guardian (Labor Code § 230.8).

Workplace Safety: Cal-OSHA and IIPP Requirements

California operates its own occupational safety and health program under Cal-OSHA, which in many areas is stricter than federal OSHA. Every California employer with at least one employee is required to maintain an Injury and Illness Prevention Program (IIPP).

IIPP: Required for Every Employer

California Labor Code § 6401.7 requires every employer to establish, implement, and maintain an effective IIPP. The program must be in writing and must address eight specific elements.

Cal-OSHA provides free IIPP model programs at dir.ca.gov for different types of businesses. A general industry template is a reasonable starting point, but it must be customized to reflect your actual workplace hazards. Once your safety documentation is in order, connecting it to your broader HR policies is easier when everything lives in one place. FirstHR keeps compliance documents, onboarding workflows, and training records in a single system for small business teams.

Workplace Violence Prevention Plan: New Requirement (SB 553)

Effective July 1, 2024, most California employers must establish, implement, and maintain a Workplace Violence Prevention Plan (WVPP) as a standalone document or as part of their IIPP. The plan must include procedures for identifying and evaluating workplace violence hazards, correcting those hazards, responding to workplace violence incidents, training employees, and maintaining a violent incident log.

The exemptions in Labor Code § 6401.9 are narrower than people assume. A worksite qualifies only if fewer than 10 employees are there at any given time, it is not accessible to the public, and it already complies with the IIPP standard. Health care settings covered by the separate Cal-OSHA standard are exempt, as are employees teleworking from a location the employer does not control.

Cal-OSHA publishes a model plan and fact sheets for general industry that satisfy the requirement. Hazard records, violent incident logs, and incident investigations are kept five years; training records one year.

Employees can examine and copy the hazard records, training records, and incident logs free of charge within 15 calendar days of a request. Since January 1, 2025, a collective bargaining representative may seek a temporary restraining order on behalf of employees facing a threat.

Heat Illness Prevention

California has one of the strictest heat illness prevention standards in the country. The outdoor heat illness prevention standard (8 CCR § 3395) applies to every outdoor workplace, and shade has to be up whenever the temperature exceeds 80 degrees. An indoor heat illness prevention standard (8 CCR § 3396) took effect July 23, 2024 and applies when indoor temperatures reach 82 degrees or higher while employees are present.

Both standards require shade or a cool-down area, cool drinking water (at least 1 quart per hour per employee), rest periods for heat recovery, and emergency response procedures. In agriculture, construction, landscaping, oil and gas extraction, and heavy-materials transportation, the outdoor standard adds high-heat procedures at 95 degrees, including effective communication with workers and pre-shift meetings. Cal-OSHA keeps the current text and model plans on its heat illness prevention page.

Anti-Discrimination and Harassment

California's Fair Employment and Housing Act (FEHA), administered by the Civil Rights Department (CRD), provides broader anti-discrimination protections than federal law. Its discrimination rules apply to employers with 5 or more employees (not 15 as under federal Title VII), its harassment ban reaches employers of any size, and it covers a longer list of protected characteristics.

Protected Classes Under FEHA

FEHA prohibits discrimination, harassment, and retaliation based on: race, color, national origin, ancestry, religion, sex (including pregnancy, childbirth, and related medical conditions), sexual orientation, gender identity and expression, marital status, age (40+), physical disability, mental disability, medical condition, genetic information, military and veteran status, and reproductive health decision-making. As of January 1, 2025, the list also includes intersectionality (SB 1137, which protects against discrimination based on a combination of two or more protected characteristics).

Pay Transparency: Required in Job Postings

Effective January 1, 2023, employers with 15 or more employees must include the pay scale in all job postings, including those placed through third-party platforms. SB 642 sharpened the definition from January 1, 2026: a pay scale is a good faith estimate of the salary or hourly wage range you reasonably expect to pay for the position on hire.

Two duties sit underneath that, and they have no headcount threshold at all. Under Labor Code § 432.3, any employer must give the pay scale to an applicant who makes a reasonable request for it, and to a current employee who asks about their own position. Civil penalties run $100 to $10,000 per violation.

