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State snapshot

Key considerations

Which issues would you most highlight to someone new to your state?

California is infamous for its worker-friendly laws, which provide for greater levels of protection and entitlement than those of other states or at the federal level. The Plaintiff’s Bar in California is also among the most active in the United States and employers there face a 42% higher chance of being sued by an employee than the national average.

New employers should be aware of the state’s increasing focus on the issue of equal pay, which has expanded to cover race and ethnicity, and will likely continue to expand to other protected classes. New employers in California should also be aware of increasing requirements at the local level, as major cities now have ordinances on minimum wage, paid sick leave, work scheduling and laws restricting pre-employment screening and inquiry (so-called ‘ban-the-box’). The state also continues to protect its immigrant workforce – which is among the highest in the nation – by criminalizing employers’ attempts to harass and exploit such employees.

What do you consider unique to those doing business in your state?

Doing business in the sixth largest economy in the world can be rewarding but it does carry a high risk for those who are unprepared when it comes to the state’s employment laws. California’s anti-discrimination law expands traditional protected classes to include sexual orientation, gender identity/expression, political activities or affiliations, and military or veteran status, among others.

Wage and hour laws continue to be a difficult area for new employers and mistakes here are especially unforgiving because of California’s Private Attorneys General Act, which allows employees to sue on behalf of the state in order to recovery additional penalties for Labor Code violations. California’s stringent laws on daily overtime, meal and rest breaks, so-called ‘use-it-or-lose-it’ policies, timely final wage payments and wage statement reporting create a potential minefield for unwary employers.

Is there any general advice you would give in the labor/employment area?

Be ready to adapt to rapid and continuous change. The California legislature has been a key driver of pro-worker rights, so it is important to monitor key legislative developments which may affect employers. California regulations are also subject to enforcement by up to six different state regulatory agencies (far more than in other states), so an understanding of administrative rule making and enforcement is crucial.

Emerging issues

What are the emerging trends in employment law in your state, including the interplay with other areas of law, such as firearms legislation, legalization of marijuana and privacy?

California continues to expand its equal pay law, which now prohibits wage disparities due to gender, race, and ethnicity. This expansion is expected to eventually include the remaining California protected classes. An offshoot of these efforts is the recent prohibition of prior salary as the sole justification for pay disparities. Employers should expect future legislation prohibiting employers from even asking for prior salary during the application process. 

Local ordinances in California’s major cities have expanded minimum wage and paid sick leave requirements above and beyond state requirements. More local jurisdictions are also joining the ban-the-box movement.

The legislature is reacting to the Trump administration by proposing additional laws for the protection of immigrant employees, wage and hour issues (including rules on scheduling to provide more consistent schedules for retail employees and prohibitions on hiring new employees until current employees are full-time and requesting salary history), and enhanced medical leave rights (dropping the threshold for coverage down to 20 employees).

Proposals for reform

Are there any noteworthy proposals for reform in your state?

Due to the high number of lawsuits filed under the Private Attorneys General Act in recent years, new bills were proposed last year to curtail the frequency of such suits by private employees. Although the initiatives were not entirely successful, they are expected to continue in order to provide some relief to the state’s overburdened courts. 

Employment relationship

State-specific laws

What state-specific laws govern the employment relationship?

The sources of California employment law are numerous and include a number of statutory codes and administrative regulations. California’s anti-discrimination and disability accommodation law is the Fair Employment and Housing Act, while the California Labor Code contains expansive laws governing wages, working conditions, worker’s compensation and employment relations, among others. The Industrial Welfare Commission Wage Orders contain additional wage and hour requirements for employees in specific industries. Employee leave laws include the California Family Rights Act and pregnancy disability leave laws. Article 1(1) of the California Constitution provides all citizens with privacy, and this extends to employees. The Cal-WARN Act adds certain protections to employees in the event of mass layoffs, relocations or plant closings.

Who do these cover, including categories of workers?

