More than 15 years after the California Supreme Court decided Hernandez v. Hillsides, Inc. (2009) 47 Cal.4th 272, it remains a foundational case on employee privacy rights. While the employer prevailed, the case clarified where the legal boundaries lie—and why employers should tread carefully when it comes to surveillance.

Here are five (plus one) updated takeaways for California employers navigating privacy in the workplace, along with a refresher on the underlying facts.

Case Background: What Happened in Hernandez v. Hillsides?

Hillsides, Inc., a nonprofit residential facility in Pasadena serving abused and neglected children, discovered that someone had been accessing pornographic websites late at night from a computer located in the shared daytime office of two clerical employees, Abigail Hernandez and Maria-Jose Lopez. The employer, deeply concerned about exposure to inappropriate material given its mission to protect vulnerable children, sought to identify the perpetrator.

After an initial attempt to place a camera in a computer lab proved too broad due to foot traffic, the facility’s director, installed a hidden video camera inside the plaintiffs’ office without notifying them. The camera, concealed among books and toys, was capable of recording video remotely when triggered by motion, but was only activated three times, all after hours and never while the employees were present.

Hernandez and Lopez eventually discovered the camera (a blinking red light gave it away), and although no footage of them existed, they sued for invasion of privacy.

The trial court granted summary judgment in favor of Hillsides, but the Court of Appeal reinstated the privacy claim. Ultimately, the California Supreme Court reversed, siding with the employer—but not without underscoring the delicate balance between employer interests and employee rights.

1. Privacy Expectations Exist—Even in Shared Workspaces

Despite the office being shared and accessible to other staff, the Court acknowledged that Hernandez and Lopez had a reasonable expectation of privacy. The office had a door that could be closed and locked, window blinds, and limited foot traffic—factors that contributed to the Court finding a protected “zone of privacy.”

Tip: If the physical environment gives employees the ability to shield themselves from view, that often creates a reasonable expectation of privacy—even if others can enter.

2. Surveillance Must Be Narrow, Targeted, and Justified

While Hillsides installed the camera without notice, several facts helped its defense:

  • The camera was only aimed at one workstation (Lopez’s),
  • It was activated only three times for limited periods,
  • No images of plaintiffs were ever recorded, and
  • The employer had a legitimate concern—protecting children from exposure to sexual content by stopping a potential staff abuser.

Tip: Surveillance should be a last resort, with a clearly documented purpose and minimal impact on employee privacy.

3. You Can Have a Policy—But It Must Be Specific

Hillsides had a policy stating that employees had no expectation of privacy in computer or email use, but it did not mention physical surveillance or video monitoring. The Court found this policy insufficient to notify employees about the risk of visual monitoring.

Tip: Surveillance of people (e.g., via camera or microphone) requires specific policy language and preferably signed acknowledgments.

4. Intent Matters—But It Doesn’t Excuse Intrusion

While the employer never intended to record Hernandez or Lopez—and in fact took steps to ensure they weren’t captured—intent alone didn’t eliminate the privacy concern. Still, the Court ultimately found that the limited scope, time, and purpose of the intrusion made it not “highly offensive” under California law.

Tip: Always combine legitimate intent with a reasonable, proportionate, and transparent execution plan.

5. You May Win the Case—But Still Lose Trust

The discovery of a hidden camera—even if legally defensible—can deeply damage morale and trust. Hernandez and Lopez were so disturbed they sued, despite no actual footage of them being captured.

Tip: Build a culture where privacy is respected, and where employees understand the business reasons for any monitoring in place.

6. BONUS: Audio Surveillance is a Legal Minefield in California

California is a two-party consent state (Penal Code § 632). Recording any confidential conversation—in person or by phone—without all parties’ consent is illegal, and this includes audio features on video surveillance systems.

Hernandez and Lopez were particularly alarmed when they saw a red blinking light and found the device warm to the touch. Though the employer claimed the device didn’t record audio and plaintiffs were shown footage with no sound, California law would have treated any secret audio recording as a more serious offense.

Tip:

  • Don’t use audio-enabled video surveillance unless you’ve provided clear notice and obtained consent.
  • Include specific audio surveillance disclosures in your employee handbook.
  • Post visible signage where recording occurs.
  • Avoid installing hidden microphones or using cameras that passively record sound in any space where employees talk privately.

