Labor Laws Every California Business Owner Should Know

To run a successful business in California, you must be familiar with the California Labor Code.

What is the California Labor Code? It’s a crucial state law set that applies to all business owners with one or more employees. These laws outline employees’ rights and their employers’ responsibilities toward them.

Violating these labor laws can have serious legal ramifications — lawsuits, fines, and other penalties are just some potential outcomes. You don’t want to wait until you’ve been hit with a complaint or served court papers to learn the answer to the question, “What is the California Labor Code?”

What Is the California Labor Code? What You Need to Know

Whether you’re just starting your California-based business or you’ve been up and running for some time, you should be well-acquainted with the following labor laws.

Minimum Wage

California’s labor laws set the minimum wage far above the federal standard. As of January 1, 2024, all employers must pay their employees a minimum wage of $16.00 per hour. However, California’s minimum wage law is complicated, and employers are responsible for complying with all applicable provisions.

For example, as of April 1, 2024, fast-food workers should receive a minimum wage of $20.00 per hour. In addition to such provisions, some cities and jurisdictions have ordinances that set local minimum wages above the state level.

As such, complying with the state’s minimum wage law requires you to consider where your employees work geographically and the industries in which they’re employed. You must pay your workers the applicable minimum wage and cannot contract around this legal requirement.

Overtime

Federal overtime regulations state that an employee who works more than 40 hours in a week is entitled to one-and-one-half times their regular pay rate for every additional hour. California’s overtime rules are more nuanced, and employers who don’t follow them can face legal consequences.

There are three situations in which an employee may be entitled to time-and-a-half pay:

• They work more than eight hours in a single workday
• They work more than 40 hours in a single workweek
• They work more than six days in a single workweek

In addition, California law requires the employer to pay double the employee’s pay rate for any hours over 12 that the employee works in a single shift. Thus, an employee who works 13 hours in one shift would receive one-and-one-half times their regular rate of pay for timeworked above eight hours up to twelve hours and earn double time pay for the hour worked beyond 12.

Reproductive Loss Leave

Newly enacted Senate Bill 848 allows employees who have experienced a reproductive loss event, such as a miscarriage, to take a period of unpaid leave without fear of losing their position or accrued benefits.

This law applies to a broad range of employees and independent contractors and is meant to address a specific type of loss that a company’s standard bereavement leave policy may not address. After all, what is the California Labor Code if not a comprehensive form of legal protection for employee rights of all kinds?

Non-Compete Agreements

In the past, employers used non-compete agreements to prevent workers from working for local competitors upon leaving the company. These agreements also sometimes prohibited employees from starting their companies in direct competition with their former employers.

Most non-compete agreements are now prohibited, meaning you can’t make a new employee sign such an agreement. Most existing non-compete agreements are null and void thanks to laws like SB 699 and AB 1076.

Workplace Safety

California employers have a new mandate to address the potential for workplace violence.

This order requires employers of all sizes and industries to create detailed plans for responding to the threat of workplace violence. Such guidelines are meant to provide a prescribed response to active incidents and address the reporting of threats of violence from other employees and members of the public.

Cannabis Use

Employers are prohibited from discriminating against employees or applicants because they use cannabis outside of working hours. This means you can’t discipline or retaliate against an employee who uses cannabis during their personal time, nor can you refuse to hire a qualified candidate on the same grounds.

That said, employers can take action against employees who use cannabis or other substances while at work. Moreover, in certain circumstances, you’re permitted to ask employees who are on the clock to submit to certain drug tests intended to detect the presence of cannabis or other drugs.

Other Notable Changes

In addition to the laws above, several new regulations have recently taken effect, all of which affect the employment relationship in various ways. For example, SB 616 addresses paid sick leave, how it’s accrued, and the annual limits on its accrual and usage.

Another modification to the California Labor Code and employment laws, SB 365, deals with arbitration. This law allows employees to proceed with litigation in court, as opposed to staying the action, during the pendency of an appeal of an order dismissing or denying a petition to compel arbitration.

Finally, SB 497 creates a new rebuttable presumption in certain situations. If an employer takes adverse action against an employee within 90 days after that employee has engaged in a protected activity, the action is presumed to be in retaliation. In such instances, employers could be liable for up to $10,000 in damages per violation.

California’s Labor Code Is Expansive and Confusing

This list features just a few laws employers must know when running a business in California. If you still don’t feel you have a satisfactory answer to the question, “What is the California Labor Code?” you aren’t alone.

Keeping track of all the federal laws, state statutes, and local ordinances that affect the employment relationship in the state can be challenging. Fortunately, retaining skilled legal counsel can help ensure your business fulfills its various legal obligations.

A qualified attorney can explain California’s Labor Code in greater depth and identify ways to protect yourself from potential lawsuits and employment-related claims. In this way, they can be one of your greatest allies in navigating complex legal disputes.