The Fair Employment and Housing Act covers an employee, applicant or person providing services pursuant to a contract (California Government Code, §12940). The meaning of “person providing services pursuant to a contract” has been interpreted broadly to also include contract workers and employees of an independent contractor (Hirst v City of Oceanside, 236 Cal App 4th 774 (2015)). Volunteers and unpaid interns are now also protected under the act from discrimination and harassment (California Government Code, §12940). Employers must also reasonably accommodate the religious beliefs of volunteers and unpaid interns (California Government Code, §12940 (l)).

Independent contractors may file harassment claims against the employing entity but may not file discrimination or retaliation claims under the act. California independent contractors are not covered by requirements to pay minimum wage, overtime, meal periods, rest breaks, vacation pay out, reimbursement of work-related expenses or other similar benefits under wage/hour laws. 

Misclassification

Are there state-specific rules regarding employee/contractor misclassification?

Sections 226.8 and 2753 of the California Labor Code prohibit the willful misclassification of individuals as independent contractors, and imposes civil penalties of between $5,000 and $25,000 per violation. There is no single definition of ‘independent contractor’ and different tests have been applied depending on the law implicated and context. For example, under the Fair Employment and Housing Act, an independent contractor:

  • has the right to control the performance of the contract for services and discretion on the manner of performance;
  • is customarily engaged in an independent business;
  • has control over when and where the work is performed;
  • supplies the tools and instruments used in the work; and
  • performs work that requires a particular skill not ordinarily used in the course of the employer's work (California Government Code, §12940(j)(5).

For the purposes of determining whether an independent contractor is properly classified for wage and hour purposes, the Department of Labor Standards Enforcement follows the workers' compensation standard's multi-factor or economic realities test (see the Department of Labor Standards Enforcement Policies and Interpretations Manual, §28 (2002 edition)).

Contracts

Must an employment contract be in writing?

Generally no written agreement is required. However, a commissioned salesperson’s agreement must be in writing (California Government Code, §2751). 

Additionally, California’s Wage Theft Protection Act requires employers to provide employees with written notice of their rates of pay, allowances, regular payday and other information, at their time of hire and within seven days of any changes to such information (California Labor Code, §2810.5).

Are any terms implied into employment contracts?

There are implied covenants of good faith and fair dealing in employment contracts (Guz v Bechtel National, Inc, 24 Cal 4th 317 (2000)). Implied contract or implied terms may also be found based on:

  • an employer’s words or conduct;                                                                                                                      
  • its personnel policies or practices;                                                                                                                    
  • the employee's longevity of service;                                                                                                                  
  • actions or communications by the employer reflecting assurances of continued employment; and  
  • the practices of the industry in which the employee is engaged (Foley v Interactive Data Corp, 47 Cal 3d 654, 680 (1988)).

Are mandatory arbitration agreements enforceable?

Mandatory arbitration agreements are considered contracts of adhesion and therefore have been found to be procedurally unconscionable. They will therefore be enforced only if the terms are not substantively unconscionable (ie, one-sided or harsh) and comply with the requirements established in Armendariz v Foundation Health Psychcare Services, Inc (24 Cal 4th 83 (2000)):

  • The agreement must provide the employee with all remedies available in a court action.
  • The agreement must provide for sufficient discovery to allow employees to gather necessary evidence to prove their claims.
  • The agreement must provide for a written decision that can be meaningfully reviewed.
  • The employee cannot be required to pay any additional costs beyond those it would routinely face in court litigation.
  • The employer cannot limit the types of claim subject to arbitration such that only claims typically brought by employees are subject to arbitration.

Further, arbitration agreements cannot be used to waive an employee’s rights under the Private Attorney General Act, which must remain with the court even if the remainder of the case is sent to arbitration.

How can employers make changes to existing employment agreements?

Most employment agreements include express provisions requiring all modifications to be made in writing. Where employment is at will, the employer may unilaterally alter the terms of employment.

Hiring

Advertising

What are the requirements relating to advertising open positions?

Advertisements must not suggest a preference against applicants or independent contractors on the basis of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition (eg, cancer-related conditions or genetic characteristics), genetic information, marital status, sex, gender identity, gender expression, age (40 years and older), sexual orientation, or military and veteran status of any person.

