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State snapshot

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

California has many unique employment laws. The most prominent among them are the wage and hour laws, which differ significantly from federal laws and the laws in most other states:

California has daily overtime and double time and laws regarding meal and rest breaks. California courts have applied the state minimum wage law to invalidate many traditional piece-rate and commission plans.
California requires very detailed wage statements.
Employers cannot typically impose or enforce non-compete agreements or non-solicitation of customer provisions.

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

California has employee-friendly provisions concerning:

  • overtime;
  • meal and rest periods;
  • vacation;
  • personal days/floating holidays;
  • sick leave (as of July 2015);
  • inspection/copies of personnel files;
  • family leave;
  • minimum wage;
  • wage statements;
  • wage theft notice;
  • mandatory anti-harassment and bullying training for supervisors;
  • mandated reimbursement for employee business expenses; and
  • pregnancy-related disability leave and reasonable accommodations.

In addition, California has many small necessities leave requirements for larger employers, which entitle employees to additional protected time off for various medical, family, and personal reasons. California’s Private Attorney General Act allows employees to serve as “attorney general” in order to sue on behalf of the state and all affected employees. This makes class action and representative suits more common, because even small claims create significant economic incentives for plaintiffs. Under Section 17200 of the Business and Professions Code, unfair business practices are banned. Further, the code extends many statutes of limitation—including wage claims—to four years.

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

California is widely known as one of the most employee-friendly states in the country. It is also a litigious state, with a well-organized and capitalized plaintiffs’ bar. Class actions and Private Attorney General Act cases are commonly filed to address wage and hour issues.

Proposals for reform
Are there any noteworthy proposals for reform in your state?

California’s new Paid Sick Leave Law has left significant room for interpretation. The legislature has already announced plans for clean-up legislation in early 2015.

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?

Some emerging trends in employment law include reimbursement procedures for employees who must use cell phones and other mobile devices for work. Further, there have been controversial decisions requiring employers to pay the minimum wage separately for each hour of work. These decisions have caused California employers to revise piece-rate plans and commission plans that do not separately pay the minimum wage for work time that does not directly involve production or generation of sales.

California has also seen a rash of new employment legislation seeking to protect the rights of undocumented immigrants—in particular, shielding them from retaliation for making changes to personal information initially provided to the employer or complaining about unpaid wages or working conditions. A new law requires mandatory training on “abusive conduct,” which is broadly defined. Even clients with exemplary policies concerning respect and courtesy in the workplace are concerned that the new definition might subject normal performance review processes and counseling sessions to criticism as being “abusive.”

Employment relationship

State-specific laws
What state-specific laws govern the employment relationship?

California is an at-will employment state (Section 2922 of the California Labor Code). An implied contract of continued employment exists unless there is clear language within the contract (signed by the employee) affirming the at-will relationship. Most California laws regarding employment and the terms thereof are included in the California Labor Code. Laws regarding discrimination and harassment are included in the California Government Code.

Who do these cover, including categories of workers?

Most California employment laws cover employees, not independent contractors; however, harassment laws include independent contractors.

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

Yes—fines of $5,000 and $15,000 per violation are imposed on employers that willfully misclassify their employees as independent contractors (Section 226.8 of the California Labor Code). Fines increase to $10,000 and $25,000 per violation if a pattern or practice of misclassification is found. California state law imposes tax penalties for misclassification, including back taxes, interest, and a 10% penalty.

Contracts
Must an employment contract be in writing?

No—employment contracts can be written or oral, express or implied. Agreements must be in writing in order to receive compensation from commissions (Section 2751 of the California Labor Code). Agreements must also specify how the commission is to be calculated, earned, and paid. The employer must provide a signed copy of the agreement and obtain a signed receipt from the employee acknowledging receipt of the agreement containing the commission arrangement.

Are any terms implied into employment contracts?
USA > California
Seyfarth Shaw LLP

There is an implied covenant of good faith and fair dealing which provides that no party can take any action in bad faith in order to deprive the other party of the benefit of express contractual terms.

Are mandatory arbitration agreements enforceable?

Yes—subject to several limitations. Arbitration agreements containing the procedural requirements within Armendariz v. Foundation Health Psychcare Services are likely to be enforced. These requirements include:

  • mutuality of obligation to arbitrate;
  • a fair arbitrator selection process;
  • adequate discovery procedures;
  • employer payment of costs above what the employee would pay in court;
  • a written decision by the arbitrator and sufficient reasons to be reviewed by a court; and
  • that any rules specified in the agreement be attached or easily available to the employee.

