In 2025, my firm is seeing a noticeable uptick in enforcement actions by the California Employment Development Department (EDD), particularly around the classification of workers as independent contractors. While it’s purely speculative, this rise in audits and assessments could be partially driven by the state’s ongoing budget shortfalls, as California seeks to recover unpaid payroll taxes to help close the gap.

Here are five key things California employers should know:

1. We’ve Seen An Increase In EDD Audits —Be Prepared

We’ve seen an increase in EDD audits in 2025, primarily focused on misclassification of workers. Companies that have historically classified certain roles as independent contractors—especially in industries like hospitality, logistics, tech, and gig work—are now finding themselves under review. These audits can result in large assessments for unpaid unemployment insurance, disability insurance, and other payroll taxes.

2. Misclassification Can Trigger Multiple Layers of Liability

In addition to EDD assessments, misclassified workers may pursue private claims for unpaid overtime, missed breaks, unreimbursed expenses under Labor Code section 2802, and even PAGA penalties. The financial exposure can be significant, especially when claims reach back four years and include attorneys’ fees and interest.

3. The EDD and DLSE Use Different Tests—Know Them Both

California primarily applies the ABC Test under AB 5, which presumes a worker is an employee unless all three parts of the test are met. However, the economic realities test—still used in some cases—evaluates factors like the level of control, whether the work is part of the employer’s regular business, and who provides tools and equipment. Employers must be familiar with both tests, as different agencies may apply different standards.

4. Even a Written Contract May Not Protect You

Even if both parties agree to an independent contractor arrangement and sign a contract saying so, that agreement doesn’t determine legal status. Enforcement agencies and courts will look at the actual working relationship. If the business controls the work and the worker is economically dependent on the company, classification as an employee may be required under the law.

5. Now Is the Time for a Classification Audit

Given the rise in enforcement and potential financial exposure, employers should proactively review their worker classifications. Consider having legal counsel conduct an internal audit using the ABC and economic realities tests to identify any high-risk roles. A proactive review could help avoid audits, assessments, and costly litigation down the road.

Bottom line: With California facing a projected budget deficit, state agencies may be ramping up enforcement efforts to increase revenue. Whether your business relies heavily on contractors or just uses them occasionally, now is the time to reassess and ensure compliance.

Employers in California should periodically review their employee documentation and record retention policies to ensure compliance with state laws. Below are five critical areas to audit as of 2025:

1. Are Employee Time Records Maintained for at Least Four Years?

California law requires employers to track hourly employees’ start and stop times, meal periods, and total hours worked. Time records are crucial in wage and hour lawsuits, which can reach back four years. Employers should:

  • Ensure timekeeping systems are accurate and configured properly.
  • Regularly audit the system to confirm it tracks required data.
  • Implement a complaint procedure for employees to report timekeeping issues.

2. Are Pay Stubs and Schedules Properly Backed Up?

Under Labor Code Section 226, employers must retain pay stubs for at least three years; however, many extend this to four years due to the statute of limitations on wage claims brought under the Unfair Competition Law. Employers should:

  • Store electronic copies of pay stubs that meet legal requirements.
  • Avoid relying solely on payroll companies for record retention, as access may be lost if switching providers.
  • Retain employee schedules for four years, as they are often critical in defending wage claims.

3. Are Employee Files Maintained Confidentially and for Four Years?

Senate Bill 807 (SB 807), effective January 1, 2022, amended California Government Code Section 12946 to require employers to retain personnel files for at least four years after creation or employment action (e.g., termination). Employers should:

  • Keep personnel files confidential and secure.
  • Maintain and preserve any and all applications, personnel, membership, or employment referral records and files for at least four years after they are initially created or received.
  • Retain personnel files of applicants or terminated employees for a minimum of four years after the date of the employment action taken (e.g., non-hire of an applicant or termination of an employee).
  • Employers in California are required to retain records of completed sexual harassment training for a minimum of two years. These records should include:
    • The names of employees who participated in the training
    • Dates of the training sessions
    • Copies of training materials used
    • Any certificates issued documenting the completion of training

While California law does not define “personnel files,” guidance from the Division of Labor Standards Enforcement (DLSE) suggests including documents used to evaluate promotions, compensation, or disciplinary actions.

