The 7 Point Beginners Guide To Legal Compliance In California

Being in business in the state of California means you have a lot of rules and laws to abide by. It can be confusing for business owners to understand how to best move forward with their HR and other elements of their business. If you are one of the businesses that aren’t sure where to start or how to best deal with issues, you may want to speak with someone at a PEO in California. In this article, we are going to talk about 7 things you need to know to be legally compliant.

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1. Issuing The Correct Overtime Pay

Whether you have an hourly or salary employee, you need to ensure that you are paying your employee the right amount of overtime pay. Just because they are a salaried employee, that does not mean that they do not get overtime pay. You have to ensure that you are properly tracking their time so that if there is ever a case against you, you will know what you are up against.

You can learn how to calculate your employee’s non-exempt overtime pay by reading this article. Learning how to do this properly or having someone that will do this for you is important since not complying results in major penalties.

2.  Know The Difference Between An Employee & Independent Contractor

While having independent contractors working for you can allow you to have less of a burden on you than having an employee, you need to make sure that you are working with someone as an independent contractor.

One of the biggest things that determine if a person is an independent contractor is the ability to get the result by the means that they want to get it. This doesn’t mean they will necessarily take those liberties, but they need to have them.

There is also a test that has been adopted to test for wage order claims. According to the California Chamber, you must prove each element in order to show that the worker is an independent contractor vs an employee:

  • That the worker is free from control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • That the worker performs work that is outside the usual course of the hiring entity’s business; and
  • That the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

If any of these fail, the person will be treated as an employee vs being treated as an independent contractor.

3. Breaks For Meals & Rest

Many California employers continue to have challenges with complying with the breaks for meals and rest. This should be understood well before you start bringing on your new employees.

While the ruling of the Supreme Court has said that businesses are not required to police their employees and make sure that they are getting breaks, it is required that you are very clear on when break times are and how long those breaks are. If people don’t take them, you as a business cannot get in trouble, but now there is more tension than ever since breaks need to be so clearly outlined.

For any specific questions that you have, you should speak with a legal professional for help.


Family, medical and parental leaves can put you in a very confusing place since sometimes FMLA and CFRA actually contradict themselves. If you are in charge of HR, it can be an absolute nightmare trying to figure out what the proper action to take is.

If you fail to grant the proper leave, you could be in major trouble. This is why many people choose to have a PEO  deal with their HR. They are well versed in the law of California and understand how to best deal with these issues.

5. Sexual Harassment

One of the things that you are will have ongoing challenges with is sexual harassment. This is a common problem, but the biggest problem for employers is not understanding what constitutes sexual harassment. It is important that you take a class as well as have your employees take classes so everyone is well informed about what sexual harassment means.

6. Drug & Alcohol Testing

Before the employee goes on the payroll, you are able to require a suspicionless drug test before allowing them to work. You are not able to put them under random drug testing except under very specific circumstances.  There are many different laws that have to do with drug testing so make sure to learn all of them or you could be in court.

7. Termination

There are certain procedures and forms you need to fill out in order to terminate an employee. More employees are claiming unlawful termination. Any misstep during the employment process could give the employee a right to sue you. You need to make sure all personnel documents are specific and protect you as much as possible.


Doing business in California can be a great opportunity and any laws that are in place as there to make sure everyone is playing fairly. Ensure that you are on the right side of the law and you have nothing to worry about when you are starting your business in California.

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