Understanding Wage and Hour Laws in California

Overview

California's wage and hour laws are among the most protective in the United States. These laws govern how employees are paid, when they are paid, and how much they must be paid. The primary sources of California wage and hour law include the California Labor Code, the Industrial Welfare Commission (IWC) Wage Orders, and regulations issued by the Division of Labor Standards Enforcement (DLSE), also known as the Labor Commissioner's office.

Federal wage and hour protections are provided primarily by the Fair Labor Standards Act (FLSA). In situations where California and federal law differ, the standard that is more favorable to the employee generally applies.

This guide provides a general overview of California wage and hour law. It does not constitute legal advice.

Minimum Wage

State Minimum Wage

California maintains a state minimum wage that applies to all employers, regardless of size. The state minimum wage is periodically adjusted. As of January 1, 2026, the California state minimum wage is $16.90 per hour for all employers. Future adjustments may be tied to inflation under current law.

Local Minimum Wages

Many California cities and counties have adopted local minimum wage ordinances that set rates higher than the state minimum. Examples include Los Angeles, San Francisco, San Jose, Oakland, and others. Employers are required to pay the highest applicable minimum wage - whether state, local, or federal.

Industry-Specific Minimum Wages

Certain industries are subject to separate minimum wage requirements. For example, fast food restaurant employees covered by AB 1228 are subject to a separate minimum wage rate effective April 1, 2024. Healthcare workers are subject to phased minimum wage increases under SB 525.

Overtime

Daily and Weekly Overtime

California is one of the few states that requires daily overtime in addition to weekly overtime.

Under California Labor Code Section 510 and the applicable IWC Wage Orders:

• Daily overtime. Non-exempt employees are entitled to overtime pay at one and one-half (1.5) times the employee's regular rate of pay for all hours worked in excess of eight (8) hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek.

• Daily double time. Non-exempt employees are entitled to double their regular rate of pay for all hours worked in excess of twelve (12) hours in any workday, and for all hours worked in excess of eight hours on the seventh consecutive day of work in a workweek.

• Weekly overtime. Non-exempt employees are entitled to overtime pay at one and one-half times the regular rate of pay for all hours worked in excess of forty (40) hours in any workweek.

Alternative Workweek Schedules

Under certain conditions, employers may adopt alternative workweek schedules that allow employees to work up to ten (10) hours per day within a forty-hour workweek without triggering daily overtime. Adoption of an alternative workweek schedule requires compliance with specific procedures set forth in Labor Code Section 511, including an employee vote.

Regular Rate of Pay

The "regular rate of pay" for overtime purposes is not necessarily the employee's hourly rate. It must include all non-discretionary compensation earned during the pay period, including certain bonuses, commissions, and piece-rate earnings. The calculation of the regular rate of pay is governed by both California and federal law and can be complex.

Exempt vs. Non-Exempt Employees

Not all employees are entitled to overtime and other wage and hour protections. Employees who meet specific criteria may be classified as "exempt" from overtime requirements.

Salary Basis Test

To qualify for most exemptions under California law, the employee must earn a monthly salary of at least twice the state minimum wage for full-time employment. This threshold changes when the minimum wage increases.

Duties Test

In addition to the salary requirement, the employee's actual job duties must meet the criteria for a specific exemption. Common exemptions include the executive, administrative, and professional exemptions, each of which has specific duties requirements defined in the applicable IWC Wage Order.

Under California law, the employee must spend more than fifty percent (50%) of their working time engaged in exempt duties. This is a stricter standard than the federal "primary duty" test under the FLSA.

Timely Payment of Wages

Pay Periods

California Labor Code Section 204 requires that most employees be paid at least twice per month (semi-monthly) on designated paydays. Wages earned between the 1st and 15th of the month must be paid no later than the 26th of the same month. Wages earned between the 16th and the last day of the month must be paid no later than the 10th of the following month.

Final Pay

California has strict requirements regarding the timing of final wage payments:

• Involuntary termination. If an employer terminates an employee, all earned and unpaid wages are due immediately at the time of termination. (Labor Code Section 201.)

• Voluntary resignation with notice. If an employee provides at least 72 hours' notice of resignation, all earned and unpaid wages are due on the employee's last day. (Labor Code Section 202.)

• Voluntary resignation without notice. If an employee resigns without providing 72 hours' notice, wages are due within 72 hours of the resignation.

Waiting Time Penalties

If an employer willfully fails to pay final wages on time, the employee may be entitled to waiting time penalties under Labor Code Section 203. The penalty is the employee's daily rate of pay for each day the wages remain unpaid, up to a maximum of thirty (30) days.

Pay Stubs

California Labor Code Section 226 requires employers to provide employees with an accurate, itemized wage statement (pay stub) with each payment of wages. Required information includes:

• Gross wages earned
• Total hours worked (for non-exempt employees)
• Number of piece-rate units and applicable rate (if applicable)
• All deductions
• Net wages earned
• Dates of the pay period
• Employee name and last four digits of the Social Security number (or employee identification number)
• Employer's legal name and address
• All applicable hourly rates and the corresponding number of hours worked at each rate

Employees who suffer injury as a result of an employer's knowing and intentional failure to provide compliant pay stubs may be entitled to statutory penalties.

Deductions from Wages

California law strictly limits the deductions an employer may make from an employee's wages. Under Labor Code Section 221, it is generally unlawful for an employer to collect or receive any part of wages previously paid to an employee. Permissible deductions include those required by law (such as taxes and court-ordered garnishments), those authorized in writing by the employee for the employee's benefit (such as health insurance premiums), and certain other limited categories.

Deductions for cash shortages, breakage, or loss of equipment are generally prohibited unless the employer can show that the loss was caused by the employee's dishonest or willful act.

Reporting Time Pay

Under the applicable IWC Wage Orders, if a non-exempt employee reports to work as scheduled but is not put to work or is furnished with less than half the usual or scheduled day's work, the employee must be paid for at least half the usual or scheduled day's work, with a minimum of two (2) hours and a maximum of four (4) hours at the employee's regular rate of pay.

Record-Keeping

Employers are required to maintain accurate payroll records for each employee for a minimum of three (3) years under California law. These records must include, among other things, hours worked, wages paid, and deductions made.

Common Areas of Dispute

Wage and hour claims represent one of the largest categories of employment litigation in California. Common issues include:

• Misclassification of employees as exempt from overtime
• Failure to pay all overtime owed
• Off-the-clock work (requiring employees to work before clocking in or after clocking out)
• Failure to reimburse business expenses (Labor Code Section 2802)
• Improper rounding of time entries
• Failure to provide compliant pay stubs
• Late payment of final wages

Conclusion

California's wage and hour laws are detailed and impose substantial obligations on employers. The interplay between state and federal law, the IWC Wage Orders, and the case law interpreting these provisions creates a complex regulatory framework. Both employees and employers benefit from a clear understanding of these requirements. Individuals with questions about a particular wage and hour issue are encouraged to consult with a qualified employment law attorney.

This guide is provided for general informational and educational purposes only. It does not constitute legal advice, and no attorney-client relationship is created by reading this material. Laws and regulations may change, and the application of law depends on the specific facts of each situation. Consult a qualified attorney for advice regarding your particular circumstances.