4. Are Forms I-9 Retained Correctly?

Federal law requires employers to keep Form I-9 for three years after hire or one year after termination, whichever is longer. Employers must also:

  • Store I-9 forms separately from other personnel records for easy retrieval during inspections.
  • Ensure compliance with production deadlines if requested by authorities (within three business days).

5. Are Managers Trained on Record Retention Policies?

Policies are only effective if managers understand and follow them. Employers should train supervisors on:

  • Proper documentation of employee discipline, tardiness, absences, and accommodations.
  • Standard forms available for documenting workplace issues.
  • Procedures for submitting and storing records electronically or in paper form.

By maintaining proper records and training staff on retention policies, employers can mitigate litigation risks while ensuring compliance with California’s stringent requirements under SB 807 and related laws.

In light of the Trump administration’s heightened focus on immigration enforcement, our law firm has been inundated with inquiries from employers seeking guidance on I-9 compliance. The complexities surrounding employment verification have become a pressing concern for many businesses, prompting us to address these issues head-on. Recently, we hosted two webinars that attracted over 500 employers, underscoring the widespread interest and need for clarity on this topic (given the demand, we are conducting another webinar on March 21, more information below). These sessions provided valuable insights and practical advice, helping employers navigate the intricacies of I-9 compliance and ensure they remain in full compliance with federal regulations.

We’ve identified five key aspects of I-9 compliance that are crucial for understanding and adhering to federal requirements. By focusing on these areas, employers can better manage their responsibilities and avoid potential penalties:

1. E-Verify and Remote Document Verification

E-Verify is an online system that allows employers to confirm the eligibility of their employees to work in the United States. With the rise of remote work, remote document verification has become increasingly important. However, this is only available for employers who are enrolled in E-Verify and are good standing, and they must follow specific guidelines to ensure the process is secure and compliant. This includes using video conferencing tools to inspect documents and maintaining detailed records of the verification process. All employers not enrolled in the E-Verify program must physically inspect the documents produced by employees when completing the I-9.

2. USCIS Handbook for Employers M-274

The USCIS Handbook for Employers (M-274) is an essential resource for understanding the requirements of Form I-9, which is used to verify the identity and employment authorization of individuals hired for employment in the United States. The handbook provides detailed instructions on how to complete and retain Form I-9, as well as guidance on handling special situations such as name changes and rehires.

3. Retention of Form I-9

Employers must retain completed Form I-9 for each employee for a specific duration to comply with federal regulations. The retention period is determined based on the employee’s tenure with the company:

  • For current employees, retain the form for as long as they work for you.
  • For former employees, retain the form for either three years after the date of hire or one year after the date employment ends, whichever is later.

Employers can retain Form I-9 on paper, microfilm, microfiche, or electronically, but they must ensure that the forms are accessible and can be presented within three business days of an inspection request from DHS, DOJ, or DOL officers.

4. Time to Complete Form I-9

The Form I-9 needs to be completed by both the employee and the employer within specific timeframes to ensure compliance with U.S. immigration laws:

  • The employee must complete Section 1 no later than their first day of employment.
  • The employer must complete Section 2 by examining the employee’s documents and verifying their identity and employment authorization within three business days of the employee’s first day of employment.

In special cases, such as when the employee will work for less than three business days, both sections must be fully completed at the time of hire.

5. Recertification and Reverification

Employers need to reverify or recertify Form I-9s in specific situations to ensure that employees remain authorized to work in the United States:

  • Reverify employment authorization no later than the date the current authorization expires.
  • If rehiring an employee within three years from the date the original Form I-9 was completed, update the form to reflect the rehire date and reverify employment authorization if necessary.

Employers should also be aware of special situations, such as automatic extensions of employment authorization and specific requirements for employees with Temporary Protected Status (TPS) or those who are refugees or asylees.

