California Payroll Laws – 5 Key Things for Workers to Know

There are numerous important things to know about California’s payroll and employment laws. Five of the most important are:

1. they cover non-exempt workers in the state,
2. they forbid employers from requiring their employees to work off the clock,
3. they require employers to provide rest breaks and meal breaks,
4. they set the state’s minimum wage and require employers to comply with it, and
5. they make employers pay workers that have been discharged.

These are far from the only essential things to know about California’s workplace laws. Employees also have rights under other laws, like:

• the California Family Rights Act (CFRA),
• state and federal rules set by the Occupational Safety and Health Administration (OSHA), and
• the Private Attorneys General Act (PAGA).

Altogether, these California laws provide robust protections for workers in the state. California’s state laws are generally stronger than similar federal laws. Additionally, enforcement by the Labor Commissioner and the Division of Labor Standards Enforcement (DLSE), a sub-agency of the California Department of Industrial Relations, is vigorous.

Violating any employment law, including one of these five I discuss below, can be grounds for a wage and hour lawsuit. Our California employment attorneys can help.

1. They apply to non-exempt workers

California’s wage and hour laws apply to non-exempt employees in the state. These laws provide legal protections for workers, including the rights to:

• overtime pay,
• a minimum wage,
• rest or meal breaks, and
• payroll protections.

All workers in an employment relationship – that is, who are not independent contractors – are considered non-exempt workers, unless they fall into an exemption. Some of these exemptions are for:

• executive, administrative, or professional employees – also known as the “white collar exemption,”¹
• commission-earning employees,² and
• employees working in certain, specific industries or roles, like computer professionals ³ or doctors. ⁴

The only way for a worker to be exempt from California’s labor laws is to fall into one of these categories. Employers cannot make an employee exempt by simply having them sign a contract stating that they are exempt.

Note that some industries, occupations, and collective bargaining agreements are governed by specialized rules

2. They forbid working off the clock

California’s payroll laws forbid employers from making employees work when they are not “on the clock.”⁵ Non-exempt workers perform work off the clock when they do their job without pay, and with their employer’s knowledge.

Employees perform work off the clock when they, for example:

• prepare their workstation before their shift begins,
• clean up or wind down their workstation after their shift ends,
• finish paperwork after clocking out,
• do work during their rest or meal break, or
• fix mistakes or errors at their employer’s request after their shift ends.

Even working for just a few minutes before clocking in or after clocking out can run afoul of California’s employment law and amount to wage theft.⁶

However, if the employer is unaware of the off-the-clock work, they might not be held liable for wages that went unpaid during the payroll period.

3. They require rest or meal breaks

California’s payroll laws also require employers to provide non-exempt workers with meal breaks and rest breaks. The specifics of those breaks will depend on how long the worker is on the clock.

For example, California employees are entitled to the following breaks:

• a 30-minute lunch break, if they work more than 5 hours in a workday,
• a second 30-minute meal break if the worker is on the clock for more than 10 total hours in a day, and
• a 10-minute rest break for every 4 hours of work, if the employee works more than 3.5 hours in a day.⁷

During these rest periods, employers are not allowed to have the worker “on call.”⁸

As much as feasible, these breaks have to come in the middle of the employee’s work shift.⁹

If the employer does not comply with these requirements, workers can be entitled to 1 hour of pay, at their regular rate of pay, for each break that was not provided.¹⁰

4. They set California’s minimum wage

California’s payroll laws also set the state’s minimum wage. They forbid California employers from paying employees less than that wage, unless a valid exception applies.¹¹

Year	California minimum wage for employers with 25 or fewer employees	California minimum wage for employers with 26 or more employees
2021	$13.00/hour	$14.00/hour
2022	$14.00/hour	$15.00/hour
2023	$15.50/hour	$15.50/hour
2024	$16.00/hour	$16.00/hour
2025	$16.50/hour	$16.50/hour
2026	$16.90/hour	$16.90/hour

Cities and municipalities in California are free to set a higher minimum wage within their borders. Some cities in California have done this, like:

• San Jose, where the minimum wage is $18.45 per hour,¹²
• San Francisco, where the hourly rate is $19.18 per hour,¹³ and
• Berkeley, where it is also $19.18 per hour.¹⁴

In these jurisdictions, employers have to pay employees this higher rate.

There are several exceptions to California’s minimum wage law. They include:

• workers in national service programs, like AmeriCorps,¹⁵
• outside salespeople,¹⁶
• student employees,¹⁷
• handicapped employees working in authorized nonprofits or rehabilitation facilities,¹⁸ and
• exempt executive/administrative/professional employees,
• certain apprentices,
• certain public-sector employees, and
• special industry-specific rules.

However, service workers who make a significant portion of their income from tips, like waiters, are not exempt from the minimum wage.¹⁹

5. They require employers to pay discharged workers

California workers should also know that they are entitled to their accrued pay and benefits if they are discharged, including through a layoff. This payment of wages includes compensation for unused vacation time, in addition to the worker’s final wages.

Workers under a collective bargaining agreement may also be entitled to compensation for unused sick leave or other time off, like leave to care for family members.

