Definition of California Labor Laws

What are California Labor Laws? A complete definition of California Labor Laws

California is known for its extensive labor laws, which offer workers more protection than federal laws and laws established by other states. The state’s Department of Industrial Relations (DIR) manages labor laws in California under the Division of Labor Standards Enforcement (DLSE), also known as the Labor Commissioner’s office.

State-specific employment laws are often used in California. They differ from federal law and are sometimes called Work Orders. Several government agencies work with the DIR to enforce state law.

The coalition includes:

• Members of the Labor Enforcement Task Force (LETF)
• Alcoholic Beverage Control (ABC)
• Bureau of Automotive Repair (BAR)
• California Department of Insurance (CDI)
• California Department of Tax and Fee Administration (CDTFA)
• Contractors State License Board (CSLB)
• Division of Labor Standards Enforcement (DLSE)
• Division of Occupational Safety & Health (Cal/OSHA)
• Employment Development Department (EDD)
• State Attorney General (DOJ)

Next, we’ll discuss many of the areas California labor laws cover.

A sampling of California’s Labor Laws

California has extensive regulatory reach within the state. Below we highlight 11 of their labor laws.

Minimum wage

The minimum wage is set to increase every year until January 2023. In 2022, employers with 25 or fewer employees must abide by a $ 14-an-hour minimum wage. For those organizations with more than 26 workers, the minimum wage is $15.

Overtime

Employees who work more than 8 hours in a day or 40 within a workweek must be paid one and a half times their regular rate in overtime pay. Employees who work more than 12 hours per day must be paid double their rate in overtime pay.

There are some exemptions to this rule, including:

• Taxi cab drivers
• Student nurses
• Workers who earn primarily through commission
• Executive employees
• Administrative workers
• Professionals

Double-time pay

Employees who work over 12 hours or eight days in a row should be paid double their regular rate. The same exemptions from regular overtime apply.

Worker classification – the ABC test

Under the 2019 AB5 law, employers must use the ABC test to determine whether their worker is a W-2 or W-9 employee. In other words, whether their team member is a regular employee or an independent contractor.

To be considered an independent contractor, an individual must satisfy all three provisions:

• The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and, in fact;
• The worker performs work that is outside the usual course of the hiring entity’s business; and
• The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Penalties for employee misclassification run from costs between $5,000 and $25,000 per violation.

Worker classification – exemptions from the ABC test

Due to the complex nature of contracting relationships and specific industry requirements, many jobs are exempt from the ABC test and follow their own criteria. Generally, these specific roles must satisfy the less strict Borello test, which considers the following factors:

1. Whether the worker performing services holds themselves out as being engaged in an occupation or business distinct from that of the employer;
2. Whether the work is a regular or integral part of the employer’s business;
3. Whether the employer or the worker supplies the instrumentalities, tools, and the place for the worker doing the work;
4. Whether the worker has invested in the business, such as in the equipment or materials required by their task;
5. Whether the service provided requires a special skillset;
6. The kind of occupation and whether the work is usually done under the direction of the employer or by a specialist without supervision;
7. The worker’s opportunity for profit or loss depending on their managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. The method of payment, whether by time or by the job;
11. Whether the worker hires their own employees;
12. Whether the employer has a right to fire at will or whether a termination gives rise to an action for breach of contract; and
13. Whether or not the worker and the potential employer believe they are creating an employer-employee relationship (this may be relevant, but the legal determination of employment status is not based on whether the parties believe they have an employer-employee relationship).

Hours worked

This term relates to how long an employee works under the supervision of an employer. The number of hours worked is used to determine overtime and double pay.

Paychecks

Payday is covered under California Labor Code Section 207. Wages earned from the 1st to the 15th of the month must be paid by the 26th day. Anything earned between the 16th and the final day of that month must be paid by the 10th of the month. Weekly, biweekly, and semimonthly paydays must be completed no later than seven days after the payroll period. Overtime wages are required to be paid by the next payday. If terminated, an employee is owed their wages, overtime, and accrued vacation pay.

