Managing hourly workers in California is complex — and nowhere is that more true than with paid sick leave laws. In addition to state-level requirements, many California cities and counties have their own ordinances that impose stricter accruals, higher caps, and more generous usage rules.
Whether you’re employing workers directly or using an Employer of Record (EOR) like HireArt, here’s what you need to know about California wage and hour compliance.
While California has a reputation for being laidback and easygoing, their worker protections are anything but!
California is one of the most complex states in the country for wage and hour compliance. Employers must navigate a mix of statewide labor protections, extensive local ordinances, and highly specific rules around breaks, reimbursements, and worker classification.
Whether you manage employees directly or through an Employer of Record (EOR) like HireArt, understanding California’s wage and hour laws is critical to avoiding penalties and maintaining compliance.
This blog is based on information available to HireArt as of October, 2025. HireArt does not provide tax, accounting or legal advice. This material has been prepared for informational purposes only, and should not be relied on for, tax, legal or accounting advice. Consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.
California employers are required to pay at least the state minimum wage, and in many areas, higher local rates apply.
As of 2025, the statewide minimum wage is $16.00 per hour.
However, cities such as San Francisco, Berkeley, Emeryville, and Los Angeles enforce local minimum wage ordinances ranging from $17.00 to $18.67 per hour.
Employers must always follow the higher applicable rate between state and local law.
California’s Healthy Workplaces, Healthy Families Act establishes a statewide baseline for paid sick leave.
Employees accrue one hour of sick leave for every 30 hours worked, up to an annual use cap of 40 hours and a total accrual cap of 48 hours. Accrued time must carry over from year to year, and employers may apply a 90-day waiting period before new hires can use accrued leave. These requirements apply to any employee who works at least 30 days in a year in California.
In addition to state law, many California cities and counties enforce stricter paid sick leave ordinances. Employers with workers in these jurisdictions must comply with whichever law offers the greatest benefit to the employee.
Below are examples of key local variations:
Employers with multi-location workforces in California should regularly review city-specific laws to ensure continued compliance.
Meal and rest break requirements in California are among the strictest in the nation.
If an employer fails to provide a required meal or rest period, the employee is entitled to one additional hour of pay at their regular rate for each day the violation occurs.
California law treats accrued paid time off as earned wages.
All accrued and unused PTO or vacation time must be paid out when employment ends. “Use-it-or-lose-it” policies are prohibited. However, when tracked separately, sick leave does not need to be paid out unless it’s combined with PTO under a unified policy.
Employers in California are legally required under Labor Code §2802 to reimburse employees for all necessary business expenses.
This includes:
Failing to reimburse these expenses can lead to wage claims and penalties under state law.
California has some of the most detailed wage statement and final pay rules in the country.
Accurate, timely wage statements and payments are key compliance requirements under the state’s Labor Code.
California uses the ABC Test (codified under AB 5) to determine whether a worker is an employee (W-2) or an independent contractor (1099).
To classify someone as an independent contractor, the employer must prove all three of the following:
A) The worker is free from control and direction in performing the work.
B) The work performed is outside the usual course of the hiring entity’s business.
C) The worker is customarily engaged in an independently established trade or business.
If any part of this test fails, the worker must be classified as a W-2 employee. This standard is stricter than federal law, and misclassification carries significant penalties.
HireArt acts as an Employer of Record (EOR) to help employers manage the complexity of California’s labor landscape. Through HireArt, companies can:
By partnering with HireArt, employers gain confidence that their California workforce is managed with precision, compliance, and care — no matter where employees are based across the state.
