In California’s complex and ever-evolving labor law landscape, compliance with wage and hour regulations remains one of the most litigated and misunderstood areas for employers—and one of the most critical rights areas for employees. At the Law Offices of Paul P. Cheng & Associates, we regularly advise both employers seeking to minimize risk and employees seeking to assert their lawful rights. Below is an overview of the current legal framework, essential compliance points, and enforcement trends that every California workplace should understand.
Legal Framework: Federal and State Interplay
California wage and hour law is governed by both federal and state regulations. At the federal level, the Fair Labor Standards Act (FLSA) sets baseline rules for minimum wage, overtime, and recordkeeping. However, California’s Labor Code and the Industrial Welfare Commission (IWC) Wage Orders impose significantly stricter requirements. These are enforced by the California Department of Industrial Relations (DIR) and the Division of Labor Standards Enforcement (DLSE).
As a rule of thumb: where state and federal laws conflict, the standard more favorable to employees will apply. In practice, this almost always means California law governs.
Key Compliance and Risk Areas for Employers
1. Wage Statement Requirements
Employers must issue wage statements that clearly include:
- Legal name and address of the employer
- Employee’s full name and last 4 digits of SSN
- Inclusive dates of the pay period
- Gross wages earned and net wages paid
- Total hours worked (for non-exempt employees)
- Applicable hourly rates and itemized deductions
- Piece-rate earnings and units produced (if applicable)
Failure to comply may trigger penalties under the Private Attorneys General Act (PAGA) and expose employers to class and representative actions.
2. Employee Misclassification
Misclassifying employees as “independent contractors” or exempt from overtime can result in:
- Back pay for overtime and missed meal/rest breaks
- Wage statement violations
- Penalties and potential PAGA exposure
Proper classification is determined by duties, control, and compensation thresholds, not job titles.
3. Timely Wage Payments
Wages for non-exempt employees must be paid at least twice a month. Delayed payments—even by one pay period—constitute a violation and may lead to penalties accruing over time.
4. Unlawful Deductions
Employers may not deduct wages for business losses or employee negligence. Any deduction must:
- Be authorized in writing
- Not reduce wages below the minimum wage
- Not apply to debts upon separation unless permitted by law
5. Meal and Rest Breaks
- Meal Breaks: 30 minutes unpaid, duty-free, provided no later than the 5th hour of work.
- Rest Breaks: 10 minutes paid for every 4 hours worked, ideally mid-shift.
Failure to authorize and permit breaks—even if policies exist on paper—can lead to substantial penalties.
6. Accrued PTO as Wages
Accrued paid time off (PTO) is considered earned wages:
- Employers may not impose “use-it-or-lose-it” policies
- PTO accrual caps must be reasonable
- Commission-based employees must have PTO payouts calculated using their regular hourly rate, not base pay
7. Misuse of Overtime Exemptions
To qualify as exempt under California law, employees must meet all three of the following:
- Salary Basis: At least $68,640/year or $5,720/month (2025 threshold)
- Duties Test: More than 50% of time on executive, administrative, or professional tasks
- Independent Judgment: Actual discretion in job performance
Title alone (“manager” or “supervisor”) is not enough to confer exemption status.
8. Overtime Pay Calculation
- Daily OT: >8 hours/day = 1.5x; >12 hours/day = 2x
- Weekly OT: 7th consecutive day = 1.5x (first 8 hours), 2x thereafter
- Commission-based employees must include total weekly commissions when calculating the regular rate of pay for OT
9. Seventh Day of Rest
Employees have the right to decline a 7th consecutive day of work. Termination or retaliation for exercising this right is unlawful.
2025 Minimum Wage & Exemption Updates
Effective January 1, 2025:
- Statewide minimum wage increases from $16.00 to $16.50/hour
- Exempt salary threshold increases accordingly to $68,640/year
- Fast food workers must be paid at least $20/hour
- Healthcare workers must be paid at least:
$23/hour (by June 30, 2025)
$24/hour (starting July 1, 2025)
$25/hour (by July 1, 2026)
Certain unionized workplaces may invoke exemptions only if their collective bargaining agreements (CBAs) guarantee wages at 1.3x the minimum wage—i.e., at least $21.45/hour. Failure to meet this may invalidate the exemption.
Also note: Many California cities and counties (e.g., San Francisco, Los Angeles, Berkeley) have higher local minimum wage standards, often adjusted annually based on inflation.
Enforcement & Remedies
California aggressively enforces wage laws through:
- PAGA Actions: Employees may sue on behalf of the state for civil penalties
- Attorneys’ Fees: Prevailing employees may recover attorneys’ fees—often exceeding unpaid wages
- Anti-Retaliation Protections: Labor Code §98.6 prohibits demotion, termination, or other retaliation for asserting wage rights
Final Word
The penalties for noncompliance are steep. Employers should routinely audit their wage and hour practices to mitigate risk and ensure compliance. Employees should remain informed of their rights and seek counsel when concerns arise.
If you are facing wage-related disputes or want to proactively assess your business’s compliance practices, contact the experienced employment law team at the Law Offices of Paul P. Cheng & Associates for a confidential consultation.
Toll-Free: 888-356-4937
Email: info@pprclaw.com