Under recent case law, class action waivers have been enforced. The only exception to this is that some case law holds that employees cannot be required to arbitrate Private Attorney General Act claims.

How can employers make changes to existing employment agreements?

Because California is an at-will state, employers may make changes to the terms and conditions of employment; as long as proper notice has been given (depending on the type of term being changed) and the employee continues employment, the new term becomes part of the employment relationship.

Hiring

Advertising
What are the requirements relating to advertising open positions?

California law has no set time for advertising open positions for private employers.

Background checks
What can employers do with regard to background checks and inquiries?
(a) Criminal records and arrests

Employers are prohibited from considering as a factor in employment or requesting job applicants to disclose information concerning:

  • an arrest or detention that did not result in a conviction; or
  • referral to or participation in a pre-trial or post-trial diversion program (Section 432.7 of the California Labor Code).

Section 432.7 also prohibits employers from asking job applicants about criminal records that have been expunged, sealed, or dismissed. California public employers are prohibited from asking about criminal histories on job applications, as are all employers in San Francisco. Employers cannot ask about most marijuana convictions older than two years (Section 432.8 of the California Labor Code).

(b) Medical history

Under the California Fair Employment and Housing Act, a California employer cannot require applicants to submit to medical or psychological examination. Further, employers cannot inquire into whether an applicant has a mental or physical disability or medical condition. It is also unlawful to make an inquiry regarding the nature and severity of a mental or physical disability or medical condition. However, an employer can inquire into an applicant’s ability to perform job-related functions and may respond to an applicant’s request for reasonable accommodation. Once an employment offer has been made, but before the commencement of employment duties, an employer may require a medical or psychological examination, provided that:

  • the examination or inquiry is job related and consistent with business necessity; and
  • all employees in the same job classification are subject to the same examination or inquiry.

(c) Drug screening

Drug testing is limited by California’s constitutional right to privacy. Typically, employers using drug testing as part of the hiring process are expected to conduct those tests post-offer and pre-hire.

(d) Credit checks

Credit checks are extremely limited in California. A consumer credit report is prohibited unless it is for:

  • a managerial position;
  • a position within the State Department of Justice;
  • a sworn peace officer or other law enforcement position;
  • a position for which the information contained in the report is required by law to be disclosed or obtained;
  • a position that involves regular access (for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment) to all of the following types of information of any one person:
    • bank or credit card account information;
    • social security number; and
    • date of birth;
  • a position in which the person is, or would be, any of the following:
    • a named signatory on the bank or credit card account of the employer;
    • authorized to transfer money on behalf of the employer; or
    • authorized to enter into financial contracts on behalf of the employer;
  • a position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process, or trade secret that:
    • derives independent economic value (actual or potential) from not being generally known to, and not being readily ascertainable through proper means by, other persons who may obtain economic value from the disclosure or use of the information; and
    • is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information; or
  • a position that involves regular access to employer, customer, or client cash totaling $10,000 or more during the working day (Section 1024.5 of the California Labor Code).

(e) Immigration status

Employers are prohibited from discriminating, retaliating, or taking any adverse action against an employee because he or she updates or attempts to update his or her personal information—including immigration status—unless the changes are directly related to the skill set, qualifications, or knowledge required for the job (Section 1024.6 of the California Labor Code).

(f) Social media

Employers are prohibited from requiring or requesting an employee or applicant to do any of the following:

  • disclose a username or password for the purpose of accessing personal social media;
  • access personal social media in the presence of the employer; or
  • divulge any personal social media, except when reasonably believed to be relevant to an investigation of allegations of employee misconduct or employee violation of applicable laws and regulations, provided that the social media is used solely for purposes of that investigation or a related proceeding (Section 980 of the California Labor Code).

(g) Other

Discrimination statutes apply to employers with as few as five employees. Harassment statutes apply to all employers.

Wage and hour

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

The California Labor Code and Industrial Welfare Commission Wage Orders.

What is the minimum hourly wage?

Effective July 1 2014, the minimum wage in California is $9 per hour. Effective January 1, 2016, the minimum wage in California will be $10 per hour. Several cities (e.g., San Jose and San Francisco) have higher minimum wages.

