Why California HR Compliance Is Different
California doesn't just have more labor laws than other states—it has fundamentally different rules that turn standard HR practices into compliance nightmares. Daily overtime. Mandatory meal break attestations. Contractor misclassification penalties that start at $5,000 per violation. PAGA lawsuits that can bankrupt businesses.
If you're running a California business (or employing California workers remotely), generic HR software won't cut it. You need tools specifically built to handle:
- Cal/OSHA compliance and workplace safety recordkeeping
- AB5's ABC test for contractor classification
- Daily overtime calculations (not just weekly)
- Meal and rest break tracking with penalty pay automation
- Pay transparency requirements for job postings
- Sexual harassment training mandates (AB 1825, SB 1343)
- Final paycheck timing (immediately upon termination)
- Itemized wage statements with specific required fields
💰 The Real Cost of California Non-Compliance
- Meal/rest break violations: 1 hour of pay per day per violation (adds up fast)
- AB5 misclassification: $5,000–$25,000 per violation + back wages + benefits
- Wage statement errors: $50–$4,000 per employee + attorney fees
- Final paycheck delays: Full day's wages for each day late (waiting time penalties)
- PAGA lawsuits: $100–$200 per pay period per employee (can be millions)
- Harassment training failures: Unlimited liability in lawsuits
California's Unique HR Requirements
1. Cal/OSHA Workplace Safety
California's Occupational Safety and Health Administration is stricter than federal OSHA and requires detailed recordkeeping for all workplace injuries, hazards, and safety programs.
What You Need:
- OSHA 300/300A logs (electronic filing for 250+ employees)
- Injury and Illness Prevention Program (IIPP) documentation
- Cal/OSHA poster compliance
- Heat illness prevention plans (outdoor workers)
- COVID-19 exposure tracking and reporting
Software feature needed: Incident reporting workflows, safety training tracking, automated OSHA form generation
2. AB5 and Contractor Classification
AB5's ABC test presumes all workers are employees unless you prove otherwise. The test is extremely strict—most contractors fail it. Misclassification triggers massive penalties.
The ABC Test (all must be true):
- A: Worker is free from your control
- B: Work is outside your usual business
- C: Worker has an independent business
Exemptions exist for certain professions (licensed professionals, direct salespeople, etc.) but documentation is critical.
Software feature needed: Worker classification workflows, exemption documentation storage, audit trail for classification decisions
3. Meal and Rest Break Requirements
California requires specific meal and rest break timing—and if employees miss breaks, you owe penalty pay. Managers must actively ensure breaks happen.
The Rules:
- Meal breaks: 30 minutes unpaid before end of 5th hour (second meal before end of 10th hour)
- Rest breaks: 10 minutes paid per 4 hours worked
- Penalty: 1 hour of pay at regular rate per missed break per day
- On-duty meal waivers: Must be voluntary and documented in writing
Software feature needed: Automatic break reminders, attestation workflows, penalty pay calculation and tracking
4. Pay Transparency (SB 1162)
As of January 2023, California requires salary ranges in all job postings (15+ employees). Failure to comply risks penalties and lawsuits.
Requirements:
- Job postings must include pay scale (not just "competitive")
- Must provide range to current employees upon request
- Must keep pay records for 4 years
- Annual reporting to state (100+ employees)
Software feature needed: ATS with pay range fields, pay equity analysis tools, compensation benchmarking
5. Sexual Harassment Training Requirements
California mandates 2 hours of harassment training for supervisors and 1 hour for employees, every 2 years. Training must meet specific content requirements.
Who Needs Training:
- All employers with 5+ employees (including contractors)
- Supervisors get 2 hours (harassment + abusive conduct)
- Non-supervisors get 1 hour
- Must complete within 6 months of hire/promotion
- Refresher every 2 years
Software feature needed: Compliance-approved training modules, automatic scheduling, completion tracking, certificate storage
6. Final Paycheck Timing Rules
California requires immediate final payment upon termination. Any delay triggers "waiting time penalties" equal to a full day's pay for each day late (up to 30 days).
Timing Requirements:
- Termination/layoff: Final pay immediately (same day)
- Resignation (no notice): Within 72 hours
- Resignation (72+ hours notice): On last day of work
- Includes: All wages + unused vacation (California doesn't allow "use it or lose it")
Software feature needed: Offboarding workflows, automatic final pay calculations, vacation accrual tracking, same-day payroll processing
California HR Compliance Checklist
Use this checklist to audit your California compliance. If your HR software can't handle these, you're at risk.