By understanding and adhering to these key aspects, California employers can ensure compliance with employment verification requirements and avoid potential penalties. For more detailed information, refer to the USCIS Handbook for Employers (M-274) and other relevant resources.

As we continue to support employers in navigating the complexities of I-9 compliance, we are excited to announce our upcoming webinar on March 21, 2025, at 10 a.m. PT. This session will focus on a hands-on workshop addressing the most pressing issues employers face regarding I-9s and compliance, and registration is available here.

California’s fast-food industry is once again at a crossroads. Following the April 1, 2024, minimum wage increase to $20 per hour (as previously covered here), fast-food operators have struggled with higher labor costs, price increases, job losses, and store closures. Now, the Fast Food Council is considering another increase to $20.70 per hour, with a final vote expected in April or May 2025.

If the proposed wage hike is approved, fast-food employers will need to act quickly to adjust labor budgets, pricing strategies, and compliance measures. Here are five key steps operators should start considering now to prepare for another wage increase.

Five Steps Fast-Food Employers Should Start Considering Now

1. Review Payroll and Budget for the Potential Wage Increase

If the new $20.70 per hour wage is approved, employers must:

  • Ensure payroll systems are updated to reflect the new rate as soon as it takes effect.
  • Adjust labor budgets to account for increased wage costs.
  • Project financial impacts on operations, including potential reductions in hours, staffing, or menu price adjustments.

2. Plan for Higher Overtime Costs

With a higher minimum wage, overtime rates will also increase:

  • 1.5x Overtime Pay: $31.05 per hour
  • 2x Double-Time Pay: $41.40 per hour

Employers should evaluate scheduling practices, limit unnecessary overtime, and consider staffing adjustments to manage costs.

3. Update Employee Notices and Pay Stubs

If the increase is approved, fast-food operators will need to:

  • Update employee notices as required by Labor Code section 2810.5 to reflect the new wage.
  • Ensure pay stubs are accurate, displaying the correct new hourly rate and applicable overtime calculations.

4. Assess the New Exempt Employee Salary Threshold

A higher minimum wage means exempt employees will also require a higher salary to maintain their exempt status. If the wage increases to $20.70 per hour, the new minimum salary for exempt employees in covered fast-food businesses will be:

$20.70 x 2 x 2,080 = $86,112

That means managers and other exempt employees would need to be paid at least $86,112 annually to remain exempt from overtime laws. Employers should start reviewing their exempt employee classifications now and determine if reclassification or salary adjustments will be necessary.

5. How Employers Are Responding to Rising Labor Costs

The latest economic data on California’s $20 per hour minimum wage highlights the widespread financial strain on fast-food operators, with job losses, reduced hours, and increased menu prices becoming unavoidable realities. According to a February 2025 report by Berkeley Research Group (BRG):

  • California’s fast-food sector lost 10,700 jobs (-1.9%) between June 2023 and June 2024, marking the worst employment trend in decades outside of economic recessions.
  • Nearly 89% of surveyed fast-food operators reduced employee hours in the first few months after the wage increase, and 87% expect to make further cuts in the next year.
  • Menu prices in California’s fast-food sector increased by 14.5% from September 2023 to October 2024, almost double the national average (8.2%), making fast food significantly more expensive for consumers.
  • 35% of operators reduced employee benefits, and automation adoption has increased as businesses look for ways to offset labor costs.

With the Fast Food Council now considering an increase to $20.70 per hour, these trends are expected to continue. Employers will likely make additional reductions in staffing and hours, further raise menu prices, and accelerate automation investments to maintain operations. More layoffs and restaurant closures could be on the horizon as businesses struggle to absorb rising labor costs.

What’s Next for Fast-Food Operators?

The Fast Food Council is expected to vote on the proposed wage increase in April or May 2025. If approved, employers will need to move quickly to implement changes and adjust business strategies to stay competitive.

By planning now, fast-food operators can mitigate financial strain, ensure compliance with labor laws, and make informed business decisions before the next potential wage increase takes effect.