Government Code 12999, as expanded by SB 1162, also requires employers with 100 or more payroll employees to file an annual pay data report with the CRD, broken down by job category, race, ethnicity, sex, and pay band. A separate report covers employers with 100 or more labor contractor employees.

Under Government Code 12999, pay data reports are due on or before the second Wednesday of May, so the report for reporting year 2026 is due May 12, 2027.

Harassment Training Requirements (SB 1343)

Employers with 5 or more employees must provide harassment prevention training:

• Supervisors: 2 hours of training every 2 years, within 6 months of hire or promotion to a supervisory role
• Non-supervisory employees: 1 hour of training every 2 years

Training must be interactive, either conducted live (in person or via webinar with a trainer available to answer questions) or through e-learning that tells trainees how to reach a trainer who answers within two business days. For seasonal and temporary employees hired to work less than six months, the deadline is 30 calendar days after hire or 100 hours worked, whichever comes first.

According to the CRD's employer training FAQ (October 2025), you can run the two-year clock in one of two ways. Track it from each person's own last session, so a supervisor trained in March is due again in March two years later, or retrain everyone by the statewide deadline, currently January 1, 2027. The CRD also offers free online courses that satisfy the requirement.

Content has to cover the federal and state law on harassment, practical prevention examples for supervisors, abusive conduct under AB 2053, and harassment based on gender identity, gender expression, and sexual orientation.

Non-Compete Agreements: Void in California

Business and Professions Code Section 16600 makes non-compete agreements void and unenforceable in California. This is not new law; California has prohibited non-competes for decades. What is new as of 2024 is the scope and enforcement mechanism.

Under SB 699 (effective January 1, 2024), this prohibition extends to agreements signed in other states by employees who live or work in California. An employee who signed a non-compete with a Texas employer before moving to California cannot be bound by it here.

Under AB 1076 (effective January 1, 2024), employers were required to notify current and former employees (employed after January 1, 2022) in writing by February 14, 2024, that any non-compete clauses in their agreements are void.

Attempting to enforce a non-compete, or even including such a clause in a contract, is now a civil violation under Business and Professions Code 16600.5, so the risk goes beyond an unenforceable clause. The statute gives the worker a private right of action, meaning they can sue you directly for damages and attorney's fees.

Equal Pay and Salary History Rules

California's Equal Pay Act (Labor Code § 1197.5) requires equal pay for substantially similar work, not just identical jobs. Substantially similar is a broader standard than the federal Equal Pay Act's requirement for equal work, and comparisons can be made across different office locations, not just employees working side by side.

Employers cannot use an employee's prior salary history to justify a pay disparity. Penalties include back wages, liquidated damages equal to the back pay amount, and attorney fees.

SB 642 widened the exposure from January 1, 2026. Wage rates now expressly cover every form of pay, from salary and overtime through bonuses, stock, profit sharing, life insurance, and vacation pay. The filing window moved to three years from the last act, and a claimant can reach back up to six years of back pay, so a pay decision made today stays live far longer than it used to.

The salary history ban (AB 168, Labor Code § 432.3) applies to all California employers and has been in effect since January 1, 2018. You cannot ask job applicants about their current or prior compensation. If an applicant volunteers salary history without prompting, Labor Code 432.3 lets you consider it when setting their pay, though never as the justification for a pay gap.

Filing a Complaint with the CRD

Employees have three years from the date of the last discriminatory or harassing act to file a complaint with the California Civil Rights Department (CRD), a significantly longer window than the 180 to 300 days allowed under federal law. After the CRD issues a Right-to-Sue notice, the employee has one year to file a lawsuit in civil court.

Complaints can be filed online through the CCRS portal at ccrs.calcivilrights.ca.gov, by phone at 800-884-1684, or by mail. Free mediation through the CRD's Dispute Resolution Division is available before or during the investigation process.

A CRD complaint is automatically shared with the federal Equal Employment Opportunity Commission (EEOC) under a worksharing agreement. Filing with one agency therefore satisfies the requirement to exhaust administrative remedies with both, the agency step an employee has to complete before suing.

