As an HR professional or employer with employees in California, you need to know which employee benefits are required in The Golden State. Learn about the local employment laws that impact your organization.
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If your organization is based in California or you employ California workers, you need to know the ins and outs of benefits and HR compliance for California. This guide will provide a general overview of California’s regulations for small to medium size businesses.
While there are many federal laws and regulations regarding employee benefits and HR, every state is responsible for establishing its own laws regarding businesses and employment.
In California especially, local requirements prevail over other state laws if you're an out-of-state employer, and sometimes federal laws as well.
Some of the state regulatory agencies that manage employment law include:
As the most-populated state in the United States, California is often considered one of the most employee-friendly states, offering greater protections for workers than federal law. This guide will highlight some of the most significant differences you need to know.
Employees in California have many rights under state and federal law. If you have or plan to hire employees in the state, you'll need to know what protected rights your employees have, no matter the size of your organization.
Some state rights include:
California requires employers to offer all eligible employees certain employee benefits and accommodations.
We've broken up the requirements in the sections below.
Employers must provide pregnancy accommodations in the workplace. You must allow for breaks for breastfeeding, as long as it doesn't disrupt the organization's operations, but they don't need to be paid.
The California Fair Employment and Housing Act , in conjunction with the federal Americans with Disabilities Act, requires organizations with five or more employees to provide reasonable accommodations for those with physical or mental disabilities.
This might include allowing employees to change job duties, providing medical leave, changing work schedules, relocating the work area, or providing additional aid.
There are some employee benefits that are required under California labor laws and federal laws.
Required benefits include:
California is one of 11 states and the District of Columbia that require employers to reimburse their employees for necessary work-related expenses—and employers can suffer big consequences if they don't adhere to state mandates.
Following the outbreak of the COVID-19 pandemic and the rise of remote work, many employees have sued their employers over unpaid remote work expenses in the state of California, including Amazon in 2022.
Under California Labor Code Section 2802 , employers must reimburse employees for all necessary expenses, including internet access costs and phone bills.
Providing a remote work employee stipend is a way employers in California can alleviate the risks of remote work by allowing their employees to get reimbursed for their remote work expenses, including home office setup costs.
California was the first state to require mandatory retirement plans. The law, passed in 2012 and in effect since June 30, 2022, requires that organizations with five or more employees provide a retirement plan to their employees. Otherwise, employers must enroll in the CalSavers IRA program or face fines.
If you offer a retirement plan for your employees, you must file an exemption through CalSavers.
Failure to comply with the law could result in fines of $250 per employee after 90 days and $500 per employee after 180 days of non-compliance.
Most benefits aren't required by law in the state of California. This includes voluntary benefits like paid vacation time, paid holidays, life insurance, and severance pay.
While these aren't required to be provided to employees, if you elect to do so, you'll be subject to the state laws governing how these benefits must be offered and managed. You’ll be required to provide any benefits promised to workers in an employment contract.
Even if these types of benefits aren’t required, offering them can help you attract and retain employees, improve job satisfaction, and boost employee morale. Popular benefits include professional development opportunities, tuition reimbursement , commuter benefits , childcare benefits, and more.
While health insurance isn't required by state law, federal law requires employers with 50 or more full-time equivalent employees (FTEs) to provide health insurance benefits with minimum essential coverage (MEC).
Offering health insurance benefits to your employees is a great way to attract and retain top talent.
While traditional group health insurance is a popular option, rising premium costs have made it challenging for small to medium size businesses to offer the benefit.
There are some alternatives for small business owners who can't offer group coverage due to minimum contribution or minimum participation requirements or who can't afford to pay the high price of California insurance premiums.
A health reimbursement arrangement (HRA) is an IRS-approved, employer-funded health benefit that allows you to reimburse your employees, tax-free, for their individual health insurance monthly premiums and qualifying medical expenses. This includes many expenses normally covered under dental and vision insurance.
With an HRA, you have complete control over your benefit while giving your employees more freedom to choose how they want to use their benefit.
Some HRAs, such as the individual coverage HRA (ICHRA), can satisfy the federal regulations for applicable large employers (ALEs).