As a business owner in California, you wear many hats—manager, strategist, and sometimes even janitor. But when it comes to managing employees, the Golden State’s complex employment laws can turn what seems like a simple task into a legal minefield. While small businesses often handle human resources tasks in-house, there comes a point when hiring a dedicated HR professional isn’t just a luxury—it’s a necessity. Here’s a guide to help you decide when it’s time to bring an HR expert on board.

1. Your Employee Count Hits 50 (or Approaches It)

In California, the magic number for many employment law thresholds is 50 employees. Once you reach this size, you’re subject to laws like the federal Family and Medical Leave Act (FMLA) (remember, the California counterpart, the California Family Rights Act (CFRA), applies to employers with five or more employees) which require you to provide eligible employees with up to 12 weeks of unpaid, job-protected leave. Managing compliance—tracking eligibility, handling requests, and ensuring proper documentation—can quickly overwhelm a business owner or untrained staff.

Even before you hit 50 employees, California imposes rules that smaller businesses must follow, such as the CFRA and mandatory sexual harassment prevention training for employers with five or more employees (including temporary or seasonal workers). An HR professional can streamline compliance and reduce your risk of costly mistakes.

2. You’re Struggling to Keep Up with California’s Employment Laws

California is notorious for its employee-friendly regulations, which are constantly evolving. From the Fair Employment and Housing Act (FEHA) protecting against discrimination to the ever-changing minimum wage laws (currently $16.50 per hour statewide as of 2025, with higher rates in many cities and counties), staying compliant is a full-time job. Add in paid sick leave mandates, meal and rest break requirements, and the intricacies of overtime rules, and it’s easy to see why DIY HR might not cut it anymore.

An HR professional brings expertise in navigating these laws, ensuring your policies—like employee handbooks, payroll practices, and termination procedures—meet legal standards. They can also keep you updated on new legislation, such as recent expansions to paid family leave or changes in independent contractor classifications under AB 5.

3. Employee Issues Are Eating Up Your Time

Are you spending more time resolving workplace disputes, drafting job descriptions, or figuring out how to handle a worker’s accommodation request than running your business? As your workforce grows, so do HR demands. Issues like complaints about harassment, requests for disability accommodations under the Americans with Disabilities Act (ADA) and FEHA, or even basic onboarding tasks can become overwhelming.

An HR professional takes these responsibilities off your plate. They can mediate conflicts, ensure accommodations are handled legally, and create efficient systems for hiring, training, and performance reviews—freeing you to focus on growth.

4. You’ve Had a Close Call (or a Lawsuit)

California employees have a low bar for filing claims with the Department of Fair Employment and Housing (DFEH) or the Labor Commissioner’s Office. A missed paycheck, an improperly classified exempt employee, or a failure to provide lactation breaks can snowball into fines, penalties, or litigation. If you’ve already faced a wage-and-hour violation, a discrimination complaint, or even a warning from a disgruntled worker, it’s a sign your HR processes need professional attention.

An HR expert can audit your practices, spot vulnerabilities, and implement safeguards—like proper record-keeping for hours worked or training supervisors on anti-discrimination policies—to prevent future headaches.

5. You’re Planning to Scale


Growth is exciting, but it amplifies HR complexity. Expanding your team, opening new locations, or hiring remote workers across California (or beyond) introduces challenges like multi-jurisdictional compliance, benefits administration, and consistent company culture. An HR professional can design scalable systems, from recruiting strategies to benefits packages.

What If You’re Not Ready for a Full-Time HR Hire?

For smaller businesses—say, those with 10 to 20 employees—hiring a full-time HR professional might feel premature. In that case, consider alternatives:

  • HR Consultant: Bring in an expert on a project basis to update policies or train staff.
  • Outsourced HR Services: Many firms offer affordable packages tailored to California businesses.
  • Of course – my favorite: Legal Counsel: Pairing with an employment attorney can bridge the gap until you’re ready for an in-house hire.