Background checks

What can employers do with regard to background checks and inquiries?

(a) Criminal records and arrests

As a general matter, employers are prohibited from making any non-job-related inquiry of applicants or employees that directly or indirectly expresses a limitation, specification, or discrimination about any protected characteristic. In addition to the federal Fair Credit Reporting Act governing the use of background checks in employment, California employers must also comply with certain requirements in the California Investigative Consumer Reporting Agencies Act and the California Consumer Credit Reporting Agencies Act. 

An employer may not ask an applicant about any arrest or detention which did not result in a conviction (California Labor Code, §432.7). Neither can employers ask applicants to disclose information regarding a conviction for certain marijuana-related crimes or possession of certain drug-related paraphernalia when the conviction is more than two years old (California Labor Code, §432.8). With limited exceptions, employers may not ask for juvenile convictions or inquire or use information about juvenile arrests, detentions, or court dispositions in making an employment determination.

Los Angeles employers are subject to ban-the-box local laws which prohibit inquiries on criminal records until after a conditional job offer has been made. San Francisco employers cannot inquire about applicants’ criminal records until after the initial job interview.

(b) Medical history

As a general matter, employers may not inquire about any mental or physical disability or medical condition, but may ask the applicant if he or she can perform the essential functions of the job. 

The Fair Employment and Housing Act prohibits employers from requiring applicants to take a medical or psychological examination before the initial job offer (California Government Code, §§ 12900-12996). After extending an initial job offer, the employer may ask the applicant to undergo a pre-employment medical exam or laboratory test, so long as it relates specifically to the essential functions of the job. 

Background check reports may not include medical information without the employee’s or applicant’s authorisation (California Civil Code, §1786.12(f)). 

(c) Drug screening

There is no specific statute on drug screening but California courts have generally permitted employers to require employees to pass a drug test as a condition of employment, so long as it tests all applicants and does not single out certain applicants due to protected characteristics. Note that employers in certain safety-sensitive industries such as transportation and aviation are subject to federal drug testing laws.

The California Supreme Court has held that an employer may refuse to hire an applicant who tests positive for marijuana even where it is prescribed for medicinal purposes (Ross v RagingWire Telecomms, Inc, 42 Cal 4th 920 (2008)).

(d) Credit checks

Under the California Consumer Credit Reporting Agencies Act, employers generally may not obtain a consumer credit report or perform a credit check of an applicant or employee except in limited circumstances, such as where the position of the person for whom the report is requested involves:

  • a managerial position;
  • access to confidential/proprietary information or regular access to $10,000 or more of cash belonging to the employer/customer/client; or
  • regular access to individuals’ bank or credit card account information or date of birth, or in cases where the person is, or would be, either a named signatory on the employer’s bank or credit card account, authorised to transfer money on the employer’s behalf or authorized to enter into financial contracts on the employer’s behalf.

Before obtaining a consumer credit report for employment purposes, employers must give written notice to the consumer specifying the exemption it is using to obtain the report (California Civil Code, §1785.20.5; California Labor Code, §1024.5).

(e) Immigration status

The federal Immigration Reform and Control Act sets out certain requirements to establish authorization to work in the United States. California has additional requirements prohibiting employers from engaging in unfair immigration-related practices, such as using E-Verify to check a person’s authorisation status at a time or in a manner not required under federal immigration law, or in retaliation for a person’s exercise of his or her employment rights under the Labor Code. 

Under the recently enacted Section 1019.1 of the Labor Code, employers may not:

  • request more or different documents than required under federal law to verify work authorization status;
  • refuse to honor documents that look genuine;
  • refuse to honor documents or work authorizations based on the specific status/term accompanying the authorization to work; or
  • attempt to re-investigate or re-verify an incumbent employee’s authorization to work using an unfair immigration-related practice. 

A penalty of up to $10,000 per violation may be recovered by the applicant, employee or the labor commissioner.

(f) Social media

While there is no specific statute prohibiting retrieval or review of applicant or employee social media information, relying on such information to make employment decisions can raise a host of issues under the state’s anti-discrimination and privacy laws. For example, an employer may be liable for discrimination if it conducts a social media search which reveals an applicant’s protected characteristics and then relies on such information in deciding whether to hire. 