Whistleblower Protections (Labor Code § 1102.5)

California's whistleblower statute protects an employee who reports a suspected legal violation to a government agency, to a supervisor, or to anyone at the company with authority to investigate, and it also protects an employee who refuses to take part in something unlawful. The report does not have to turn out to be right, only reasonably believed.

The exposure is real. Labor Code § 1102.5 makes an employer that retaliates liable for a civil penalty of up to $10,000 per employee for each violation, awarded to the employee who was retaliated against, on top of the reinstatement and lost wages that Labor Code § 98.6 provides. A whistleblower rights notice is also one of the required workplace postings.

The risk shows up when a complaint precedes discipline. If someone raised a wage, safety, or harassment concern and you then need to address a genuine performance problem, document the timeline and the reason before you act. Under Labor Code § 1102.6 the burden falls on the employer to show by clear and convincing evidence that it would have taken the same action anyway.

Termination and Final Pay

California has strict rules about when a final paycheck must be issued: in most cases, immediately when you let someone go, and on the last day or within 72 hours when they quit, depending on the notice they gave.

The final paycheck must include all earned wages (including any wages owed for hours worked through the final day), all accrued but unused vacation time or PTO (California treats accrued vacation as earned wages that cannot be forfeited), and any other compensation owed.

Accrued sick leave is different: California requires no payout of it at separation unless your policy provides one, and an employee rehired within 12 months gets the unused balance back.

Paying Out Accrued Vacation

California courts have consistently held that accrued vacation time is a form of earned wages under Labor Code Section 227.3. An employer cannot implement a "use it or lose it" vacation policy that causes earned vacation to expire without pay. What is permitted is a cap on accrual: once an employee reaches the cap, they stop accruing until they use some vacation. But vacation already accrued must be paid out at termination.

If your vacation policy has a cap, it needs to be clearly documented and communicated, and it should be reasonable. According to the Labor Commissioner's vacation FAQ, a cap used as a subterfuge, a disguised way to deny employees their vacation, will not be recognized.

COBRA and Cal-COBRA at Termination

Federal COBRA continuation coverage applies to employers with 20 or more employees. California's Cal-COBRA covers group plans at employers with 2 to 19 employees and runs up to 36 months, against 18 months under federal COBRA. The election notice and forms go out within 14 days of notice of the qualifying event, and the former employee then has 60 days to elect.

Under Cal-COBRA, the first step is yours: Insurance Code 10128.55 requires the group contract to have you notify the insurer in writing within 30 days of the qualifying event, and the insurer sends the election package from there.

Employee Privacy Rights

California's employee privacy protections start higher than most, grounded in the California Constitution's explicit right to privacy (Article I, Section 1). Three areas need active attention: employee data rights under the CCPA, recording and monitoring, and personnel file access. The last two apply regardless of size, while the CCPA reaches only businesses that meet its coverage tests.

CCPA/CPRA: Employees Now Have Full Consumer Privacy Rights

The employee exemption from the California Consumer Privacy Act (CCPA) expired on January 1, 2023. According to the California Privacy Protection Agency, a business is covered if it does business in California and meets any one of three tests: gross annual revenue above $26,625,000 in the preceding calendar year; buying, selling, or sharing the personal information of 100,000 or more California consumers or households; or deriving 50% or more of annual revenue from selling or sharing personal information.

Employees of a covered business have the same seven data rights as any consumer: to know what personal information is collected, to correct inaccurate data, to delete personal information, to opt out of the sale or sharing of their data, to limit the use of sensitive personal information, to non-discrimination for exercising these rights, and to notice at the point of collection.

Covered employers must answer an employee data request within 45 days, extendable by another 45 with notice. Penalties reach $2,663 per unintentional violation and $7,988 per intentional one, both adjusted for inflation from the original $2,500 and $7,500. Privacy policies get reviewed and updated at least once every 12 months.

Monitoring, Recording, and Personnel File Access

California Penal Code § 632 requires all-party consent before recording any confidential communication. A violation is a crime, and it can also bring civil damages.

If you record phone calls, video meetings, or in-person conversations for training, documentation, or any other purpose, every participant must be informed and must consent. A verbal disclosure at the start of a call ("this call may be recorded") is the standard way to put everyone on notice before the conversation begins.

