Labor &
Employment

California applies the ABC test from AB5 to determine worker classification. A worker is presumed to be an employee unless the hiring business proves all three prongs: (A) the worker is free from control and direction in the performance of the work, (B) the work is outside the usual course of the hiring business, and (C) the worker is customarily engaged in an independently established trade. Most restaurant, hospitality, and operations roles fail prong B, which is the most demanding. Misclassification carries significant exposure across wages, taxes, and penalty claims.

Related: Risk & Compliance

Nonexempt employees are entitled to a 30-minute, unpaid, off-duty meal period before the end of the fifth hour of work, plus a second meal period before the end of the tenth hour if the shift extends that long. A 10-minute paid rest period is required for every four hours worked (or major fraction thereof). Missed, late, interrupted, or on-duty meal periods trigger a one-hour premium pay penalty per day — treated as wages and therefore subject to waiting-time penalties, wage-statement penalties, and PAGA representative claims.

California Labor Code Section 226 requires nine specific items on every wage statement. Knowing violations trigger per-employee, per-pay-period penalties: $50 for the first pay period and $100 for each subsequent pay period, capped at $4,000 per employee, plus actual damages and attorneys' fees. Under PAGA, representative claims for wage-statement violations can reach much larger aggregate amounts. Because wage statements are easy to audit from the outside, this is a common opening claim in employment litigation.

An employee who is terminated is entitled to their final wages at the moment of termination. An employee who quits with at least 72 hours' notice is entitled to their final wages on the last day. An employee who quits without notice is entitled to final wages within 72 hours. Late final wages trigger waiting-time penalties — one day of wages for each day late, up to 30 days. Final wages include all earned but unused vacation or PTO (in California, PTO is treated as wages and cannot be forfeited).

Employee non-competes are generally void in California under Business and Professions Code Section 16600, with very narrow exceptions for the sale of a business and dissolution of a partnership. Non-solicitation of customers is also heavily scrutinized. Non-solicitation of employees and protection of actual trade secrets remain enforceable when narrowly drafted. Recent legislation (effective 2024) also exposes employers who impose non-competes on California workers to statutory damages, so California-specific drafting is essential.

Related: Contracts

Treat the notice as an immediate litigation-track matter. A DFEH (now CRD) charge initiates a government review process that can lead to mediation, investigation, or a right-to-sue letter. A PAGA notice triggers the state's statutory cure period and begins the representative-action clock. In both cases, preserving documents, gathering payroll and timekeeping data, and engaging counsel within days rather than weeks materially improves the employer's position. Early-stage informal responses often lock in admissions that are difficult to walk back later.

Related: Dispute Resolution · Dispute & Recovery