In addition, Section 7 of the National Labor Relations Act prohibits employers from discriminating or taking adverse action against employees who engage in protected concerted activity, which may include online discussions of wages, hours or other working conditions.

California employers must also refrain from asking applicants to access a personal social media account in its presence and may not require employees to provide log-in information for their social media accounts (California Labor Code, §980(b)).

(g) Other

Employers may not demand or require applicants or employees to take a polygraph test nor request an applicant or employee to take a polygraph test without first advising him or her of rights under Section 432.2 of the Labor Code.

Likewise, California employers cannot use the results of applicant or employee HIV tests for employment purposes (California Health and Safety Code, §120980(f)).

Wage and hour

Pay

What are the main sources of wage and hour laws in your state?

The California Labor Code and the Industrial Welfare Commission Wage Orders are the statutory laws dealing with wage and hour issues.

Wage claims can be especially problematic because an employee who prevails on a wage claim is usually entitled to an award of reasonable attorneys’ fees in addition to any damages received. Employee wage claims are typically brought before a state government labor agency or through the federal or state civil judicial system.

What is the minimum hourly wage?

For employers with at least 26 employees, the state minimum wage is $10.50 as of January 1 2017, and will increase as follows: 

  • $11 per hour from January 1 2018;
  • $12 per hour from January 1 2019;
  • $13 per hour from January 1 2020;
  • $14 per hour from January 1 2021; and
  • $15 per hour from January 1 2022 (California Labor Code §1182.12).

Note that there are local ordinances with higher minimum wages (eg, $11.50 in San Diego).

What are the rules applicable to final pay and deductions from wages?

In California, an employee who is terminated by the employer for any reason must receive payment on the date of termination for all wages earned through the final day of employment (including all accrued but unused vacation entitlement) (California Labor Code, §201). If the employee resigns, the employer has 72 hours from the date of resignation to provide payment of final wages (California Labor Code, §202). An employer’s willful failure to pay an employee’s final wages in a timely manner can result in the imposition of a significant waiting time penalty, equal to one day of the employee’s wages for every day that payment is withheld, up to a maximum of 30 calendar days (California Labor Code, §203).

Hours and overtime

What are the requirements for meal and rest breaks?

Employees who work five hours or more per day must be provided with a duty-free uninterrupted 30-minute meal period. Meal periods must also be timely, meaning they are taken before the end of the employee’s fifth hour of work. If the employee is required to remain at the work site or facility during the meal period, then the meal period is on duty and must be paid. If a meal period is not provided, is interrupted or otherwise non-compliant, the employer must pay a premium equal to one hour of wages to that employee. 

Employers must authorize and permit non-exempt employees to take a duty-free uninterrupted 10-minute paid, off-duty rest break for every four-hour work period or major fraction thereof. Rest breaks should be taken in the middle of the work period insofar as practicable. Employees working less than 3.5 hours are not entitled to a rest period.

What are the maximum hour rules?

Non-exempt employees must generally be paid 1.5 times the regular rate of pay for all hours worked over eight in a day up to and including 12 hours in any workday, as well as the first eight hours worked on the seventh consecutive day of work in a work week (California Labor Code, §510). Non-exempt employees must be paid double the regular rate of pay for work performed over 12 hours in any workday and over eight hours on the seventh consecutive day of work in a work week (California Labor Code, §510). 

How should overtime be calculated?

The California Department of Labor Standards Enforcement relies on the Fair Labor Standards Act regulations to determine the regular rate of pay for the purposes of calculating overtime. The regular rate must include all remuneration for employment paid to or on behalf of an employee (Huntington Memorial Hosp v Sup Ct, 131 Cal App 4th 893, 902-05 (Cal Ct App 2005)). This typically includes hourly, salary and piecework earnings, commissions, on-call pay, non-discretionary bonuses (ie, production and attendance bonuses), shift differentials, the value of certain meals and lodging. 