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

Deductions from wages are extremely limited in California. An employer can lawfully withhold amounts from an employee’s wages only:

  • when required or empowered to do so by state or federal law;
  • when a deduction is expressly authorized in writing by the employee to cover insurance premiums, benefit plan contributions, or other deductions not amounting to a rebate on the employee’s wages; or
  • when a deduction to cover health, welfare, or pension contributions is expressly authorized by a wage or collective bargaining agreement (Sections 221 and 223 of the California Labor Code).  

Advance authorization of lump-sum deductions from final pay is prohibited in California (Barnhill v. Sanders, 125 Cal.App.3d 1 (1981)).

Hours and overtime
What are the requirements for meal and rest breaks?

Section 512 of the California Labor Code states that an employer may not employ an employee for a period of more than five hours per day without providing the employee with a meal period of no less than 30 minutes. However, where the employee’s daily working time does not exceed six hours, the meal period may be waived by mutual consent of both the employer and employee. A second meal period of no less than 30 minutes is required if an employee works more than 10 hours per day. However, if the employee’s total working hours do not exceed 12 hours, the second meal period may be waived by mutual consent if the first meal period was not waived. Under the Wage Orders, employers must authorize and permit non-exempt employees to take a rest period. This rest period must be taken in the middle of each work period, insofar as this is practical. The rest period is considered time worked and paid. The rest period is based on the total daily hours worked and must be at the minimum rate of a net 10 consecutive minutes for each four-hour working period or major fraction thereof. The Division of Labor Standards Enforcement considers anything more than two hours to be a "major fraction" of four. A rest period is not required for employees whose total daily work time is less than three-and-a-half hours. Since employees are paid for their rest periods, they can be required to remain on the employer's premises during such periods.

What are the maximum hour rules?

The general overtime provisions—which are found in the Wage Orders—state that non-exempt employees who are 18 years old or older, or any minor employee who is 16 or 17 years  old and is not required by law to attend school or otherwise prohibited by law from engaging in the subject work, cannot be employed for more than eight hours a day or for more than 40 hours in any working week, unless he or she receives one-and-a-half times his or her regular rate of pay for all hours worked over eight hours in any working day and over 40 hours in the working week.  An overtime pay requirement also applies to a seventh consecutive working day.

How should overtime be calculated?

Overtime is calculated as follows:

  • one-and-a-half times the employee's regular rate of pay for all hours worked in excess of eight hours, up to and including 12 hours in any working day and for the first eight hours worked on the seventh consecutive day of work in a working week; and
  • double the employee's regular rate of pay for all hours worked in excess of 12 hours in any working day and for all hours worked in excess of eight hours on the seventh consecutive day of work in a working week.

Special California rules apply to salaried non-exempt employees. The regular hourly rate is one-fortieth of an employee’s weekly salary; additional remuneration is normally included in the regular rate. All hours over 40 in a working week (or eight hours in a day) must be paid at one-and-a-half times or double the regular rate (the fluctuating rate method used under the Fair Labor Standards Act is unavailable in this context).

What exemptions are there from overtime?

The Wage Orders include very limited exemptions for the following:

  • executive, professional, and administrative employees, outside salespersons and computer software professionals (all orders except 14 and 16);
  • employees directly employed by the state or any political subdivision thereof, including any city, county, or special district (all orders except 14 and 15);
  • the parent, spouse, child, or legally adopted child of the employer, any individual participating in a national service program (e.g., AmeriCorps), and certain drivers, including those regulated by the U.S. Department of Transport (all orders except 11, 12, 14, 15, and 16);
  • employees covered by a valid collective bargaining agreement, if the agreement expressly provides for the wages, hours of work, and working conditions, and if it provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of no less than 30% more than the state minimum wage (all orders except 14 and 15);
  • employees (except minors) whose earnings exceed one-and-a-half times the minimum wage and more than half of whose compensation is commissions (Orders 4 and 7);
  • student nurses (Order 5);
  • employees covered by a collective bargaining agreement under the Railway Labor Act (Order 9);
  • taxicab drivers (Order 9);
  • airline employees working between 40 and 60 hours during a working week due to temporary modifications to their normal work schedule not required by the employer and arranged at the employee’s request (Order 9);
  • full-time carnival ride operators employed by a traveling carnival (Order 10);
  • professional actors (Orders 10, 11, and 12);
  • employees whose duties are exclusively those of a motion picture projectionist (Order 10);
  • an announcer, news editor, or chief engineer employed by a radio or television station in a city or town with a population of 25,000 or less (Order 11);
  • any employee engaged in work that is primarily intellectual, managerial, or creative, which requires exercise of discretion and independent judgment, and for which the remuneration is not less than twice the monthly state minimum wage for full-time employment (Order 14);
  • sheepherders (Order 14);
  • irrigators (Order 14);
  • employees covered by a collective bargaining agreement, if the agreement provides premium wage rates for overtime work and a cash wage rate of at least $1 per hour more than the state minimum wage (Order 14);
  • personal attendants (Order 15); and
  • any person under 18 years old who is employed as a babysitter for a minor child of the employer in the employer's home (Order 15).

