Compliance

13 California Employment Laws Every Business Leader Should Know

27 October 2025 ExtensisHR10 minute read

Quick look: California’s employment laws are some of the most detailed and strict in the U.S. From wage rules and leave policies to workplace safety and anti-discrimination requirements, employers need to stay informed to stay compliant. This guide breaks down the key regulations every business leader should know to protect their business and their people.

California’s employment regulations are famously complex, with over 400k active mandates (and counting), affecting businesses of all sizes. For small and midsized businesses (SMBs), staying up to date on these labor laws isn’t just important, it’s essential. The following guide details the California employment regulations every business leader should know.

1. State wage and hourly laws

California’s fair pay and scheduling regulations are designed to protect employees while supporting efficient business operations. The current state minimum wage is $16.50/hour, rising to $16.90/hourly on January 1, 2026. Pay benchmarks are higher in larger cities like San Diego and Los Angeles and certain state industries.

For example, $17.87 is the hourly minimum wage for companies operating in the City of Los Angeles; if you own an airport or hotel business, $22.50 becomes the base hourly pay. San Diego retail, childcare, waste management, and other covered services workers earn at least $21.06 per hour, or $17.67 plus $3.39 worth of health benefits per hour under the city’s Living Wage Ordinance (LWO).

The state scheduling mandates include offering predictive schedules up to a week in advance and informing relevant retail and healthcare workers of shift changes at least 72 hours ahead of time.

With overtime, non-exempt employees receive one-and-a-half times their pay rate when they work over 40 hours a week or more than eight hours daily. They also get double their pay rate for every hour worked beyond 12 hours in a single day.

2. Los Angeles’ Fair Work Week Ordinance

If your company plans to base operations in Los Angeles and employs 300 or more people, it must comply with the city’s Fair Work Week Ordinance (FWWO). The FWWO requires companies to provide new and current employees transparent, “good faith” estimates on future work schedules. All schedules must be available at least 14 days in advance from the start of a work period either online or in an accessible location.

Employer-initiated shift changes made in less than 14 days means employees receive predictability pay, or extra pay based on their regular rate. Employes must also keep documented schedules, shift changes, additional hour requests, and related records available for at least three years.

3. Meal and rest breaks

Employee burnout is a serious concern, with one 2024 report finding that burnout impacted 52% of national employees, affecting their overall productivity and satisfaction. California’s meal and rest break mandates help to combat this by offering non-exempt employees, both on-site and remote, one unpaid 30-minute meal break per day when they work for over four hours. They also receive a 10-minute rest break for every four hours and a second meal break for every shift longer than 10 hours. Additionally, employees needing lactation accommodations must be given an adequate place and break time to do so.

Under Labor Code Section 226.7 and the Industrial Welfare Commission (IWC) codes, employee breaks must be fully off-duty and uninterrupted. Missed breaks can result in potential employer penalties, including compensating affected workers with one hour of premium pay.

4. ABC testing for independent contractors

Proper employment classification is crucial for managing payroll, tax forms, and workers’ compensation insurance. Employers must abide by the Dynamex or ABC test, supported by Assembly Bill 5 (AB5), to do so. An independent contractor needs to meet the following three criteria:

They are free from the hiring company’s control and direction while performing services
They are doing work outside the usual course of the hiring company’s business
They are customarily engaged in an independently established business, trade, or occupation

California requires employers to use this test and share supporting work documents to verify a contractor’s status. Otherwise, the state government presumes that worker’s classification and rights align with employee-based legislation.

5. California Family Rights Act

Most employers base their parental leave policies off the Family and Medical Leave Act (FMLA). California business owners must also abide by the California Family Rights Act (CFRA). Both FMLA and CFRA offer workers up to 12 weeks of unpaid family or medical leave while protecting their job and benefits’ access. However, CFRA applies to any company with five or more employees, while FMLA only covers those with 50+ workers. CFRA also has a more inclusive definition of family: spouses, children, parents, designated persons, and domestic partners.

Under CFRA, the following paid leave may also apply for eligible employees:

Pregnancy Disability Leave (PDL): Protected unpaid leave for physical and mental disabilities related to pregnancy, childbirth, pregnancy loss, and other relevant conditions. Separate from parental bonding leave, this runs concurrently with FMLA-eligible leave and lets workers replace wages through state disability insurance (SDI) and accrued paid time off (PTO) and sick leave.
Paid Family Leave (PFL): Up to 8 weeks of partially paid leave given to bond with a newly born, adopted, or fostered child; care for seriously ill family member; or offer military assistance and support to a soon-to-be deployed family member.

Aligning parental leave policies with city ordinances is also crucial. San Francisco-based employers must follow the city’s Paid Parental Leave Ordinance (PPLO), requiring businesses to provide employees on child-bonding leave with supplemental compensation even if they are receiving PFL aid.

These broader regulations make job protections more accessible and help employees achieve a better work-life balance.

6. California paid sick leave

Paid sick leave helps employees address their health needs, while protecting the wider team from illness. Under California’s Healthy Workplaces, Healthy Families Act of 2014, any employee who works at least 30 days per year can accrue up to 40 hours, or 5 days, of annual paid sick leave. Workers may also use these leave days to receive physical care, mental health counseling or protective assistance related to domestic violence, assault, and similar circumstances.