The Bottom Line

There’s no one-size-fits-all answer to when you need an HR professional, but a good rule of thumb is this: If employee management is distracting you from your core business, exposing you to legal risks, or becoming too complex to handle alone, it’s time to invest in HR expertise. In California’s regulatory landscape, a skilled HR professional isn’t just a support role—they’re a strategic partner in protecting your business and fostering a thriving workplace.

It is critical for California employers to properly calculate the regular rate of pay for an employee in order to pay the appropriate overtime pay and for premium pay for missed meal and rest breaks.  Here are five issues employers must be aware of regarding calculating an employee’s regular rate of pay:

1. Employers must pay the “regular rate of pay” as calculated for overtime purposes when paying premium pay for missed meal and rest breaks.

As we previously reported, the California Supreme Court in Ferra v. Loews Hollywood Hotel, LLC held that the “regular rate of compensation” owed as premium wages for missed meal and rest breaks, must be calculated just as the “regular rate of pay” is calculated for overtime purposes.  While the case discussed generally what must be included in the “regular rate of pay” calculations, there are many nuances to this calculation.

 2. What compensation must be included in calculating employee’s regular rate of pay?

The DIR defines regular rate of pay as “the compensation an employee normally earns for the work they perform.  The regular rate of pay includes a number of different kinds of renumeration, such as hourly earnings, salary, piecework earning, and commissions.  In no case may the regular rate of pay be less than the applicable minimum wage.”

The Court in Ferra held that the “regular rate of pay” for missed meal breaks, just like the calculation of overtime pay, “must account for not only hourly wages but also other nondiscretionary payments for work performed by the employee.”  The Court explained that, “We use the term ‘nondiscretionary payments’ to mean payments for an employee’s work that are owed ‘pursuant to [a] prior contract, agreement, or promise,’ not ‘determined at the sole discretion of the employer.’”

3. Examples of payments that must be calculated into the regular rate of pay.

In determining the regular rate of pay, employers must include the employee’s base hourly rate plus any amounts for:

  • Shift differentials (such as premiums to work on weekends or holidays)
  • Attendance bonuses, such as those earned for weekend work is a form of incentive pay
  • Piece rate earnings
  • Commissions
  • Nondiscretionary pay and bonuses. The DIR explains, “A nondiscretionary bonus is included in determining the regular rate of pay for computing overtime when the bonus is compensation for hours worked, production or proficiency, or as an incentive to remain employed by the same employer.”

4. Examples of payments that are not included when calculating the employee’s regular rate of pay.

Unlike the nondiscretionary items listed above, an employee’s regular rate of pay does not increase for any of the following payments made to them:

  • Discretionary payments made to employees, such as gifts or bonuses that are not tied to the employee’s production, hours worked, or by formula for certain benchmarks.
  • Reimbursements for business expenses
  • Certain pay owed as required by the Labor Code, such as premium pay for missed meal and rest breaks, reporting time pay, call back pay, split shift pay.
  • Because tips are voluntarily left by customers to employees, tips do not increase an employee’s regular rate of pay for overtime calculations and premium pay.  However, if an employer implements mandatory service charges and shares these service charges with employees, the service charges must be considered wages for overtime and tax purposes.  Therefore, the employee’s regular rate of pay for overtime purposes and in calculating premium pay will be higher when mandatory service charges are distributed to the employees.

5. Employers must be aware of the proper calculation methods in determining the regular rate of pay.

Employers must carefully follow the different calculation methods to determine the employee’s regular rate of pay.  For example, the DIR sets forth how employers are to calculate the regular rate of pay for non-exempt salary employees, employee’s paid by the piece or commission, and that employers are to use a “weighted average” method for employees paid two or more rates during the workweek.  Employers must also be careful in how to calculate the regular rate of pay for nondiscretionary flat sum bonuses paid to employees.  The calculations are complex, and employers need to review the appropriate calculation method to ensure the calculation is done properly.