Some of these exemptions under California law are narrower than the corresponding exemption under federal law. For example, an outside salesperson in California must physically spend more than one-half of his or her working hours outside the office, even if it is otherwise established that his or her primary duty is outside sales.

Record keeping
What payroll and payment records must be maintained?

When wages are paid, employers must provide each employee with an accurate itemized written wage statement that includes:

  • gross wages earned;
  • total hours worked by the employee, except for any employee whose compensation is solely based on a salary and who is exempt from payment of overtime;
  • the number of piece-rate units earned and any applicable piece rate, if the employee is paid on a piece-rate basis;
  • all deductions, provided that all deductions made on written orders of the employee may be aggregated and shown as one item;
  • net wages earned;
  • the inclusive dates of the period for which the employee is paid;
  • the name of the employee and the last four digits of his or her social security number or an employee identification number other than a social security number;
  • the name and address of the legal entity that is the employer and, if the employer is a “farm labor contractor” as defined in Section 1682(b)of the California Labor Code, the name and address of the legal entity that secured the services of the employer; and
  • all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee and, if the employer is a “temporary services employer” as defined in Section 201.3 of the California Labor Code, the rate of pay and the total hours worked for each temporary services assignment (Sections 221 and 223 of the California Labor Code).

Employers must also keep payroll records showing the daily hours worked by, the wages paid to, the number of piece-rate units earned by, and any applicable piece rate paid to employees employed at the respective plants or establishments in a central location in the state or at the plants or establishments at which employees are employed. These records must be maintained for three years.

Discrimination, harassment and family leave

What is the state law in relation to:
Protected categories
(a) Age?

Workers over 40 years old are protected.

(b) Race?

California’s Fair Employment and Housing Act (Government Code Section 12940, et seq.) prohibits discrimination, harassment, and retaliation based on race.

(c) Disability?

California’s Fair Employment and Housing Act (Government Code Section 12940, et seq.) prohibits discrimination, harassment, and retaliation based on a mental and physical disability, including HIV and AIDS status.

(d) Gender?

California’s Fair Employment and Housing Act (Government Code Section 12940, et seq.) prohibits discrimination, harassment, and retaliation based on gender and transgender identity and expression.

(e) Sexual orientation?

California’s Fair Employment and Housing Act (Government Code Section 12940, et seq.) prohibits discrimination, harassment, and retaliation based on sexual orientation.

(f) Religion?

California’s Fair Employment and Housing Act (Government Code Section 12940, et seq.) prohibits discrimination, harassment, and retaliation based on religion.

(g) Medical?

California’s Fair Employment and Housing Act (Government Code Section 12940, et seq.) prohibits discrimination, harassment, and retaliation based on medical and genetic conditions.

(h) Other?

Veterans, active military, domestic violence victims, marital status, national origin, pregnancy, ancestry, and genetic information are protected classes. 

Harassment
What is the state law in relation to harassment?

Harassment based on membership in, perceived membership in, or association with protected categories is prohibited under the Fair Employment and Housing Act.

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

The California Family Rights Act is similar to, and runs concurrently with, the Family Medical Leave Act for all purposes other than:

  • pregnancy disability (Family Medical Leave Act only);
  • domestic partner care (California Family Rights Act only); and
  • military exigencies (Family Medical Leave Act only).

California also has a pregnancy disability leave law that provides additional leave and accommodation entitlements for pregnancy disabilities and related conditions.

Privacy in the workplace

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

The California Constitution expressly protects the individual’s right to privacy. Certain privacy interests for employees or limitations on employers have been found in the workplace regarding:

  • questions about certain arrests and convictions;
  • credit checks;
  • drug testing;
  • personality profiling tests;
  • the use of lie detectors; and
  • genetic testing.

