Employment

California Payroll Rules for Contractors

Updated September 2026

Employment Requirements is 20% of the Law and Business exam - the second-biggest area. California's rules are stricter than federal rules in several places, and the exam leans on exactly those differences.

Overtime is daily, not just weekly

Example: a worker at $30 an hour works 13 hours. That is 8 hours at $30 ($240), 4 hours at $45 ($180) and 1 hour at $60 ($60) - $480 for the day.

• Time and a half for hours over 8 in a workday (up to 12), and for hours over 40 in a workweek.
• Double time for hours over 12 in a workday.
• On the seventh consecutive day worked in a workweek: time and a half for the first 8 hours, double time after that.
• Four 10-hour days is still 8 hours of overtime unless the company has properly adopted an alternative workweek schedule.
• Overtime is owed even if the worker stayed late without permission. You can discipline them, but you still pay.

Final paychecks

Paid sick leave

Employers must generally provide at least 40 hours or 5 days of paid sick leave a year. Under the accrual method it builds at one hour for every 30 hours worked, and an employer may make a new employee wait until their 90th day on the job before using it.

Hiring paperwork

• The new employee completes Form I-9 Section 1 by their first day; you complete Section 2 within 3 business days.
• Report the new hire to the EDD New Employee Registry within 20 days of their start date.
• Have them fill out the federal W-4 and the California DE 4.
• You cannot deduct the cost of a tool a worker broke through simple carelessness from their pay.

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