There are some exemptions based on a worker’s role in the company’s industry.

Vacation pay

California labor law does not require employers to provide paid or unpaid vacation time. However, organizations that have a vacation policy must adhere to it. California law sees vacation time as wages, and vacation days are accrued. Unused vacation days must be included in a terminated employee’s final pay unless otherwise detailed in a collective bargaining agreement.

Expense reimbursement

Employers must reimburse costs for items or services necessary for an employee to complete their tasks.

Pay transparency

Under local employment law, employers must pay individuals the same amount for the same work. Pay differentials must be backed with a valid reason, such as work performance or seniority.

Paid sick leave

Once an employee has worked with you for 30 calendar days, they can earn one hour of paid sick leave for every 30 hours worked. Paid sick leave can be used towards diagnosis, care, or treatment for themselves or an immediate family member. It can also be used to handle cases of sexual assault, stalking, or domestic violence.

Breaks

Employers must provide a paid 10-minute rest break for every 4 hours of work and a meal break of at least 30 minutes after no more than 5 hours of work. You must also offer breastfeeding breaks for relevant employees.

Why are California Labor Laws important to a small business?

If you are a small business in California, you must comply with state laws. Failure to adhere to the California labor code can result in expensive penalties and lawsuits.

For example, if an employer fails to provide accurate pay stub information, they would receive a $50 fine for the first violation and $100 per subsequent violation. The maximum penalty is $4,000. In addition, the average settlement for a typical Fair Labor Standards Act (FLSA) or similar state law claim was $8.2 million in 2019.

In addition to following local California laws, many employers invest in employment practices liability insurance (EPLI) to cover potential claim costs. After all, a lawsuit can be brought against mistakes, not just intentional non-compliance.

However, many labor codes can also create a healthier, positive workplace for California employees. To improve retention, you can consider these labor laws the bare minimum for successful employee retention strategies.

What is the history of California Labor Laws?

Established in 1927, the California Department of Industrial Relations was founded to support wage earners and promote profitable employment in the state. But this state has a long history of employment protests and achievements. Some examples include:

• 1849, Carpenters in San Francisco and Sacramento went on strike for $16 a day, eventually settling for $14.
• 1901, The California State Federation of Labor was first formed to protect Union and employee interests.
• 1953, the AFL and CIO unions in California worked with community groups to develop a coalition for the Fair Employment Practices Act.
• 1999, the California legislator brought back daily overtime provisions, earlier repealed by the Industrial Welfare Commission.

As a portion of the western border and a significant player in the early railroad system of the United States, California has long played a critical role in labor code development. Given its large population, environmental concerns, and history, it’s no surprise that California has a unique set of state laws regarding employment.

Other terms of relevance that can assist you

There are many other important legal bodies and terms you may notice when reviewing California labor laws:

• Department of Labor/Bureau of Labor and Industries (DOL/BOLI): The federal or state department oversees companies’ adherence to labor laws.
• Equal Employment Opportunity Commission (EEOC): Federal and state organizations focused on ensuring that all employees are treated fairly and have the same employment opportunities by preventing discriminatory practices.
• Fair Labor Standards Act (FLSA): A federal law that governs minimum wage, overtime, child labor, and recordkeeping rules and regulations for most U.S. workplaces.
• Exempt Employee: Employees who are excluded from minimum wage and/or overtime pay regulations. Exempt employees typically include salaried executive, administrative, and professional employees.
• Nonexempt Employee: An employee who is not exempt from minimum wage, overtime pay, and the other protections and provisions provided under the FLSA or state law.

Staying aware

California labor laws are just one piece of the compliance puzzle. By baking these policies into your operations and including them in your employee handbook, you can reduce the likelihood of wage claims and keep your employee motivated.

To stay ahead of all federal and state-based compliance law changes, use a digital HR system that includes a compliance module or regularly review state and federal Department of Labor press releases.

One of the most controversial aspects of California state law is determining who and who isn’t an independent contractor. How you manage employees and contractors plays a lot into that classification. For a guide to hiring and managing independent contractors, check out our free guide.