✅ Time Tracking & Payroll
✅ Worker Classification
✅ Training & Development
✅ Workplace Safety (Cal/OSHA)
✅ Pay Transparency & Recruiting
✅ Leave & Benefits
Essential Software Features for California Employers
Don't just check boxes—make sure your HR software actively prevents violations:
🕐 Daily Overtime & Break Tracking
Your time tracking system must calculate:
- Daily OT (8+ hours/day) separately from weekly OT (40+ hours/week)
- Double-time pay (12+ hours/day, 7th consecutive day)
- Meal break compliance with pre-5th-hour enforcement
- Rest break penalties automatically when breaks missed
📋 Meal & Rest Break Attestations
Must include:
- Pop-up reminders before 5th hour worked
- Employee attestations if breaks waived
- Manager approval for missed breaks
- Automatic penalty pay calculation
📄 California-Compliant Wage Statements
Wage statements must show:
- Gross wages, total hours, and pay period dates
- All hourly rates in effect during pay period
- Itemized deductions
- Employer name, address, and last 4 of SSN
- PTO balances (vacation, sick leave)
👷 AB5 Contractor Classification Tools
Track and document:
- ABC test checklist for each contractor
- Exemption documentation storage
- Audit trail of classification decisions
- Annual classification reviews
🎓 Harassment Training Management
Required capabilities:
- California-specific harassment training modules
- Separate tracks for supervisors (2 hours) and employees (1 hour)
- Automatic assignment within 6 months of hire/promotion
- Biennial refresher reminders
- Certificate storage and audit reports
⚡ Same-Day Final Paycheck Processing
Offboarding workflows must handle:
- Immediate final pay calculation (terminations)
- Unused vacation payout (mandatory in CA)
- Manager alerts for resignation timing (72-hour rule)
- Integration with same-day payroll providers
💰 Pay Transparency & Equity Tools
For SB 1162 compliance:
- ATS with mandatory pay range fields
- Compensation benchmarking against CA market data
- Pay equity analysis by protected class
- Pay data reporting (100+ employees)
Top HR Software for California Compliance
These platforms are specifically designed to handle California's unique requirements:
1. Rippling
Best for: Multi-state companies with California employees
Rippling automatically applies California-specific rules to CA employees while handling other states differently. Daily OT, meal break tracking, and AB5 documentation workflows are built-in. The platform's state-aware automation means you don't accidentally apply Texas rules to California workers.
California-Specific Features:
- Daily OT calculations (separate from weekly)
- Meal break attestation workflows
- California harassment training modules (AB 1825 compliant)
- AB5 contractor classification tracking
- Same-day final paycheck processing
- California-compliant wage statements
Pricing: Starts at $8/user/month
Best for: 10-500 employees with multi-state operations
Read full Rippling review →2. Gusto
Best for: California small businesses (1-50 employees)
Gusto was built in San Francisco and deeply understands California compliance. Their payroll engine handles daily OT, meal break penalties, and California wage statement requirements automatically. The harassment training library includes California-specific modules with automatic assignment.
California-Specific Features:
- Daily and weekly OT tracking
- Meal break compliance alerts
- California new hire reporting
- Paid sick leave accrual (CA PSL rules)
- California harassment training (included)
- Itemized wage statements with PTO balances
Pricing: $40/month + $6/person
Best for: California startups and small businesses
Read full Gusto review →3. ADP Workforce Now
Best for: Larger California employers (50-1000 employees)
ADP's California compliance team keeps the platform updated with every new regulation. Their California package includes Cal/OSHA recordkeeping, harassment training, and dedicated support for AB5 classification. The meal break tracking module is particularly robust.
California-Specific Features:
- Cal/OSHA 300 log automation
- Meal/rest break tracking with manager alerts
- California harassment training (2-hour supervisor version)
- Pay transparency reporting tools
- AB5 documentation workflows
- California-specific HR support line
Pricing: Custom (typically $15-25/employee/month)
Best for: Mid-sized California businesses with dedicated HR
Read full ADP review →4. Paycor
Best for: California businesses prioritizing time tracking accuracy
Paycor's timekeeping module is specifically designed for California's complex meal and rest break rules. Employees receive automatic reminders, managers get alerts for missed breaks, and penalty pay calculates automatically. The wage statement generator includes all required California fields.
California-Specific Features:
- Premium meal/rest break tracking (pre-5th hour alerts)
- Automatic penalty pay calculations
- Daily OT and double-time automation
- California wage statement compliance
- Mobile app break attestations
- Geofencing for remote worker compliance
Pricing: Custom (typically $99+ base + per employee)
Best for: 20-500 employees with hourly workforce
Read full Paycor review →5. Paylocity
Best for: California companies needing comprehensive compliance suite
Paylocity's California Compliance Center bundles all required tools: harassment training, meal break tracking, Cal/OSHA recordkeeping, and AB5 documentation. Their learning management system includes California-specific courses that automatically assign based on employee location and role.
California-Specific Features:
- All-in-one California compliance dashboard
- Harassment training library (AB 1825/SB 1343 compliant)
- Cal/OSHA incident tracking
- Meal/rest break automation
- Pay transparency tools
- California-specific policy templates
Pricing: Custom (typically $12-20/employee/month)
Best for: 50-1000 employees needing full compliance support
Read full Paylocity review →6. CalChamber HR California
Best for: California-only businesses needing compliance guidance
Not a full HRIS, but an essential compliance resource. CalChamber provides up-to-date California forms, posters, policy templates, and a 24/7 hotline staffed by California employment law experts. Best used alongside your payroll system.
