How to Stay Compliant with California Wage and Hour Laws in 2025

Lin’s Fusion, a Fresno, California restaurant, learned a painful $2 million lesson - California is dead serious about wage and hour payroll compliance. The restaurant’s failure to pay overtime, split shift premiums, and meal break wages led to a massive settlement with the California Labor Commissioner.¹

California’s wage and hour laws are complex and often misunderstood, presenting compliance challenges even for experienced business owners. This guide will clarify the laws most often violated and litigated: minimum wage, overtime, travel pay, meal and rest breaks, split shift premiums, worker classification, and reporting time pay. By addressing these key areas directly, we’ll help you navigate California’s regulatory landscape with confidence and ensure better compliance.

Key Takeaways

• California has stricter wage laws than federal standards, requiring daily overtime, meal/rest breaks, and higher local minimum wages.

• Wage violations are heavily enforced, with millions recovered in claims, potential lawsuits, and severe financial penalties for non-compliance.

• Accurate time tracking is essential, as employers must pay for split shifts, drive time, and correctly classify workers to avoid penalties.

Table of Contents

• Overview of California Workplace Laws

• Minimum Wage Requirements

• Overtime Pay Regulations 

• Drive Time Pay

• Meal and Rest Breaks

• Split Shift Regulations

• Worker Misclassification 

• Reporting Time Pay Rules

• Legal Recourse

• Summary

• Frequently Asked Questions

Overview of California Workplace Laws

California’s workplace laws are among the most protective in the nation, offering robust safeguards beyond federal protections.  The following chart compares the key differences between federal and California labor laws:

Approximately 25 wage and hour lawsuits are filed every day in California. Consequently, employers must proactively track employee hours, ensure correct worker classification, and implement policies that prevent violations.

Now, let’s start with one of the most fundamental aspects of California’s wage laws—minimum wage. Employers must meet state and local requirements to stay compliant.

What is the Minimum Wage in California for 2025?

Businesses in California face significant challenges in complying with minimum wage requirements. From 2014 to 2023, workers in San Francisco, Los Angeles, San Diego, and San Jose lost an estimated $2.3 to $4.6 billion annually due to minimum wage violations.

Minimum Wage Rates in California (2025)

• Statewide minimum wage (2025): $16.50 per hour

• Fast food workers (April 2024): $20.00 per hour

• Healthcare workers: Varies by facility type and size

Higher Minimum Wages for Certain Cities and Counties

Compliance becomes even more challenging when minimum wage rates vary by city and county. California employers must pay the highest applicable wage based on the employee's work location, which can complicate compliance for employers with mobile workers who work in multiple cities a week.

💡Pro Tip: Use a mobile time-tracking system that automatically applies pay differentials when employees clock into cities with higher minimum wages.

Meeting minimum wage requirements is just the start—California also has some of the strictest overtime laws in the country.

California’s Overtime Laws and How They Differ from Federal Rules

Unlike federal law, which only requires overtime pay for hours worked beyond 40 in a week, California mandates daily overtime pay in most cases. This means employees may be entitled to overtime wages even if they haven’t exceeded 40 hours in a workweek.

Standard Overtime Rules in California

Time-and-a-half (1.5x pay):

• Any hours worked beyond 8 hours in a single workday

• Any hours worked beyond 40 in a single workweek

• The first 8 hours worked on the 7th consecutive day in a workweek

Double time (2x pay):

• Any hours worked beyond 12 in a single workday

• Any hours worked beyond 8 on the 7th consecutive day in a workweek

Note: Employers must pay for all overtime worked, even if not pre-approved. 

💡Pro Tip: Adopt Alternative Workweek Schedules (AWS), which lets employees work longer shifts without triggering daily overtime—if properly approved. 

Off-the-Clock Work and Unpaid Overtime

Another caution area: Asking employees to perform quick tasks like loading equipment before clocking in or completing paperwork after shifts unwittingly invite labor complaints. These minor "off-the-clock" moments are among California's most aggressively pursued wage violations.

Neil Shouse, a California labor law attorney and Harvard Law School graduate, said, "Even if you (employee) volunteered to work off the clock, it can still violate the law if the employer allows it to happen."

Another frequently misunderstood and violated wage and hour law is travel time. 

Do Employers Have to Pay for Travel Time in California?

California employers should take heed of their state's travel time requirements, which are stricter and broader than federal law.  

Key Differences Between Federal and California Law on Drive Time Pay

💡 Pro Tip: Implement GPS-enabled time tracking that automatically captures all compensable travel time between job sites to avoid costly wage claims.

This same attention to detail is particularly important regarding meal and rest breaks, where California's rules are specific, and penalties for non-compliance are costly.