Payments generally not considered to be remuneration and therefore not included in the regular rate calculation include:

  • payments for occasional periods when no work is performed (ie, holiday and sick pay);
  • gifts and rewards for service that are not tied to hours worked;
  • production or efficiency (ie, gifts for holiday/special occasions);
  • discretionary bonuses (only if the employer has sole discretion over both the fact and amount of payment and the bonuses are not part of a contract or promise);
  • payments under a bona fide profit-sharing plan or thrift or savings plan which is not tied to hours worked, production or efficiency (Title 29 of the Code of Federal Regulations, §§778.200-778.225; California Labor Code, §200(a); Department of Labor Standards Enforcement Manual, §§35.4.4, 35.7, 49.1 to 49.1.2.4 (2002)).

What exemptions are there from overtime?

Employees may be exempt from overtime if they satisfy the salary basis test (double minimum wage, currently $43,680) and their duties fall under the executive, administrative or professional exemptions. Unlike the federal exemption analysis, California employees are subject to a strict duties test, meaning that they must perform exempt job duties for over 50% of an employee’s working time in order to be exempt from overtime. This is a quantitative, not qualitative test and the exemption must be met every week.

California also recognizes limited exemptions applicable to:

  • computer software professionals (as of January 1 2017, salary test of $42.35 per hour or at least $88,231.36 annually for full-time work) who primarily conduct systems analysis or design, develop, document, analyze, create, test or modify computer systems or programs;
  • commissioned employees (with earnings which exceed 1.5 times the minimum wage and greater than 50% of earnings represent commissions); and
  • outside salespersons (primarily engaged in sales activity and who spend over 50% of their working time away from the employer’s place of business).

Record keeping

What payroll and payment records must be maintained?

Employees must keep accurate information related to each employee (ie, name, address, occupation, social security number and date of birth), as well as:

  • time records showing when the employee begins and ends each work period, meal periods, split shift intervals and total daily hours worked (rest periods and meal periods during which operations cease do not have to be recorded);
  • payroll records showing total wages paid for each payroll period, including the value of any board, lodging or other compensation actually furnished to the employee; 
  • wage statements which should contain all of the information required under Section 226(a) of the Labor Code, including the balance of available paid sick leave available or paid time off/vacation time in lieu thereof;
  • total hours worked in the payroll period and the applicable rates of pay; and 
  • for piece rate or incentive plan employees, the piece rates or an explanation of the incentive plan formula and accurate production records (Industrial Welfare Commission Wage Order No 15, § 7). 

All required records must be written in English, properly indicate the month, day and year, and be kept on file for at least three years at the place of employment or at a central location in California (California Labor Code, §226).

Records of wage and wage rates, job classifications and other terms and conditions of employment must be maintained for all employees for at least three years (California Labor Code, §1197.5(d)).

Discrimination, harassment and family leave

What is the state law in relation to:

Protected categories

(a) Age?

California law protects more categories of worker than federal law. Its anti-discrimination provisions apply to all employers with five or more employees, while its anti-harassment provisions apply to all employers with one or more employees (Title 2 of the California Code Regulation, §11008(d)). Supervisors are not individually liable for discrimination (Reno v Baird, 18 Cal 4th 640 (1998)). However, all employees, including supervisors and managers, may be held personally liable for acts of harassment (Californian Government Code, §12940(j)(3)).

California law has also been amended to provide unpaid interns, volunteers and employees providing services under a contract (eg, staffing agency employees) with the same legal protections as regular employees (California Government Code, §12940(a)).

Age is a protected category under the California Fair Employment and Housing Act (California Government Code, §12940(a)).

(b) Race?

Race is a protected category under the California Fair Employment and Housing Act (California Government Code, §12940(a)).

(c) Disability?

Actual or perceived disability is a protected category under the California Fair Employment and Housing Act (California Government Code, §12940(a)).

(d) Gender?

Gender is a protected category under the California Fair Employment and Housing Act (California Government Code, §12940(a)). Gender identity and gender expression are also protected categories.

(e) Sexual orientation?

Sexual orientation (including sexual identify and expression) is a protected category under the California Fair Employment and Housing Act (California Government Code, §12940(a)). 

