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Here’s what you need to know about California labor laws (2021 edition)

Labor law in California can be pretty complicated, but don’t worry—we’ve done the research and put in the hard work to make it as simple as possible to understand. Here’s a handy guide of what small business owners need to know about California employment law in 2021.

Quick Index

  1. California labor laws about wages and hours
  2. California labor laws about pay and benefits
  3. California laws about time off and leaves of absence
  4. Business insurance requirements in California
  5. Health and safety laws in California
  6. California laws about end of employment and business exit
  7. California laws about diversity, employee relations, and Equal Employment Opportunity

1. California labor laws about wages and hours

Let’s go over laws that address California minimum salary as well as what kind of hours your employees can work and what kind of breaks you need to give them.

California minimum wage in 2021

In 2021, you’ll need to pay California employees at least $13 per hour (if you have 25 or fewer employees) or $14 per hour (if you have 26 or more employees).

Plan for an increase next year, too: In 2022, minimum wage will bump up by a dollar per hour—$14/hour for smaller businesses and $15/hour for businesses with more than 26 employees.

California overtime law 2021

In California, employers are required to pay their employees overtime pay for any time they work past 40 hours. So, for example, if your employee worked 44 hours last week, they’d get regular pay for the first 40 hours, and overtime pay for the 4 hours they worked in addition to that.

Overtime isn’t paid solely on hours, either. You also need to pay overtime if an employee works a seventh consecutive day in a row—even if they haven’t worked more than 40 hours.

Laws about work breaks in California

Here are the 2021 requirements for providing breaks for your employees.

Rest breaks

You need to provide your employees with a paid 10-minute break for each 4-hour work period. The rest needs to be near the halfway point of the work period (and if you don’t provide a rest period, you’ll need to pay the employee for an additional hour of work).

Meal breaks

For every 5-hour period your employee works, they’re entitled to a 30-minute meal break. (Meal breaks can’t be combined, either. If your employee works 10 hours in a day, they’re entitled to two separate 30-minute breaks.)

Didn’t allow a meal break? You’ll need to pay your employee for an additional hour of work.

Breastfeeding breaks

You’ll need to provide a reasonable amount of break time to accommodate any employee who is breastfeeding. If they need to pump, you need to provide the time (and, by law, a private space) to do that.

Breastfeeding breaks are a bit different than other kinds of breaks in that they’re not automatically paid breaks. The State of California suggests that, when possible, breastfeeding breaks should coincide with rest or meal breaks, but when a breastfeeding employee needs to pump at a time that doesn’t coincide with a regular break, you’re required by law to allow it—but you’re not required to pay them for the time.

Child labor laws in California

There are plenty of laws and guidelines in California regarding if, when, and how you can employ a minor—that is, anyone under the age of 18. Here are the major ones you need to know about:

  • Almost every minor in California needs to have a permit to work.
  • California employees under the age of 16 aren’t allowed to work in certain occupations, such as jobs that use dangerous machinery, harmful acids, or scaffolding. They also aren’t allowed to handle tobacco.
  • There are different sets of time restrictions depending on how old your minor employee is. A 14-year-old has a different set of time restrictions than a 17-year-old would.
  • If your business is in the entertainment industry, there will be some additional restrictions such as getting an entertainment permit for minors.

Keep in mind that California’s child labor laws have a lot of overlap with federal law, so if you plan to hire a minor, you should check with both state and federal authorities for the most up-to-date rules.

2. California labor laws about pay and benefits

Here are the California laws you’ll need to know about paying your employees.

Paying wages and issuing pay statements

Wage payments

In California, you need to pay your employees with checks that can be fully cashed without any kind of fee (you can also pay in cash).

Wage deductions

You’re allowed to make deductions from your employees’ wages only in certain circumstances—and generally only with your employee’s written authorization to do so (unless a law or court order is involved). A common deduction circumstance is withholding tax payments, but there are several others, such as child support withholding or creditor garnishments.

Pay statements

By law, you need to provide each employee with a pay statement. The pay statement can be a detachable part of the check or a separate written statement, but you need to provide it each time you pay wages (or at least semi-monthly), and it must contain the following information:

  1. Gross wages earned
  2. How many hours were worked (Or if your employee is paid on a “piece-rate” basis, you should include the number of units they performed and the rate of pay for each unit.)
  3. All deductions
  4. Net wages earned
  5. The dates of the period you’re paying for in that check
  6. Your employee’s name (as well as their employee ID number or the last 4 digits of their Social Security Number)
  7. The name and address of your business
  8. Any and all applicable pay rates during the pay period (as well as a complete list of the hours the employee worked at each rate)
  9. If you’re paying overtime from a prior pay period, you’ll need to include that overtime as a correction. (Make sure to include the dates when the overtime was worked.)