With immigration enforcement becoming a pressing issue in workplaces across the United States, it is critical for employers to understand their rights and obligations when confronted with an ICE (Immigration and Customs Enforcement) raid or audit. In recent years, ICE has ramped up its enforcement actions, including unannounced raids and formal I-9 audits, targeting employers in various industries. Failing to handle these situations properly can lead to significant legal and financial consequences.

Below, we outline key steps employers should take to prepare for and respond to an ICE raid or audit, ensuring compliance while protecting their rights.

1. What to Do During an ICE Raid

    ICE raids can occur without prior notice, with officers arriving at your premises to conduct searches, seize documents, and question employees. Employers must act swiftly and strategically to protect their business. Here’s how:

    a) Prepare in Advance:

    • Designate a company representative to handle ICE interactions and train frontline employees on how to respond.
    • Train employees to contact management immediately if anyone from the government arrives at the workplace and is asking questions.  They should be trained that they are not authorized to share any information with any third parties, and they should be instructed to inform the officers that they have to speak with company management.  The employees need to be trained that they are not to consent to any access to private areas of the company. 

      b) Actions to Take During a Raid:

      • Contact Counsel Immediately: Notify your legal counsel as soon as ICE officers arrive. Request that the officers wait for counsel before proceeding, if possible.
      • Verify the Warrant: Ask for a copy of the warrant and check that it is signed by a judge, specifies the premises to be searched, and lists the items to be seized. Do not consent to the search but allow it to proceed while noting any objections.
      • Document the Raid: Record the officers’ actions, take notes, and log items taken. Request a copy of the warrant and an inventory of seized items.
      • Follow Legal Boundaries: Do not provide false information, hide documents, or obstruct the officers. Avoid providing employee-specific information unless required by the warrant.

      c) Post-Raid Documentation:

      • After the raid, document all details, including the officers’ names, actions taken, and items seized. This information will be critical for legal review and potential challenges.

      2. Responding to an ICE I-9 Audit

      Department of Homeland Security’s ICE generally conducts most audits, or “Notices of Inspection” (NOI), typically require employers to produce I-9 forms and related documentation within three business days. However, these audits can also be conduced by other agencies, such as the Department of Justice or the Department of Labor.  Here are a few items on how to respond effectively:

      a) Immediate Actions:

      • Contact legal counsel upon receipt of an NOI.

        b) Preparing the Documents:

        • Gather requested I-9 forms for current employees and terminated employees within the retention period (three years from the hire date or one year from termination, whichever is later).
        • Include any supporting documents (List A/B/C) if applicable, payroll records, and E-Verify documentation.
        • Ensure I-9 forms are stored separately from personnel files to streamline retrieval.

        c) Review and Organization:

        • Use the three-day period to review I-9 forms for errors or omissions. Make any allowable corrections before submission.

        d) Submitting to ICE:

        • Provide requested documents by the deadline and request a receipt for all items submitted. If additional time is needed, legal counsel can attempt to negotiate an extension with ICE.

        3. After the Audit: Possible Outcomes

        Once ICE completes its review, employers may receive one of several notifications:

        • Compliance Letter: Indicates no violations were found.
        • Notice of Technical or Procedural Failures: Identifies minor errors; employers may be allowed to correct them.
        • Notice of Suspect Documents: Lists employees whose work authorization is in question. Employers have 10 days to address the issues or terminate the employees.
        • Notice of Intent to Fine (NIF): Cites substantive violations or unauthorized employment, which may result in civil or criminal penalties.

        Employers have the right to challenge alleged violations through a hearing before an Administrative Law Judge.

        4. Proactive Steps to Mitigate Risk

        Taking proactive measures is key to minimizing the risk of ICE enforcement actions and demonstrating good faith compliance. Here’s how employers can prepare:

        a) Conduct Internal I-9 Audits:

        • Regularly audit I-9 forms under the protection of attorney-client privilege to identify and correct errors before an ICE audit occurs.

        b) Provide Employee Training:

        Train HR and management staff on proper I-9 procedures to ensure compliance and mitigate penalties in case of an audit.

        c) Maintain Proper Documentation:

        • Organize I-9 forms and supporting documents in a way that allows for quick and efficient retrieval during an audit.
        • Lawfully audit and clean out I-9 forms for terminated employees once they are past the retention period.

        d) Develop a Raid Response Plan:

        • Designate a company representative to handle ICE interactions and provide employees with clear instructions on what to do during a raid.