California’s Meal and Rest Break Laws

According to California labor attorney Eric B. Kingsley, a 2024 "Best In Law" Award winner, "The most common violations (wage and hour) involve issues with meal and rest breaks."

California's labor laws mandate uninterrupted meal and rest breaks, free from all work duties, with strict rules on when they must be taken. If an employee misses a required break or is required to stay on-site, the employer may owe additional pay—failure to comply results in one extra hour of pay per violation per day.

California Meal Break Requirements

• 30-minute unpaid meal break for shifts over 5 hours

• A second 30-minute meal break is required for shifts over 10 hours

• Employees may waive their first meal break if their shift is 6 hours or less (if mutually agreed upon)

• Meal breaks must be duty-free—if an employee is required to stay on-site, the meal break must be paid

California Rest Break Requirements

• 10-minute paid rest break for every four hours worked

• Breaks must be duty-free and uninterrupted—employees cannot be required to remain on-call

The Nuances of Meal Break Compliance 

However, monitoring and ensuring compliance is tricky. Even when breaks are provided, violations can occur if they don't fully meet legal requirements.

For example, if an employee clocks out for a meal break but returns in 29 minutes instead of the full 30 minutes, that break is non-compliant under California law. The employer may still be liable for premium pay even though the break occurred. 

Employees may also choose to work through their meal break without triggering a violation. We’ll explore this further in our dedicated article on California meal break laws.

💡Pro Tip: Be cautious about automatically deducting meal breaks—doing so when an employee works through the break can lead to wage theft complaints.

In addition to break requirements, California also regulates how work schedules are structured under the state’s split shift rules.

What Is a Split Shift and How Does It Affect Payroll?

Many employers don't realize that asking employees to come back later in the same day creates an event called a "split shift," which requires additional premium pay under California law. The premium compensates employees for the inconvenience. 

How the Split Shift Premium Works

• Employers must pay a split shift premium unless the employee’s total daily earnings exceed the minimum wage for all hours worked plus one additional hour at minimum wage.

• The premium equals one extra hour of pay at the local minimum wage rate for each split shift worked.

• The employer's defined workday determines whether a shift qualifies as a split shift. A workday is a fixed 24-hour period that must remain consistent each day and doesn't have to begin at midnight (e.g., it could run from 6:00 AM to 6:00 AM the next day).

Example of a Split Shift Premium Calculation

Scenario: A janitorial employee in San Francisco works the following schedule:

• Shift 1: 6:00 AM – 10:00 AM (4 hours)

• Unpaid break: 6 hours

• Shift 2: 4:00 PM – 8:00 PM (4 hours)

• Total hours worked: 8 hours

Wage Breakdown

• Employee’s hourly rate: $19.00/hour

• Total earnings for the day: 8 hours × $19.00 = $152.00

Split Shift Premium Calculation

Minimum required earnings (including split shift premium):

• (8 hours × $18.67) + $18.67 = $168.03

Since the employee’s total earnings ($152.00) are less than the required $168.03, the employer must pay an additional split shift premium of $18.67.

Note: Employees who reside at their workplace (e.g., live-in caregivers) are exempt from the split shift premium.

💡Pro Tip: If split shifts are unavoidable, factor the premium pay into your labor budget.

Just as California regulates workdays and pay requirements, it also enforces strict worker classification laws. 

Independent Contractor or Employee? Understanding California’s ABC Test

California law strictly regulates worker classification, imposing stricter standards than federal law. Unlike federal guidelines, California’s ABC Test makes it significantly harder for employers to classify workers as independent contractors. The chart below outlines the key differences between California and federal worker classification rules.

The ABC Test: How California Determines Worker Status

California uses the ABC Test to classify a worker as an independent contractor, requiring all three conditions to be met:

✅ A: The worker is free from the company’s control in how they perform their job.
✅ B: The worker performs tasks outside the company’s usual business operations.
✅ C: The worker is engaged in an independently established trade, occupation, or business.

If any condition fails, the worker must be classified as an employee, with all associated protections like overtime, meal breaks, sick leave, and workers' compensation. While classifying workers as independent contractors can save companies up to 30% on labor costs, failing to meet legal requirements can result in severe penalties.

Penalties for Misclassification

Employers caught misclassifying workers can face the following:

• Fines of $5,000 to $25,000 per misclassified worker

• Back pay for wages, benefits, and unpaid overtime

• Penalties for unpaid payroll taxes

• Lawsuits under the Private Attorneys General Act (PAGA)

California also stands out for its strong protections for employees who report to work as scheduled but are sent home early. These are known as reporting time pay rules.

Reporting Time Pay aka Show-up Pay 

​Did you know that scheduling employees without being certain you'll need them can lead to extra costs? California's 'show-up pay' laws require you to pay employees half their scheduled hours when they report to work but are sent home early. You must pay at least two hours and no more than four hours at their regular rate, even when no work is available.