Pay frequency

There are two major rules regarding how often you pay employees in California:

  1. You need to designate paydays in advance (and communicate those dates clearly to your employees).
  2. You need to pay your employees at least twice a month (unless they’re exempt from this requirement).

When it comes to overtime, there’s an additional rule: Any overtime must be paid by the end of the regular payroll period after the period in which the employee earned that overtime. So, for example, if an employee works several hours of overtime just before the end of a payroll period, you’ll need to ensure you pay them for their extra hours by the end of the next payroll period.

Temporary Disability Insurance

According to California law, you need to provide your employees with access to temporary disability insurance—which pays a wage-replacement benefit to eligible workers who can’t work as normal due to a non-job-related medical issue (such as an illness that isn’t work-related or a pregnancy).

You can provide this coverage through a voluntary private plan, but the more common way to offer disability insurance is through California’s State Disability Insurance program (it’s often shortened to SDI). SDI isn’t coverage employers pay for out-of-pocket. The program is funded by taxes withheld from your employees’ paychecks.

Healthcare continuation

If your business has between 2 and 19 employees and offers health insurance, your group health plan needs to offer continuation coverage (as laid out in the California Continuation Benefits Replacement Act, also known as Cal-COBRA) to qualified employees and their eligible dependents.

3. California laws about time off and leaves of absence

It won’t surprise you to know that your employees are entitled to some time off. Here are the rules in California:

Family and Medical Leave

If you have more than 49 employees, you’re required to comply with the California Family Rights Act (CFRA). This means that for every 12-month period of employment, you'll need to provide eligible employees with up to 12 weeks of job-protected leave during major family events (such as the serious health condition of a family member or the birth of a child).

Paid Family Leave

In California, eligible employees receive a partial wage replacement benefit from the state when they take time to care for a seriously ill member of their family (or to bond with a new baby or adopted child). The benefit is called Paid Family Leave, and employees can take up to 8 weeks of it per 12-month period.

Paid Sick Leave

After California employees (full-time or part-time) have worked for at least 30 days in a calendar year, they’re eligible to earn sick leave. They’ll get at least one hour of paid sick leave for every 30 hours they work for you—provided that they’ve worked at your business for at least a 90-day period.

Your employees can take their paid sick leave for the following reasons:

  • Diagnosis, care, or treatment of the employee’s existing health condition (or the health condition of an immediate, covered family member)
  • Preventative medical care for the employee or the covered family member
  • Appropriate legal, medical, or social services in the event of sexual assault, stalking, or domestic violence

(Learn more about paid sick leave in California and the Healthy Workplace Healthy Family Act here.)

Other time off requirements

If you run a small business in California, there are more time off regulations you might be required to comply with in California—depending on how many employees you have. Here’s a partial and high-level list (but you can learn more by visiting the California Employee Handbook Table of Contents):

  1. Pregnancy disability leave (if you have 5 or more employees)
  2. New parent leave (if you have 20 or more employees)
  3. Kin care leave
  4. Family military leave (25 or more employees)
  5. Bone marrow and organ donor leave (15 or more employees)
  6. School activities leave (25 or more employees)
  7. Domestic violence leave
  8. Military leave leave
  9. Jury duty leave
  10. Voting leave

4. Business insurance requirements in California

Just about every small business in California needs insurance of some kind, but the only coverage that’s required by law (in most cases) is workers’ compensation insurance. So let’s start there—and then talk about a few other business coverages that aren’t required, but could really help your business in a pinch.

Workers' compensation - commonly called "workers’ comp" protects your employees if they ever get sick or injured because they work for you. It’ll provide a financial benefit to cover any medical costs and can even pay out a wage replacement benefit if the injury is serious enough to keep your employee home for a while. Workers’ comp is required in California for all businesses with at least one employee. If you don’t purchase it for your small business, you could face jail time or hefty fines.

(See what your business might pay for workers’ comp with our 60-second rate calculator.)

General liability coverage protects your company if a third party ever sues you for bodily injury or property damage. It’s not required in California, but it can save you from a nasty lawsuit and it’s a good idea for most small businesses.

This protects your building (if your business owns it) and the stuff inside your building. Business property insurance isn’t required by the state of California, but if you suspect your small business wouldn’t survive the financial hit from a fire (or other covered disaster), then you should strongly consider buying commercial property coverage.

A Business Owner’s Policy (or, as it's commonly known, a BOP) is a bundle of handy coverages—such as general liability, business property insurance, and business interruption insurance. It’s not required, but it’s a great way to get the coverages your business needs most in one package.

(Need any of these coverages? Get a Huckleberry quote in about 5 minutes. Everything is online and easy.)

