Many out-of-state companies desire access to the California market. It is large. California has the sixth-largest economy in the world. However, employers in California can face disruptive regulatory oversight, unusual and complicated employment laws with substantial penalties for noncompliance and will be confronted by employee-friendly courts and administrative agencies.
Even employers who are primarily based out-of-state with only a few employees in California still must comply with California employment law.
In 2011 in the case of Sullivan v. Oracle, the California Supreme Court held that non-California residents working in California for a California-based employer were subject to California’s daily overtime laws when they worked in California for a whole workday.
It remains open whether non-California residents who work partial days in California will be subject to California’s wage and hour laws. In 2018, the Ninth Circuit requested the California Supreme Court address this issue, but the Supreme Court has not yet ruled.
Some of the surprises that may be found in California by out-of-state employers, of which California employers should be familiar with, are:
- Minimum Wage—As of January 2019, the minimum wage for larger employers (having more than 26 employees) became $12. Meanwhile, California has no shortage of jurisdictions that have their own special minimum-wage laws.
- Daily Overtime—California non-exempt employees must be paid at one and one-half times the regular rate for all hours worked over eight in a day (and any hours worked on a seventh consecutive workday during a workweek) and must be paid double-time for all hours worked over twelve in a day (and any hours worked over eight on a seventh consecutive day during a workweek). Federal law only requires overtime pay only when employees work more than forty hours during a workweek.
Out-of-state employers need to comply with the more liberal California law. - Itemized Wage Statements—California employers must provide specific items of information on wage statements. If they do not there are significant statutory penalties.
- Meal and Rest Periods—Non-exempt employees working in California must be provided certain meal and rest periods. Employers are required to keep accurate records of employee meal periods and pay a penalty when either meal or rest periods are not provided.
- Independent Contractors—California frowns on businesses that classify workers as independent contractors instead of employees. Misclassifications can trigger liability for missed meal and rest periods, unpaid overtime and unpaid expenses, and even significant civil penalties.
- Discrimination and Harassment—California recognizes “protected characteristics” in addition to those that appear in federal law anti-discrimination laws, including characteristics such as hairstyle, sexual orientation, and gender
identity or expression. - Local Ordinances—Many California local governments impose additional obligations on employers within their jurisdictions, such as a higher minimum wage, additional paid sick leave, and healthcare insurance surcharges.
Out-of-state employers who wish to establish a California presence need an in-depth understanding of California business and employment laws and must be able to correctly implement compliance policies. The best advice is to engage a qualified
California business and employment attorney to guide the company through the labyrinth of applicable California laws and regulations.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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