        5. Understand California State Law Notice To Employee Obligations

        Pursuant to Labor Code section 90.2(a), California employers are required to provide notice to employees of any inspection of I-9 Employment Eligibility Verification forms or other employment records by an immigration agency by posting a notice within 72 hours of receiving the notification of inspection. Employers should familiarize themselves with this requirement and the Frequently Asked Questions on AB 450.  The Notice To Employee required under Labor Code section 90.2 are available in English and Spanish. 

        Immigration raids and audits can be disruptive and stressful, but with the right preparation and legal guidance, employers can navigate these challenges effectively. By understanding your rights and responsibilities, maintaining proper documentation, and conducting regular internal audits, you can reduce your risk of penalties and ensure compliance with immigration laws.

        California employers in the hospitality industry must navigate complex tipping laws to ensure compliance and avoid costly mistakes. In this video, I break down five key issues every employer should understand when it comes to tips, including who legally owns a tip, the rules around employer-mandated tip pooling policies, and whether tips impact overtime calculations and that California does not have a minimum wage tax credit. I also discuss the differences between mandatory service fees and tips and the potential impact of the “No Tax on Tips” movement on California businesses. Watch the full discussion to stay informed and protect your business from common pitfalls:

        California employers often ask what steps they can take to prevent employment litigation. While it’s impossible to completely avoid frivolous lawsuits, employers can focus on what they can control. By regularly reviewing a few key areas, employers can significantly reduce their liability. Here are five steps to get started (hint: the most important step is listed last):

        1. Take Reasonable Steps to Comply with the Labor Code to Reduce PAGA Audits

          With the new Private Attorneys General Act (PAGA) reform law, California employers can receive immediate relief. The reformed PAGA framework caps penalties for employers who take reasonable steps to comply with the Labor Code, potentially reducing penalties by as much as 85%. To establish compliance, employers should conduct periodic wage and hour audits to ensure adherence to meal and rest break obligations, establish compliant policies and handbook policies, train supervisors on Labor Code compliance, and take appropriate corrective action with supervisors to violate company policy.  Also, quarterly audits by experienced employment law counsel can demonstrate good faith compliance with the Labor Code.

          Also, next Thursday, January 30, 2025, my firm is offering a webinar: Navigating the Revised PAGA Law-Steps Employers Must Take to Reduce Penalties.  We will be offering certificates to all who attend the entire presentation, and this is a start to establish that your organization is taking reasonable steps to understand and comply with California employment laws. Register here.

          2. Document Reasons For Terminations Accurately

          When terminating an employee, consider providing them with a termination letter that clearly documents the reason for the termination. While this is not legally required, it is a good practice. It is crucial to document performance issues accurately and not to sugarcoat the reasons for termination. If the termination is for cause, clearly state this in the documentation. Avoid taking the easy route by labeling the termination as a layoff if it is not. The company does not want to be in a position where it initially provides a reason as a layoff, but then, when litigation is initiated, attempts to explain that the true reason was performance. This can appear as if the company is changing the reason for the termination, which can negatively impact the company’s credibility in litigation. What the employer states as the reasons for the termination, both in the documents and at the termination meeting, will be key. Therefore, do not downplay the reasons and ensure that the stated reasons are complete and accurate.

          Examples of “for cause” reasons for termination could include:

          • Consistent poor performance or failure to meet job expectations
          • Violation of company policies or procedures
          • Insubordination or refusal to follow reasonable instructions
          • Theft or dishonesty
          • Harassment or discrimination
          • Excessive absenteeism or tardiness
          • Misuse of company property or resources

          By clearly documenting these reasons, employers can provide a solid foundation for their decision and reduce the risk of litigation.

