California Employer HR Compliance Guide

Priority Compliance Actions

• 1Audit all job postings to include a good-faith pay scale estimate reflecting expected compensation upon hire, ensuring compliance with SB 642 by January 1, 2026.
• 2Reaudit exempt employee classifications and adjust salaries to meet the $70,304/year threshold, and verify that each worksite's local minimum wage ordinance is being applied where it exceeds the state rate.
• 3Review and update independent contractor agreements using the ABC test framework, and assess whether any workers currently classified as contractors qualify for employee status under AB 5.
• 4Update leave policies to incorporate CFRA (5+ employees), the 40-hour paid sick leave requirement, and the 2026 AB 406 victim-leave expansions, and train managers on California's broader CFRA family-member definitions.
• 5Document objective, business-related reasons for all compensation differences across your workforce to defend against expanded Equal Pay Act claims with a six-year lookback period.

Leave Laws

Federal FMLA applies to employers with 50+ employees; California Family Rights Act (CFRA) mirrors FMLA but applies to employers with 5+ employees and covers a broader set of family members and conditions, providing up to 12 weeks of unpaid, job-protected leave. California's Healthy Workplaces Healthy Families Act requires all employers to provide at least 5 days (40 hours) of paid sick leave per year, accruing at 1 hour per 30 hours worked, usable after 90 days. Effective January 1, 2026, AB 406 expands leave protections for employees who are victims of certain crimes or proceedings. Additional mandated leaves include Pregnancy Disability Leave (PDL, up to 4 months), bereavement leave (5 days for employers with 5+ employees), and domestic violence/sexual assault leave.

Wage & Hour

California does not recognize the federal tip credit; all employees must receive the full minimum wage regardless of tips. Overtime is owed at 1.5× for hours over 8 in a day or 40 in a week, and 2× for hours over 12 in a day or the first 8 hours on the seventh consecutive workday in a workweek. Final paychecks are due immediately upon involuntary termination or layoff; upon resignation with 72+ hours' notice, on the last day; otherwise within 72 hours — failure triggers waiting-time penalties of one day's wages per day late, up to 30 days. California requires employers to reimburse all necessary business expenses under Labor Code § 2802, including a portion of personal cell phone and home internet costs if used for work.

Worker Classification

California is an at-will employment state, though strong public-policy and implied-contract exceptions apply. Independent contractor classification is governed by the ABC test under AB 5 (Labor Code § 2750.3): a worker is an employee unless the hiring entity proves (A) the worker is free from control, (B) performs work outside the usual course of the business, and (C) is customarily engaged in an independently established trade. Numerous industry-specific exemptions exist (e.g., certain licensed professionals, referral agencies), but misclassification exposure is significant. Non-compete agreements are broadly unenforceable in California under Business & Professions Code § 16600; SB 699 (2024) reinforced this by voiding non-competes regardless of where they were signed.

Hiring & Onboarding

California bans salary history inquiries and requires employers to provide pay scale information to applicants upon request (Labor Code § 432.3). The state's ban-the-box law (AB 1008) prohibits most private employers with 5+ employees from asking about criminal history on applications and requires individualized assessment before rejecting a candidate based on a conviction. New hire reporting must be submitted to the California EDD within 20 days of hire. Drug testing is permissible pre-employment but California prohibits adverse action based solely on off-duty cannabis use (AB 2188, effective 2024); employers may still maintain drug-free workplace policies and test for impairment.

Related Tools

Law Changes

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