5. Health and safety laws in California

You need to provide a safe working environment for your team—that’s no surprise. But here are the specific health and safety requirements you’ll need to pay attention to.

  • California requires a written Injury and Illness Prevention Program

You’ll need to develop and implement the program yourself on behalf of your business—you can’t simply use a pre-written one. (Don’t worry, though—the state offers free training on how to develop such a program.)

  • California also prohibits smoking in "enclosed spaces" of the workplace

That means you’ll need to make a reasonable effort to prevent workplace smoking by posting “No Smoking” signs (including e-cigarettes) around work areas and keeping an eye out for violators.

  • California drivers aren’t allowed to use a hand-held mobile device while driving

Make sure your employees aren’t texting (or calling!) while driving. They are, however, allowed to use the hands-free or voice-operated functions of their phones while on the road.

6. California laws about end of employment and business exit

Nothing lasts forever, and when it’s time for an employee to leave your business, you’ll need to comply with California laws about layoffs and final pay.

California last paycheck law

If you fire or lay off an employee, you need to pay their final wages immediately—as soon as you terminate their employment. The rules are the same if the employee quits: As long as they’ve given you 72 hours of notice, you’re required to pay them on their final day of work.

What if an employee quits without telling you in advance?  You’re required to issue their final paycheck within 72 hours.

Meanwhile, if your employee has accrued any vacation days, you’ll have to pay those out at the end of employment.

Mass layoff notification

If you know that your business is about to close (or if you plan to lay off all or most of your staff for another reason), you’ll need to provide a 60-day notice to your employees so they can make other plans. It’s only fair.

7. California laws about diversity, employee relations, and Equal Employment Opportunity

It goes without saying that you should treat your employees well, but here’s what that looks like according to California employment law:

Fair employment practices

You aren’t allowed to make employment decisions based on a long list of characteristics, such as the race, religion, skin color, national origin, disability, sexual orientation, gender identity or medical condition of a prospective employee.

Learn more about discrimination at the Fair Employment and Housing Act (FEHA) website. (And if you’re concerned about legal costs if someone were to accuse you of discrimination or wrongful termination, you should consider purchasing Employment Practices Liability Insurance.)

Pregnancy accommodation

If a team member is pregnant, you’ll need to provide reasonable accommodations (such modified duties, special equipment, or an altered work schedule) so that they can continue their job.  

Disability accommodations

You’re also required to provide reasonable accommodations to qualified individuals who have physical or mental disabilities.  

Equal pay

If two people on your team do similar work, you can’t pay one of them less money because of their sex, race, or ethnicity. (If you’re ever asked about a pay differential, you’ll need to be ready to prove that the difference in wages is due to a legitimate reason—such as seniority, education level, or the relative quality of the employee’s work.)

Access to personnel files

By law, all your employees have the right to access their own personnel file. If they ask you for it (usually via written request), you’ll need to provide it to them within 30 calendar days.

Whistleblower protections

You’re not allowed to make any rule or policy that would prevent one of your employees from being a whistleblower. (A whistleblower is a worker who discloses information about your business to a government or law enforcement agency because they believe you’re violating safety standards or breaking a law.)

You can’t retaliate against an employee if they become a whistleblower or if they’ve ever been a whistleblower in the past. And you also aren’t allowed to retaliate if an employee refuses to participate in an activity which would break the law. (Moral of the story: Don’t ask your employees to break the law.)

Where else can you get updated information on California labor laws?

Great question. As you’ve seen, work law is complex and, unfortunately, there are plenty of ways to break a law without realizing it. A good place to get full details on California employment law is at the Department of Industrial Relations website.

Finally, if you’re losing sleep about keeping compliant with California’s changing employment laws, there’s a pretty simple fix: An Employment Practices Liability Insurance policy. It’s easy to add to your Huckleberry Business Owner’s Policy, and it’ll protect you and your business if an employee ever sues you for an unfair or illegal employment practice. It’s not a substitute for staying up to date on California work law, but it’s a great way to get some peace of mind—just in case. We recommend it.

That was it! We hope this labor law guide was helpful. If you have 60 seconds, now is a great time to check out our workers’ comp rate calculator. (It really does take only a minute, and most business owners are surprised by how much they can save on a required coverage.)


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Disclaimer

All content on this page is for general informational purposes only and does not apply to any specific case, is not legal, tax or insurance advice and should not be relied upon. If you have any questions about the situation for your small business or the latest information in your state, you should contact an attorney for legal advice, an insurance agent or broker, and/or your state's labor or industry agency, board, commission or department. Please note that the information provided on this page may change at any time as a result of legislative action, court decisions or rules adopted or amended by any state or the federal government.

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