Workplace monitoring through cameras, computer tracking, email review, or other means is generally permissible. A business covered by the CCPA has to disclose it in its notice at collection, and a written policy is the safe course for everyone else. Under Labor Code 435, audio or video recording in restrooms, locker rooms, and changing rooms is banned unless a court order authorizes it.

Under Labor Code § 1198.5, current and former employees have the right to inspect their personnel files within 30 calendar days of a written request. Former employees may make this request once per year. Missing the deadline exposes you to a $750 penalty per violation plus attorney fees.

Two retention clocks run at once for personnel files, and the longer one governs. Labor Code § 1198.5 sets three years after separation. Government Code § 12946 sets four years for applications and personnel files, measured from creation or from the personnel action. Payroll records follow a third rule: three years under Labor Code § 1174(d). Keep everything four years and you satisfy all three.

California Labor Code § 980 (AB 1844) prohibits employers from requiring or requesting that employees or applicants provide passwords to personal social media accounts, log in to personal accounts in the employer's presence, or divulge personal social media, except where it is reasonably believed relevant to a misconduct investigation. Anti-retaliation protections apply to employees who refuse these requests.

Required Workplace Postings

California requires employers to display a specific set of notices in a prominent location where all employees can see them. Remote and hybrid employees who never see a physical posting location should get the notices electronically as well.

Five entries on that list are conditional rather than universal. The federal EEOC poster follows Title VII coverage at 15 or more employees, the FMLA poster starts at 50, and the medical and exposure records notice applies only where hazardous substances are used. The two state leave postings start at 5 employees.

That threshold comes from 2 CCR 11095, which requires every employer covered by CFRA to post its notice, and CFRA has covered employers of 5 or more since 2021. The DIR's postings table still shows an older split at 50 employees, so go by the regulation.

Everything else on the list applies from your first hire, including the discrimination and harassment posting and the transgender rights posting. Industry adds more on top: forklift operators, farm labor contractors, barbering and cosmetology licensees, and public works projects each carry postings of their own.

All required California postings are available free of charge at dir.ca.gov/wpnodb.html. Download directly from the DIR to ensure you have the current version. According to the DIR's posting FAQ, a posting only needs replacing when its content changes, and the wage orders change every year.

Employee Handbook: Required Policies

California does not technically require employers to have a written handbook. But many individual policies must be communicated in writing, and the practical reality is that a handbook is the most effective way to document and deliver all required notices, establish at-will status, and protect yourself in litigation.

The last row is the newest and the least understood. The Civil Rights Council's regulations on automated-decision systems took effect October 1, 2025. They do not require a policy document. They make clear that an algorithmic screening tool can violate FEHA exactly as a paper test can, if it harms applicants on a protected basis.

The most important compliance function of a California handbook is establishing at-will employment clearly and conspicuously. The language should appear prominently, ideally on the first page and in the signature acknowledgment. It should also be included in offer letters.

Arbitration Agreements After AB 51

California's AB 51 tried to prohibit mandatory arbitration agreements as a condition of employment. In Chamber of Commerce v. Bonta, decided February 15, 2023, the Ninth Circuit held that the Federal Arbitration Act preempts the law as a whole to the extent it touches arbitration agreements. California employers may require arbitration as a condition of employment.

Important limitations remain. Under Viking River Cruises v. Moriana, as the California Supreme Court read it in Adolph v. Uber, the individual portion of a claim under the Private Attorneys General Act (PAGA) can go to arbitration while the representative portion stays in court and the plaintiff keeps standing to pursue it.

Sexual harassment and assault claims cannot be forced into arbitration if the employee chooses court, under the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (2022). Courts will still strike clauses that are unconscionable.

Payroll Taxes and Workers' Compensation

California employers collect and remit four payroll-related taxes, two paid by the employee and two by the employer. According to the EDD's California Employer's Guide (DE 44), every employer must register with the EDD within 15 days of paying more than $100 in wages in a calendar quarter.

The California workers compensation page has the detail: the headcount at which coverage becomes mandatory, who is excluded, where to buy the policy, the injury reporting deadlines, and what going without coverage costs.