(f) Religion?

Religion is a protected category under the California Fair Employment and Housing Act (California Government Code, §12940(a)).

(g) Medical?

An employee’s medical condition is a protected characteristic under the California Fair Employment and Housing Act (California Government Code, §12940(a)).

(h) Other?

Protected characteristics under the Fair Employment and Housing Act include national origin, color, ancestry, genetic information, marital status, sex, as well as military/veteran status and political affiliation, in addition to the categories listed above (California Government Code, §12940(a)).

Harassment

What is the state law in relation to harassment?

Harassment is prohibited on the basis of all of the protected characteristics listed above. In addition, individual employees, including supervisors, may be held personally liable for harassment (California Government Code, §12940(j)(3)).

California law also mandates that employers with more than 50 employees provide at least two hours of anti-harassment training at least once every two years (and to new supervisory employees within six months of their assumption of a supervisory position) (California Government Code, §12950.1(a)). Although initially limited to sexual harassment, this training requirement has been expanded to cover abusive conduct.

In addition, as part of its obligation to take all reasonable steps necessary to prevent discrimination and harassment (California Government Code, §12940(k)), an employer with five or more employees must develop written policies on the prevention of harassment, discrimination, and retaliation (Title 2 of the California Code Regulations, §11023). These policies must also include a complaints process which meets certain minimum requirements, including:

  • confidentiality (to the extent possible);
  • a timely response;
  • an impartial and timely investigation by qualified personnel;
  • documentation;
  • appropriate remedial actions; and
  • timely closures.

Family and medical leave

What is the state law in relation to family and medical leave?

The California Family Rights Act is broadly consistent with the federal Family and Medical Leave Act. However, there are a few key differences – including that the California act allows leave for a registered domestic partner – along with certain requirements for bonding leaves.

More critically, it is defined not to include a pregnancy-related disability. Instead, this is covered under California’s Pregnancy Disability Leave regulation (Tile 2 of the California Code Regulations, §11042). Pregnancy disability leave provides for leave of up to four months for the period of time during which an employee is actually disabled because of pregnancy (ibid). Pregnancy disability leave is separate from the California Family Rights Act, which provides for bonding time, and does not run concurrently. Consequently a pregnant employee may take up to a total of seven months of pregnancy-related leave.

Current legislation is also pending which would reduce the employee threshold to 20 employees under the California Family Rights Act.

Privacy in the workplace

Privacy and monitoring

What are employees’ rights with regard to privacy and monitoring?

Among the most important restrictions are the limitations on the use of certain background information. Employers should also be aware that California law restricts the unauthorized recording of conversations without the consent of all parties (which has led to a host of class action lawsuits) (California Penal Code, §632).

In addition, California maintains an all-purpose right to privacy, which applies in the employment context. For example, unless employers set clear limits on any expectation of privacy on company computers or using company resources, employees may be able to claim a right to privacy over personal emails, social networking and records. Clear policy language is a requirement for any employer in California. This test also applies in the context of physical searches, such as lockers and desks. 

California law also restricts taking adverse action against an employee based on lawful off-duty conduct (California Labor Code, §96(k)).

Are there state rules protecting social media passwords in the employment context and/or on employer monitoring of employee social media accounts?

Yes. California employers are prohibited from requesting the disclosure of a social media username or password, or requiring an applicant or employee to access social media or to divulge any personal social media (subject to a limited exception for investigations of employee misconduct or violations of the law) (California Labor Code, §980. In addition, information learned over social media (even if shared publicly) may give rise to issues concerning discrimination, harassment, retaliation and/or protected concerted activity under the National Labor Relations Act.

Bring your own device

What is the latest position in relation to bring your own device?

Bring your own device policies are common in California. However, employers must be aware of their obligation under Section 2802 of the California Labor Code, which has been interpreted to require reimbursement for costs (eg, data even if the individual is on an unlimited data plan and there is no marginal increase in cost for the employee if he or she is doing work on his or her device) associated with the business use of an employee’s personal device. Many employers provide a flat monthly reimbursement rather than attempt to calculate what percentage of an employee’s data usage is attributable to work.