          3. Consult with an Employment Attorney Regularly

          Having an employment attorney well-versed in California employment law is essential. California’s employment laws are complex, and an experienced attorney can save the company in legal fees and potential exposure. Just as you wouldn’t go to a general practitioner for an eye problem, you need specialized advice for California employment issues. Regular consultations with an employment lawyer also allow you to assess their compatibility with your operations, which is better discovered early on rather than during a class action lawsuit.

          4. Hire a Knowledgeable HR Professional

          An experienced HR professional allows executives to focus on their core roles and provides employees with a clear point of contact for HR information or complaints. A human resource professional experienced in handling workplace investigations and employee complaints is invaluable. No matter how well you run your company, there will be complaints. Having a proactive, knowledgeable professional to investigate and resolve issues is crucial to a successful company.

          5. Ensure the Owner/CEO is Present, Involved, and Open to Hearing Complaints

          The most important step towards reducing employment litigation comes from the top. The amount of litigation is inversely proportional to how involved the owner or CEO is with the employees. Large employers in California with a clean litigation record often have owners who are present daily, know employees by name, and are available to hear and resolve complaints. If employees have a process to make complaints and feel the company treats them seriously, most issues can be resolved internally. When employees feel unheard or unfairly treated, they may turn to litigation to resolve disputes.

          The financial strain caused by federal taxes on tips and overtime pay is significant for hardworking Americans.  Recognizing the need for change, bipartisan support has emerged to eliminate these taxes, with backing from Donald Trump, Kamala Harris, and President Joe Biden. This article explores what the “No Tax on Tips and Overtime” policy could mean for employees and employers in the hospitality industry, and how you can join Zaller Law and TipHaus in advocating for federal legislation to be enacted early in Trump’s administration.

          1. Bipartisan Support for No Tax on Tips

          The “No Tax on Tips” policy has garnered bipartisan support, with both Donald Trump and Kamala Harris advocating for it during their presidential campaigns. Trump emphasized the need to reduce tax burdens on tipped workers, aligning with his broader platform of tax reduction. Similarly, Harris, while running for president, expressed her support for eliminating taxes on tips, aiming to win over service workers, a significant and influential constituency. Additionally, President Joe Biden has also shown support for this idea. White House spokesperson Karine Jean-Pierre confirmed in August 2024 that Biden would sign legislation eliminating taxes on tips for service and hospitality workers if passed by Congress. This bipartisan backing underscores the widespread recognition of the financial challenges faced by tipped workers and the need for this legislation to support them.

          2. “No Tax On Tips Act of 2025” Announced by Senators Ted Cruz and Rick Scott

          On January 16, 2025, the “No Tax on Tips Act” was introduced by Senators Cruz and Scott.  Under the bill, “cash tips”—comprising cash, credit and debit card charges, and checks—are exempt from federal income tax, allowing taxpayers to claim a full 100% deduction for tipped wages at filing. The revised text incorporates measures to ensure that only employees who traditionally receive tips will benefit from this exemption. However, this bill only addresses tips, and does not mention not eliminating taxes on overtime.

          3. Support for Workers

          Eliminating taxes on tips and overtime would provide immediate financial relief to workers, fostering greater satisfaction and retention. This also supports the growth of the hospitality industry, which has faced significant challenges in recent years.

          4. Support for the Hospitality Industry

          Eliminating taxes on tips and overtime would permit restaurants to attract and retain skilled workers by offering competitive earning potential.  In addition, eliminating taxes on tips would enhance employee satisfaction and retention, reducing turnover costs for operators.

          5. Take Action: Support the No Tax on Tips and Overtime Petition

          This issue was a campaign promise by both Trump and Harris and has bipartisan support – it just needs to be implemented now.  Zaller Law Group has joined efforts with TipHaus to ensure this legislation remains a priority for U.S. Congress and is addressed early in Trumps administration. 

          Please join us in continuing to urge U.S. Congress to eliminate federal taxes on tips and overtime pay. Let’s strengthen the financial security of millions of workers, support the growth and recovery of the hospitality industry, and foster economic growth nationwide:

          Sign the petition here.