The Four Payroll Taxes: Rates and Wage Bases

According to the EDD, the SDI withholding rate is 1.3% for 2026, and UI runs on Schedule F+ from 1.5% to 6.2%. New employers pay UI at a flat 3.4% for their first two to three years, after which the rate follows their claims experience.

Because the wage cap on SDI was eliminated in 2024, high earners now pay on their full salary instead of topping out mid-year. On a $200,000 salary that is $2,600 a year at 1.3%, against the $1,378.48 maximum the EDD set under the old cap in 2023. There is no employer share of SDI, but there is a payroll system to configure correctly.

All payroll tax registrations and filings are handled through the EDD e-Services for Business portal at edd.ca.gov. Quarterly DE 9 and DE 9C reports fall due the day after each quarter ends and become delinquent if not filed by the last day of the following month.

Workers' Compensation: Required from Your First Hire

Labor Code § 3700 requires every California employer with one or more employees to carry workers' compensation insurance. There are no size exemptions. You can obtain coverage through a licensed private insurer, through the State Compensation Insurance Fund (a state-operated insurer of last resort), or by qualifying as a self-insured employer.

Self-insurance is a high bar for a small business. According to the Division of Workers' Compensation, it requires state approval, a net worth of at least $5 million, net income of $500,000 a year, and a security deposit.

The penalties for operating without workers' compensation coverage are severe. Going uninsured is a misdemeanor under Labor Code § 3700.5, punishable by up to a year in county jail or a fine of at least $10,000, up to double the premium you avoided, or both. A second conviction carries a floor of $50,000.

On the civil side, Labor Code § 3722 pairs a stop order with $1,500 per employee, and where you were uninsured for more than a week in the prior year the assessment becomes the greater of twice the avoided premium or $1,500 per employee. Once a claim is adjudicated, add $2,000 per employee in noncompensable cases and $10,000 per employee in compensable ones. Subdivision (f) caps these penalties at $100,000 in total, but the subdivision (b) assessment for more than a week uninsured has no cap.

The stop order itself is the part that stops a business: it requires you to cease operations until coverage is in place. Most significantly, you become personally liable for the medical costs, temporary disability payments, and permanent disability awards of any employee hurt while you were uninsured, and a single serious injury can be ruinous on its own.

California Requirements by Employer Size

One of the most confusing aspects of California compliance is that different obligations activate at different employer size thresholds. This table gives you a complete picture.

The most critical insight from this table: California is extremely aggressive about starting compliance obligations at small headcounts. FEHA anti-discrimination, CFRA leave, PDL, bereavement leave, reproductive loss leave, Fair Chance Act background check rules, and harassment prevention training all apply starting at 5 employees.

If you have 5 people on payroll, you are not a small business from a California compliance standpoint. You carry the obligations a mid-size company carries in most other states.

Key Legislative Changes to Review

California's legislature passes significant employment law changes every year. Here is a consolidated timeline of what has changed and what is coming, so you know what to review in your policies and handbooks.

Three of these land hardest on small businesses. A workplace violence prevention plan has been due since July 1, 2024, and a business without one is overdue rather than early. The Know Your Rights notice under SB 294 needed its first distribution by February 1, 2026, and repeats every February 1 after that.

The third is SB 642. Equal pay exposure now reaches back six years, which changes what your compensation records need to show. If you have never documented why two people in substantially similar roles are paid differently, that is the project this timeline should trigger.

The California HR Compliance Checklist by Cadence

Every obligation in this guide runs on a clock: at hire, each pay period, each quarter, each year, and at separation. The table below lists only the recurring set, because the expensive misses are almost never the one-time setup tasks. They are the repeating items nobody owns. The reasoning and the exceptions stay in the sections above.

If I could only watch two lines on that list, I would pick these. The pay period row repeats on every payday, so one missing pay stub item can become a per-employee, per-period penalty long before anyone notices. The annual poster refresh is the other, because a January minimum wage change quietly outdates the notice on the wall.

Give each of those two rows a named owner and a date on the calendar, and the rest of this guide becomes a reference you check rather than a fire you fight.

Frequently Asked Questions