Employment Requirements
Employment law is the single largest topic on the Law & Business exam, at roughly 20% of the questions. California protects workers more aggressively than federal law in nearly every area, so a licensed contractor who hires even one employee must master hiring paperwork, the ABC test, overtime, meal and rest breaks, pay timing, final-pay deadlines, wage statements, and recordkeeping.
Hiring and Onboarding
When you bring on a new employee you must complete federal Form I-9 to confirm the person's identity and legal authorization to work in the United States; this applies to every worker regardless of citizenship. Separately, California requires every employer to report each new hire to the Employment Development Department (EDD) so the state can enforce child-support orders and detect benefit fraud. Set up an organized onboarding routine so none of these deadlines slip.
Employee vs. Independent Contractor — the ABC Test
California presumes that anyone who performs work for you is an employee unless you can prove otherwise using the ABC test. All three prongs must be satisfied to treat a worker as an independent contractor. If even one prong fails, the worker is an employee and you owe payroll taxes, workers' compensation coverage, overtime, and every other labor protection. In construction, prong B is especially hard to meet because the work a hired worker does is usually the same work that is the core of your business.
Overtime — Daily, Weekly, and Seventh-Day Rules
California uses both daily and weekly overtime rules, and whichever one is triggered first must be paid. The seventh consecutive day worked in a single workweek carries its own overtime premium. Overtime is calculated on the employee's regular rate of pay, which includes most non-discretionary bonuses, not just the base hourly wage.
Meal and Rest Periods
Non-exempt employees are entitled to a duty-free, unpaid meal period of at least 30 minutes when they work more than five hours, and to a second meal period when they work more than ten hours. Paid rest breaks of ten minutes are also required for every four hours worked or major fraction of four hours. If you fail to provide a required meal or rest break, you owe the employee one extra hour of pay at the regular rate as a premium.
Minimum Wage and Pay Rates
California sets a statewide minimum wage that is well above the federal floor, and many cities and counties set their own local minimums that are higher still. When state and local rates differ, you must pay the highest rate that applies at the job location. Minimum wage is a floor for hourly pay, and for prevailing-wage public works projects a much higher mandated rate applies.
Pay Timing and Frequency
Wages must be paid on regular, predictable paydays that the employer designates and posts in advance. Most employees must be paid at least twice a month, and California law specifically allows construction-industry employers to pay on at least a biweekly schedule. Whatever schedule you choose, paydays must be consistent and the pay period must end no more than a set number of days before the payday.
Final Paychecks and Waiting-Time Penalty
When employment ends, California sets strict deadlines for the final paycheck and punishes delay harshly. An employee you discharge must be paid all final wages, including accrued unused vacation, immediately at the time of termination. An employee who quits with at least 72 hours notice is paid on the last day; one who quits with less notice is paid within 72 hours. Missing these deadlines triggers the waiting-time penalty.
Itemized Wage Statements (Pay Stubs)
Every payday the employer must give each employee an accurate, itemized written wage statement, either with the paycheck or as a separate document. The statement must list nine specific items so the employee can verify the math. Inaccurate or missing wage statements expose the employer to per-pay-period penalties that add up quickly across a crew.
Payroll Records and Unlawful Deductions
Employers must keep accurate payroll and timekeeping records showing hours worked and wages paid, and must retain them for at least three years. California also tightly limits what you may deduct from a paycheck. You cannot pass ordinary business costs onto workers; deductions for cash-register shortages, breakage, tools, or losses caused by simple negligence are illegal.
Vacation Payout and Paid Sick Leave
In California, earned vacation is treated as wages, so a 'use it or lose it' policy that forfeits accrued vacation is illegal; reasonable caps on further accrual are allowed, but vacation already earned must be paid out at the final rate when employment ends. Separately, California requires paid sick leave: employees accrue paid sick time and may use it for their own or a family member's illness or for certain other protected reasons.
Wage Theft Prevention Act Notice
At the time of hire, employers must give most non-exempt employees a written notice that spells out the basic terms of their pay. The notice states the pay rate and basis, regular payday, the employer's legal name and contact information, and the workers' compensation carrier. If any of that information changes, you must update the employee within a short window unless the change is reflected on the next wage statement.
Anti-Discrimination and Harassment Prevention
The Fair Employment and Housing Act (FEHA) bans discrimination and harassment based on protected characteristics such as race, religion, sex, age 40 and over, disability, national origin, sexual orientation, and gender identity. The discrimination provisions apply to employers with five or more employees, while the harassment provisions reach all employers. Employers with five or more employees must also provide sexual-harassment-prevention training.
Supervising, Training, and Required Postings
Beyond paperwork, a contractor is responsible for actively supervising and training crews so the work is done correctly and safely. Cal/OSHA requires every employer to have a written Injury and Illness Prevention Program, give new workers a safety orientation, and train employees on the hazards of their specific tasks. Employers must also display required state and federal labor-law posters where employees can read them.