7. California Fair Employment and Housing Act

A safe, inclusive workplace is essential for employee success. The California Fair Employment and Housing Act (FEHA) sets clear anti-discrimination protocols and harassment prevention training for state companies with five or more employees. Enforced by the state’s Civil Rights Department, this essential law protects all employees, interns, job applicants, volunteers, and independent contractors from being discriminated against based on their:

Race, color, ancestry, or national origin
Sex, gender identity, or sexual orientation
Reproductive decisions or conditions (pregnancy, breastfeeding, etc.)
Age or marital status
Active military or veteran background
Disability, genetic information, and medical condition (short- or long-term)
Criminal background, which the Fair Chance Act prohibits employers from asking about prior to making a job offer

FEHA also requires companies to provide proper pregnancy and disability accommodations and protects workers from retaliation for using medical, family, or disability leave; or reporting a discrimination or harassment claim.

8. Pay transparency and equal pay

California’s high cost of living continues to vary across the state, especially in major cities. Beyond general wage laws, California’s pay transparency act, or Senate Bill 1162, helps employees make informed career choices by promoting financial clarity. While hiring, businesses with 15 or more employees must share all positions’ intended salary range on every job posting.

Employers with at least 100 workers, including private employees and labor contractors, must also submit an annual pay report to the California Civil Right Department. This data is entered into the Pay Data Reporting (PDR) system to help the government identify compensation gaps and other disparities impact different demographics, industries, and job types.

9. California Privacy Rights Act

In the course of business, employers handle a variety of personal data from customers and employees. The California Privacy Rights Act (CPRA)—an updated amendment of the California Consumer Privacy Act (CCPA)backed by the California Privacy Protection Agency (CPPA)—establishes best business practices for collecting, storing, and using data. It gives individuals the right to opt out of data sharing or selling, update their shared personal info, ask how their data is used, and other privacy protections.

CPPA also requires employers to maintain privacy practice notices, conduct cybersecurity audits and risk assessments, and provide ongoing employee training. CPRA standards are even referenced by alternate states that use it to revise their own data privacy policies.

10. Cal/OSHA regulations

The federal government’s Occupational Safety and Health Administration (OSHA) oversees multiple inspections and standards to maintain healthier and safer workplaces nationwide. California’s division of OSHA (Cal/OSHA) builds on the federal standards to address state-specific workplace safety risks, including:

Aerosol Transmissible Disease (ATD) Standard: Protects healthcare employees from airborne pathogens and viruses.
Injury and Illness Prevention Program (IIPP): Requires companies to document its assessment, safety measures, reporting, and training protocols for potential and known hazards and accidents at a job site.
Heat Illness Prevention Program: Promotes best practices to prevent health and safety concerns caused by excessive outdoor heat exposure.
Permissible Exposure Limits: Regulates how much employees can be exposed to specific chemicals, metals, and other hazardous substances.
Repetitive Motion Injuries (RMIs): Addresses the risks and prevention of workplace injuries caused by repetitive motion.

Complying with these regulations ensures better on-site safety, demonstrates brand integrity, and results in more productive workforces.

11. At-will employment

California is classified as an at-will employment state, giving employers the right to terminate an employee at any time and for any lawful reason. This same principle also gives employees the right to leave and pursue other job opportunities. However, there are important exceptions:

Terminations cannot be retaliatory or discriminatory
Contracts requiring “just cause” for termination take precedence
Fixed-term or contracted employees are only subjected to the terms of their agreement
Employees on job-protected family, medical, or other leave cannot be terminated for exercising those right

12. California’s Worker Adjustment and Retraining Notification (WARN) Act

Sometimes business circumstances, like market shifts or restructuring, require major workforce changes. In these case, California employers must comply state’s WARN regulation. Like the federal WARN Act, this law requires business owners to give a 60-day notice before any mass layoffs, terminations, or relocations to its workforce. However, California’s WARN standards differs by applying to companies with at least 75 employees, layoffs of 50 or more workers, any plant closures, and relocations of at least 100 miles away from the original location.

13. Non-compete bans

To maintain open job opportunities, California prohibits non-compete agreements, or contractual restrictions preventing a former employee to work for a competitor for a specific timeframe. Enacted on January 1, 2024 through Senate Bill 699 and Assembly Bill 1076, this strict legislation applies to any company or worker operating in California; even non-competes originally signed in alternate states often become void.

However, employers can protect sensitive information through trade secret and confidentiality agreements. These measures offer legal protections against intentional data breaches or sharing by current workers. That way, integrity stays a core aspect of the employment relationships without infringing on a worker’s rights.

Simplify compliance management with ExtensisHR

Mastering California employment laws takes more than understanding current standards; employers must also stay ahead of regulatory changes and updates. With ExtensisHR’s professional employer organization (PEO)solution, you don’t have to face this complexity alone.

Our SHRM-certified team offers the bandwidth, resources, and customer support needed to maintain compliance. We understand California’s unique HR landscape, including local government requirements and industry specific standards, and help businesses translate these rules into practical, actionable plans. Together, we empower your business to be as regulatory savvy as it is operationally efficient.

Speak with our team today to learn how ExtensisHR can simplify California compliance for your business.

Disclaimer: The information provided in this blog is for general informational purposes only and is not intended as legal, financial, or professional advice. Employment laws and regulations in California can be complex and subject to change. Businesses should consult with qualified legal counsel, HR professionals, or other experts to address their specific circumstances and maintain compliance with all applicable federal, state, and local requirements.