The reporting time law protects employees from lost wages due to last-minute changes.

Employers must be careful about an easy-to-overlook reporting time pay rule related to terminating employees. Giuliana Gabriel, J.D., HR Compliance Director for California's Employers Association, explains: "Note that reporting time pay issues often come up when terminating employees. Employers should keep in mind that if an employee reports to work only to process the termination paperwork on a regularly scheduled day, they will be owed reporting time pay if they do not work at least half of their shift. It must be included on the final check."

However, exceptions exist to the reporting time pay rules. Employees are not entitled to reporting time pay if work is interrupted due to threats to employees or property, public utility failures, or Acts of God like earthquakes.

💡Pro Tip: Track employees' actual work times versus scheduled shifts to ensure compliance with reporting time pay rules. 

Legal Recourse for Wage and Hour Violations

California employers should be aware of the many options employees have for addressing wage violations, with varying statutes of limitations:

1. File a Wage Claim
   Employees can file a complaint with the California Labor Commissioner’s Office for back pay, penalties, and interest. Claims must be filed within:

   • 1 year: Penalties for late payments or incorrect wage statements.

   • 2 years: Violations based on an oral promise for more than minimum wage.

   • 3 years: Unpaid wages, overtime, or missed breaks.

   • 4 years: Written contract violations.

2. Sue the Employer
   Employees can file a civil lawsuit for unpaid wages, overtime, break violations, and damages, especially if administrative claims fail.

3. Join a Class-Action Lawsuit
   Multiple employees with the same violation can file together, often in misclassification or overtime cases, resulting in significant penalties and changes to pay practices.

4. Seek Compensation Through Penalties
   Employees may receive:

   • Waiting time penalties: One day's wages for each late paycheck, up to 30 days.

   • Liquidated damages: Double the unpaid wages in some cases.

Settlements typically range from $40,000 to $75,000, with notable cases, like a 2021 $15.25 million settlement, highlighting the financial impact.²

💡Pro Tip: As a California business owner, it's crucial to understand labor laws and have a labor law attorney on hand. Here’s a list of labor attorneys from the California Employers Association.

Summary of California Wage and Hour Laws

Understanding California wage and hour laws is essential. These regulations ensure fair pay, protect worker rights, and establish clear employer responsibilities. 

By staying informed and compliant, and automating employee time tracking, employers can avoid costly legal consequences and ensure employees receive the wages and protections they are entitled to. Following these laws also supports a more productive and ethical workplace.

📌 This overview is just the beginning—subsequent articles will dive deeper into key compliance topics, including overtime regulations, split shifts, meal and rest breaks, drive time pay, and more.

Frequently Asked Questions from Business Owners

1 - What is the minimum wage in California as of 2025?

As of 2025, the minimum wage in California is set at $16.50 per hour for all employers.

2 - How does California's overtime pay requirement differ from federal law?

California mandates overtime pay for more than eight hours in a single workday, contrasting with federal law, which only requires it for hours exceeding 40 in a week. This means California employees may receive overtime pay more frequently than those under federal regulations.

3 - What are California's requirements for meal and rest breaks?

In California, employees must receive a 30-minute unpaid meal break after working more than 5 hours, and a second 30-minute break is required for shifts over 10 hours. It’s crucial to ensure these breaks are taken to comply with state law. In addition to meal breaks, employees are also entitled to take 10-minute rest periods for every four hours worked.

4 - What can employees in California do if they believe their employer has violated wage and hour laws?

Employees in California can file claims for unpaid wages, overtime, or missed meal and rest breaks to seek compensation and penalties for violations of wage and hour laws. It is crucial to act promptly to protect your rights. 

5 - What is the ABC Test?

The ABC Test requires that a worker must meet three conditions to be classified as an independent contractor:

• A: The worker is free from the company’s control in how they perform their job.

• B: The worker performs tasks outside the company’s usual business operations.

• C: The worker is engaged in an independently established trade, occupation, or business.

6 - Do employers have to pay for travel time in California?

7 - What is reporting time pay?

Reporting time pay refers to laws that require employers to compensate employees who report to work as scheduled but are sent home early. These laws help protect workers from unpredictable scheduling and lost wages.

8 - What is a split shift? 

A split shift is a work schedule interrupted by an unpaid, non-working period longer than a meal break. Employers must pay a split shift premium if the employee’s total earnings for the day don’t exceed minimum wage plus an extra hour of pay.

¹ Gabriel Dillard, "Fresno Buffet Reaches $2M Settlement for Wage Violations," The Business Journal, March 27, 2024.

²Jessica Anvar Stotz, JD, MBA, "Average Settlement for Unpaid Wages in California," LAWLINQ, January 20, 2025.