Off-duty

To what extent can employers regulate off-duty conduct?

California law restricts taking action against an employee based on lawful off-duty conduct (California Labor Code, §96(k)). However, even though marijuana is legalized under California law, employers retain the ability to administer drug tests and terminate the employment of individuals who test positive for marijuana (Ross v Ragingwire Telecommunications, Inc, 42 Cal 4th 920 (2008)). In addition, employers may terminate or take other disciplinary action against an employee who is under the influence of drugs or alcohol at the work site.

Gun rights

Are there state rules protecting gun rights in the employment context?

No.

Trade secrets and restrictive covenants

Intellectual Property

Who owns IP rights created by employees during the course of their employment?

Generally, the intellectual property developed by an employee by virtue of his or her employment belongs to the employer, although employers would be well advised to have an express IP assignment agreement in place (California Labor Code, §2860).

However, employers cannot require the assignment of an invention that the employee developed entirely on his or her own time without using the employer’s resources, unless that invention either relates to the employer’s business or results from work performed by the employee for the employer (California Labor Code, §2870).

Restrictive covenants

What types of restrictive covenants are recognized and enforceable?

Subject to narrow restrictions in the sale-of-business context, non-competition and non-solicitation of customers provisions are void and unenforceable under California law (California Business and Professions Code, §16600). Indeed, attempting to enforce a non-competition agreement against a California employee, even if lawful in the jurisdiction in which it is entered, is considered an unfair business practice and may give rise to liability (Application Group, Inc v Hunter Group, Inc, 61 Cal App 4th 881 (1998)).

California will enforce reasonable non-solicitation of employee (so-called ‘anti-raiding’) covenants (Loral Corp v Moyes, 174 Cal App 3d 268 (1998)).

Non-compete

Are there any special rules on non-competes for particular classes of employee?

No, because non-competes are generally unenforceable except in the sale-of-business context.

Labor relations

Right to work

Is the state a “right to work” state?

No. 

Unions and layoffs

Is the state (or a particular area) known to be heavily unionized?

Relative to other states, California could be seen as heavily unionized, as approximately 15.9% of workers were unionized as of 2015. Unsurprisingly given its size, California has the largest absolute number of union members.

What rules apply to layoffs? Are there particular rules for plant closures/mass layoffs?

California does have a mini-WARN Act. Its coverage is significantly broader than its federal counterpart (California Labor Code, §1400 et seq).

Key differences include:

  • Cal-WARN applies to employers with 75 or more employees (as opposed to 100);
  • part-time employees are included;
  • no numerical threshold of affected employees for purposes of a plant closing (or termination);
  • a ‘mass layoff’ includes the layoff of 50 or more employees during any 30-day period regardless of the percentage of the workforce (under federal law it must affect at least 33% of the workforce, or 500 employees); and
  • additional notice provisions apply among a number of other differences.

Discipline and termination

State procedures

Are there state-specific laws on the procedures employers must follow with regard to discipline and grievance procedures?

No, unless employees are covered by a collective bargaining agreement. 

At-will or notice

At-will status and/or notice period?

California is an at-will state, meaning that an employee may be terminated with or without cause at any time and for any lawful reason, with or without advance notice.  

What restrictions apply to the above?

An employee’s at-will status may be modified by a collective bargaining agreement, or an express or implied contract between the employer and employee.

Employers are well advised to include specific at-will disclaimers in their company handbooks and any signed offer letters and to further provide that at-will status may be changed only through an express, signed, written agreement (to limit implied contract claims).

Of course, an employee cannot be terminated for an unlawful reason, such as membership in a protected class or in retaliation for engaging in protected activity (eg, complaining about discrimination, complaining about wage issues or whistleblowing).

Final paychecks

Are there state-specific rules on when final paychecks are due after termination?

Yes. In the case of a termination, the employee must be paid all wages (including accrued but unused vacation) due at the time of discharge (California Labor Code, §201). An employee who resigns must be paid within 72 hours of his or her resignation (California Labor Code, §202).