Discharged workers are entitled to a final paycheck, pay stub, or direct deposit with these payments for their last pay period at the time of their termination so long as the worker provided 72 hours’ notice of resignation. This does not necessarily have to be a written notice.

If adequate notice was not given, the worker’s wages have to be paid within 72 hours, or three calendar days. Employers who fail to pay former employees their unpaid wages after discharge may be charged a waiting time penalty.²⁰

Frequently Asked Questions

What can I do if my employer violated one of these employment laws?

If your employer has violated one of these employment laws, you may be entitled to compensation. That compensation often comes in the form of:

• back pay,
• the unpaid balance from the payroll violation,
• interest, and
• reasonable attorney’s fees and court costs.

Recovering this compensation is made easier by California state law’s requirement that employers keep detailed payroll records.²¹ This includes information like:

• the name of the employee and the last 4 digits of their social security number (SSN),
• the worker’s gross wages and net wages, if they are hourly or salaried,
• the number of units produced and the applicable piece rate, if the employee is a piece rate worker,
• hours worked during the workweek, and
• details about the payroll period, like if the regular payday is weekly, biweekly, or semimonthly.

You can demand this compensation by filing a wage and hour lawsuit against your employer or former employer.

How often do employers have to pay employees in California?

Most California employees must be paid at least twice per month on designated paydays. Wages earned between the 1st and 15th of the month generally must be paid by the 26th of that month, while wages earned between the 16th and the end of the month generally must be paid by the 10th of the following month.

Certain occupations and employees who are exempt from overtime may be subject to different payroll schedules.

What information must appear on a California pay stub?

California Labor Code 226 requires employers to provide an itemized wage statement showing, among other things:

• gross wages earned,
• total hours worked (unless exempt),
• applicable hourly rates,
• net wages earned,
• deductions,
• pay-period dates,
• the employee’s name and identification number,
• the employer’s legal name and address, and
• accrued paid sick leave information when required by law.

Can I sue my employer for inaccurate pay stubs in California?

Yes. Employees who suffer injury because of knowing and intentional wage-statement violations may recover statutory penalties, actual damages, costs, and attorney’s fees. Employers may also face civil penalties and representative actions under the Private Attorneys General Act (PAGA).

Are employers required to keep payroll records in California?

Yes. California employers generally must maintain payroll records showing hours worked and wages paid for at least three years. Many employment attorneys recommend retaining records longer because wage-and-hour lawsuits and PAGA claims can involve multiple years of payroll data.

Can my employer require direct deposit in California?

Generally, no. California employers usually cannot require employees to receive wages exclusively by direct deposit. Employees typically must voluntarily authorize direct deposit and must have access to at least one alternative method of receiving their wages.

Can an employer deduct money from my paycheck for mistakes or broken equipment?

Usually not. California law generally prohibits employers from deducting wages for:

• ordinary mistakes,
• cash-register shortages,
• broken equipment,
• customer theft, or
• business losses caused by an employee’s simple negligence.

However, deductions may be allowed when the employee acted dishonestly, willfully, or unlawfully, or when another specific legal exception applies.

Does California require employers to reimburse work-related expenses?

Yes. Under Labor Code 2802, employers generally must reimburse employees for necessary business expenses incurred while performing their jobs. Common examples include mileage, required cell phone use, work-related travel expenses, and necessary tools or equipment.²²

What happens if my employer gives me my final paycheck late?

California imposes waiting-time penalties when an employer willfully fails to provide final wages on time. In many cases, the penalty equals the employee’s daily wage rate for each day the payment is late, up to a maximum of 30 days.

Do California employers have to pay out unused vacation time?

Yes. Earned and unused vacation time is generally treated as wages and must be paid out when employment ends. However, California law generally does not require employers to pay employees for unused paid sick leave unless a contract, collective bargaining agreement, or employer policy provides otherwise.

What payroll deductions are legal in California?

Employers may generally withhold taxes, court-ordered garnishments, employee-authorized benefit contributions, and other deductions specifically permitted by law. Unauthorized deductions or deductions that shift ordinary business expenses to employees may violate California wage laws.

Can California employees recover unpaid wages through a PAGA claim?

In some situations, yes. Employees may bring representative actions under the Private Attorneys General Act (PAGA) for certain payroll-related violations, including wage-statement violations, late payment of wages, and other Labor Code violations. Successful claims can result in civil penalties, with a portion paid to affected employees and the remainder paid to the State of California.

Are salaried employees covered by California payroll laws?

Yes. Being paid a salary does not automatically exempt an employee from California wage-and-hour protections. Whether an employee is exempt from overtime and certain payroll requirements depends on the employee’s duties and compensation, not simply whether the employee receives a salary.

Additional Resources

For more information, refer to the following:

• Industrial Welfare Commission Wage Orders – Compilation of labor laws by the California Department of Industrial Relations.
• Exempt and Nonexempt Employees – Explanation of the two classifications of workers by the California Chamber of Commerce.
• California Paycheck Calculator For Salary & Hourly Payment – Free online tool from Forbes.
• California Tax Service Center – Information about income taxes (and other types of taxes) in the state.
• 8 Ways to Stretch Your Paycheck Further – Tips from Bankrate.com.

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