California statutes and case law prohibit or impose limitations on employers with respect to recording or monitoring confidential communications using video or audio tapes in restrooms, locker rooms, and changing areas, as well as secret videotaping in open areas. California employers cannot request or require employees or job applicants to divulge personal social media account information. With respect to email and computer monitoring, California employers can minimize employee expectations of privacy by issuing clear, written electronic use policies.

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 cannot request or require employees or job applicants to divulge personal social media account information. Specifically, employers cannot ask or demand that employees or applicants:

  • disclose usernames or account passwords to a personal social media account;
  • access personal social media in the employer’s presence; or
  • divulge any personal social media.

Employers cannot take any adverse action against an employee for refusing or failing to comply with such a request or demand. The term “social media” broadly encompasses all digital or electronic content. However, employers still may ask employees to divulge personal social media reasonably believed to be relevant in relation to an investigation into employee misconduct or violations of law. Employers can also request this information in order to access an employer-issued electronic device.

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

Bring your own device is widely used and permitted, but employee privacy rights are still being developed. Subject to its investigation exception, California’s broad social media privacy law protects employees from employers demanding access to such devices. In addition, costs the use of a personal device for business purposes may be attributable to employers.

Off-duty
To what extent can employers regulate off-duty conduct?

There are no limitations on disciplining employees for unlawful off-duty conduct. Employers are prohibited from discharging, discriminating, retaliating against, or taking any adverse employment action because an employee or applicant engaged in lawful conduct during non-working hours away from the employer's premises (Section 98.6 of the California Labor Code).

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

No—California law prohibits an employer from banning guns in the workplace.

Trade secrets and restrictive covenants

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

The employer owns such rights. Section 2860 of the Labor Code provides as follows:

“Everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.”

Employers should be aware of California’s restrictions on invention assignment agreements that make certain overly broad provisions which violate California public policy and are thus unenforceable.

Restrictive covenants
What types of restrictive covenants are recognized and enforceable?

Reasonably tailored non-disclosure agreements, non-solicitation of employees provisions, and invention assignment provisions are enforceable.

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

Absent unique circumstances, non-compete and customer non-solicitation agreements with employees are typically void. It is still unclear whether employee non-solicitation and other covenants are enforceable. Further, there is a question as to whether restrictive covenants necessary to protect trade secrets are enforceable.

Labor relations

Right to work
Is the state a “right to work” state?

There are no “right to work” laws in California.

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

In 2013 union members accounted for 16.4% of wage and salary workers in California, compared with 17.2% in 2012, per the U.S. Bureau of Labor Statistics. This is slightly higher than the 15% United States average.

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

In addition to the federal Worker Adjustment and Retraining Notification (WARN) Act, California has its own law protecting workers during mass layoffs and facility shutdowns. Cal-WARN is found in Sections 1400 to 1408 of the California Labor Code. It is more expansive than the federal WARN Act and includes layoffs of 50 or more employees in a covered establishment (i.e., 75 or more employees), regardless of the percentage of the workforce. Part-time and temporary employees are included in the headcount, as long as they meet the other eligibility requirements under the law. The 60-day notice provision remains the same, but employers are additionally required to notify state and local agencies and officials. California’s exceptions are also more limited.

Discipline and termination

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

Not for private employers, unless a collective bargaining agreement exists.

At-will or notice
At-will status and/or notice period?

At-will, in theory.

What restrictions apply to the above?

The at-will termination provision in California is limited, in that an employee cannot be terminated in violation of statute or public policy. First, the public policy at issue must:

“be supported by either constitutional or statutory provisions. Second, the policy must be 'public' in the sense that it 'inures to the benefit of the public' rather than serving merely the interests of the individual. Third, the policy must have been articulated at the time of the discharge. Fourth, the policy must be 'fundamental' and 'substantial'"(Stevenson v. Superior Court, 16 Cal. 4th 880, 889-890 (1997)).

Therefore, there is no cause of action for wrongful discharge simply because an employee disagrees with the reason for termination or the reason was mistaken.

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

An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination (Sections 201 and 227.3 of the California Labor Code). An employee without a written employment contract for a definite period who gives at least 72 hours’ prior notice of his or her intention to quit, and quits on the day specified in the notice, must be paid all of his or her wages, including accrued vacation, at the time of quitting (Section 202 of the California Labor Code). An employee without a written employment contract for a definite period who quits without giving 72 hours’ prior notice must be paid all of his or her wages, including accrued vacation, within 72 hours of quitting.