California-Specific Features:
- Live California employment law hotline
- Updated California forms and posters
- Policy templates (California-specific)
- AB5 compliance guidance
- Cal/OSHA resources
- Weekly California law updates
Pricing: $699+/year (membership)
Best for: Small businesses needing on-demand compliance support
Visit CalChamber →California HR Compliance FAQ
What makes California HR compliance different from other states?
California has stricter labor laws than federal requirements and most other states. Key differences: daily overtime (not just weekly), mandatory meal and rest break tracking, AB5's strict contractor test, immediate final paycheck requirements, mandatory harassment training every 2 years, and unlimited vacation accrual (no "use it or lose it"). Penalties are also much higher—PAGA lawsuits can claim $100-200 per pay period per employee.
What is AB5 and how does it affect contractors?
AB5 (effective January 2020) presumes all workers are employees unless you prove otherwise using the strict "ABC test." All three conditions must be met: worker is free from your control (A), work is outside your usual business (B), and worker has an independent business (C). Most contractors fail this test. Exemptions exist for licensed professionals, direct salespeople, and certain industries, but documentation is critical. Misclassification penalties start at $5,000 per violation.
How does California's daily overtime work?
California requires overtime pay for hours worked beyond 8 in a single day, even if weekly hours are under 40. Example: Employee works 10 hours Monday, 6 hours Tuesday-Friday (38 hours total). You owe 2 hours of daily OT (Monday's 9th and 10th hours). They'd also earn double-time for hours beyond 12 in a day, and for work on the 7th consecutive day. Your payroll system must calculate both daily and weekly OT and pay whichever is greater.
What happens if an employee misses a meal break?
If an employee works more than 5 hours without a 30-minute meal break, you owe one hour of pay at their regular rate (premium pay) for that day. This is per-day, per-violation—if breaks are missed repeatedly, penalties add up fast. The meal break must begin before the end of the 5th hour (not after 5 hours worked). On-duty meal waivers are allowed only in specific circumstances and must be documented in writing with employee consent.
Do I need to provide harassment training if I have fewer than 5 employees?
No, the California harassment training requirement applies to employers with 5 or more employees (including part-time and contractors). If you have fewer than 5, you're exempt. However, once you hit 5 employees, you must provide training within 6 months of hire for new employees and supervisors, plus refresher training every 2 years. Supervisors need 2 hours of training; non-supervisors need 1 hour.
What is pay transparency law SB 1162?
SB 1162 (effective January 2023) requires California employers with 15+ employees to include pay scales in all job postings—internal and external. "Competitive pay" or salary ranges aren't enough; you must provide specific minimum and maximum amounts. You must also provide pay scales to current employees upon request. Employers with 100+ employees must submit annual pay data reports to the state. Penalties for non-compliance include fines and potential discrimination lawsuits.
When do I need to give an employee their final paycheck?
Timing depends on how employment ends. Termination/layoff: Final paycheck due immediately at termination (same day, at time of termination). Resignation with no notice: Final paycheck due within 72 hours. Resignation with 72+ hours notice: Final paycheck due on last day of work. Final pay must include all wages, commissions, bonuses, and unused vacation (California prohibits "use it or lose it"). Each day you're late triggers "waiting time penalties" equal to one day's wages (up to 30 days).
Can I have a "use it or lose it" vacation policy in California?
No. California law treats earned vacation as wages, which cannot be forfeited. You cannot implement "use it or lose it" policies or cap accruals at zero. However, you can set a reasonable accrual cap (e.g., "vacation stops accruing once you reach 1.5x annual allotment"). You must pay out all unused vacation when employment ends. Many California employers use "unlimited PTO" to avoid accrual liability, but this has its own compliance risks.
Does Cal/OSHA apply to remote workers?
Yes. If your employee works from home in California, you're responsible for their home workspace safety under Cal/OSHA. You must provide an ergonomic assessment, ensure proper equipment (desk, chair, monitor), and maintain injury/illness records if workplace incidents occur. Heat illness prevention doesn't apply to home offices, but general IIPP requirements do. Document that you've provided safety guidelines and equipment.
What is PAGA and why should I care?
PAGA (Private Attorneys General Act) allows employees to sue on behalf of the state for labor code violations—even minor wage statement errors. Penalties are $100 per employee per pay period for initial violations, $200 for subsequent violations. For a 50-employee company over 1 year (26 pay periods), that's $130,000+ for a single recurring violation. PAGA lawsuits are rampant in California because employees can sue without arbitration and collect penalties. Best defense: aggressive compliance.
Find the Right HR Software for Your California Business
Compare top California-compliant HR platforms, read user reviews, and find the best fit for your business size and industry.
Or browse our complete guide library for more specialized recommendations
Related Resources
HR Compliance Checklist by State
Compare California's requirements to other states
How to Implement an HRIS System
Step-by-step guide to rolling out new HR software
Best Time Tracking Software
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Best Payroll Software
Find payroll platforms with California wage statement compliance