California may be one of the most employee-friendly states in the country, but that also makes it one of the trickiest for employers. What looks like a standard, harmless policy in another state can easily land a California business in court. From break requirements to remote work rules, there are countless ways well-intentioned employers unintentionally step over the line. That’s why understanding—and regularly auditing—your policies isn’t just best practice, it’s survival.
There’s a saying among California HR professionals: “If you’re not auditing your policies, a lawyer eventually will.” Employment laws in general are layered, location-specific, and often change without much fanfare, making it challenging to fully understand without the right experience and training, and California is 10x more complicated than most other states. While most business owners and HR teams aren’t actively trying to get it wrong, intent doesn’t matter when a policy violates state law.
If you’re managing HR for your company, it’s crucial to know which state employment policies to avoid (or how to properly implement them) to prevent serious legal risks. This is especially important if you have any employees working in California. Below are ten common HR practices that often get businesses into legal trouble. Some may look harmless on the surface, but under California law, they’re ticking time bombs if not properly addressed.
10 Workplace Practices That Will Get You Sued:
This one leads the pack in wage-and-hour lawsuits. California law guarantees:
Failing to provide these, or pressuring employees to skip or work through them, can result in penalties under the Private Attorneys General Act (PAGA). And these aren’t small fines.
The good news? Starting in January 2025, PAGA was updated to allow employers to “cure” certain violations, which can reduce penalties by up to 85%. However, the fix provision applies only to certain types of violations specified in the update and can involve complex requirements for eligibility and timing.
Start by reviewing your policies, then make sure supervisors are actually enforcing them. If your team isn’t tracking breaks properly, that’s a red flag.
This one’s gotten even trickier since California adopted the ABC test under Assembly Bill 5. However, all states have to comply with the IRS’s definition of an independent contractor, which is not easy. To legally classify someone as an independent contractor, you need to prove:
A freelance graphic designer working with your restaurant? Probably fine. A line cook working “contractor” hours in your kitchen? Likely illegal.
Misclassification can trigger back pay, benefits liability, tax penalties, and steep fines, and under PAGA, one misclassified worker can represent everyone who was misclassified.
Like many states, California is an at-will employment state, but that doesn’t mean you can fire someone without consequences. You still can’t terminate an employee for reasons that are discriminatory, retaliatory, or violate public policy.
Terminating an employee right after they file a complaint can lead to serious legal trouble. Similarly, firing someone without clear documentation of performance problems puts you in a vulnerable position.
The best protection is documentation. Keep records of warnings, performance reviews, and internal investigations. Use a consistent termination process across all departments. Documenting everything thoroughly not only supports fair treatment but also strengthens your defense if a dispute arises.
Anti-discrimination policies aren’t optional, and they can’t just live in a dusty handbook. Employers need:
State law (SB 1343) requires one hour of interactive sexual harassment prevention training for employers with five or more employees, and that applies to part-timers and temps. State law AB 1825 requires supervisor-level employees to attend two hours of interactive unlawful harassment training every two years.
Gone are the days of training once and forgetting it. Make sure managers know how to respond to concerns and what not to say during hiring or termination discussions.
This rule often trips up out-of-state employers. In California, vacation time is treated as earned wages, which means it can never expire or be “lost.” When an employee leaves, you must pay out their unused vacation at their final pay rate. A “use it or lose it” policy is outright illegal. If you want to keep vacation accrual manageable, it’s better to set a “reasonable cap” on how much can accumulate, such as one and a half times the annual accrual amount.
When an employee quits or is terminated, California law says their final paycheck is due:
Miss that window, and you could owe waiting time penalties, up to 30 days’ worth of the employee’s wages – and note that it’s 72 “clock” hours, not business hours.
Final pay must include any unused vacation time, commissions, or earned bonuses. It’s not something to leave until the last minute.
California has more protected leave types than all other states, including CFRA, pregnancy disability leave, paid sick leave, and school activity-related leave.
If your policies are vague, inconsistent, or don’t comply with these laws, you risk claims of interference or retaliation. It’s important that your policies clearly define eligibility and procedures, differentiate between paid and unpaid leave, and are updated regularly to reflect new legislation. There are also requirements for employers to provide specific information to employees about their leave rights in the employee’s primary language. This information must be provided within a period of time (usually 24 hours) after the employee notifies the employer of the need for leave.
Laws change. If your handbook hasn’t been updated in the last year or two, it probably contains outdated (or even illegal) content. For example, some employers still use sample policies they found online five years ago, not realizing they conflict with California law. Since many laws are based on the number of employees an employer has, policies should be updated as the employee count grows.
California has stricter wage laws than federal standards. You need to comply with:
If your timekeeping or payroll systems can’t handle these rules, you need an upgrade, or a lawsuit might be what forces your hand.
Here’s the harsh truth: having no policies can be as bad as having flawed ones. If there’s no written rule, there’s no clear standard, which makes your practices look arbitrary or discriminatory if you’re ever audited or sued.
No process for investigating complaints? No documentation of break times? No system for onboarding or offboarding? These gaps make it easy for employees (and attorneys) to argue unfair treatment or violations.
Effective HR policies are your strongest defense in California’s complex legal landscape. Mistakes can leave your business vulnerable, while getting them right safeguards everyone involved. Regular audits, quarterly reviews, and partnering with HR experts familiar with California’s unique rules are key to staying compliant. In the end, compliance protects your company from costly lawsuits that can drain resources and harm your reputation; it’s not just about navigating red tape.
At Next Level Strategies, we help California businesses identify risks before they become legal problems. If you’re ready to strengthen your HR practices, reach out by filling out the form below or calling 415-876-NEXT.
Reach out to our team of HR experts today!
Policies that are vague, inconsistent, discriminatory, or violate state labor laws can trigger lawsuits, especially around harassment, wage and hour issues, and wrongful termination.
Employers should follow state laws on breaks, overtime, and final pay, maintain accurate records, and regularly update policies to ensure compliance.
Misclassification can result in back pay, unpaid benefits, tax penalties, fines, and legal claims, including those brought under the Private Attorneys General Act (PAGA).