Final Thoughts

The Hernandez case remains a benchmark for understanding the boundaries of workplace surveillance in California. It teaches that a well-intentioned policy can still lead to legal exposure if not executed with care—and that privacy isn’t just a legal issue, but a cultural one.

If you’re reviewing or updating your surveillance or privacy policies, especially with emerging tools like smart cameras or AI monitoring, now is the time to revisit your approach with legal counsel., feel free to reach out if we can help you align your approach with current California law.

This post is a little different from my usual employment law updates. Lately, I’ve been thinking a lot about college—not from a legal or employer perspective, but as a parent. My son is at the stage where he’s weighing his college options, and it’s sparked a lot of reflection. Writing this helped me organize the advice for him, and I thought it might be useful to share for any other students or families navigating the decision of where to go to school and what to potentially study.

Here are five things I wish someone had told me when I was 17 or 18, trying to make one of the biggest decisions of my life with very little real-world experience.

1. College Is Still Worth It—But Be Smart About Debt

College is an investment in yourself—your skills, your confidence, your network, and your future opportunities. But debt is real. And while student loans can be considered “good debt” because they support long-term earning power, too much of it can limit your flexibility.

When you’re young, your greatest asset is your ability to take risks—interning at a startup, launching your own venture, moving to a new city. Heavy student debt can close those doors. Borrow what you need, but always ask yourself: Will this debt give me more options, or take them away?

2. Go to School Where You Want to Work and Live

One of the most underrated strategies in choosing a college is geography. If there’s a city, region, or industry hub you want to end up in—go to school there. From day one, you’ll start building a network of professors, classmates, and internship connections that will serve you long after graduation.

Your college years are more than just classes—they’re the start of your professional foundation. Being physically close to where you want to be post-college gives you a huge advantage.

3. Follow Your Gut—There’s No Perfect Formula

Rankings and brochures can only tell you so much. Choosing a college is deeply personal, and at some point, you’ll have to go with your instincts. If a school “feels right,” that matters. You’re choosing a place to live, grow, and stretch yourself—not just collect credits.

And don’t stress too much about making the “perfect” choice. You can transfer. You can change majors. The most important part is to choose intentionally and be prepared to put in the work wherever you go.

4. You Create the Experience—Not the School

Your attitude, drive, and curiosity matter far more than any school’s reputation. If you want your college to be a party school, you’ll find parties. If you want to make it a launching pad for a great career, you can do that too—at any school.

Seek out the best professors. Take on challenges. Ask hard questions. Pursue the internships, projects, and relationships that will make you stand out. You have more control than you think.

5. Learn How You Work—This Is the Time

College isn’t just about academics. It’s your first opportunity to really understand how you operate. When do you do your best thinking? How do you handle stress, deadlines, distractions? What motivates you when no one’s watching?

These are the skills and insights that will carry into every job, every challenge, and every opportunity. College is where you begin to figure out how to lead yourself.

Final Thought

The choice to go to college—or where to go—isn’t final. It’s just the start. Stay flexible. Be intentional. And remember: you are making a major decision in your life, but one that you can adjust if it is not working out as you expected. 

This week’s Friday’s Five covers an important new court decision that offers clarity—and relief—for California employers navigating the state’s complex meal period rules.

In Bradsbery v. Vicar Operating, Inc., the California Court of Appeal confirmed that written, prospective meal period waivers for shifts lasting five to six hours are valid and enforceable—so long as they’re revocable and not coerced. While this outcome aligns with what many employers (and employment defense attorneys) already assumed, it finally provides clear and authoritative guidance for day-to-day compliance.

In this week’s YouTube video, I break down what this decision means, how it fits into the broader legal framework, and what action steps employers should take to stay compliant. Here’s the summary:

1. The Core Legal Issue

The case centered on whether an employer and employee can mutually agree—in advance and in writing—to waive the employee’s 30-minute meal period for short shifts (between 5 and 6 hours).

The plaintiffs argued that these types of waivers shouldn’t be allowed unless done at the time of each shift. The court rejected that view.

2. Court’s Holding: Prospective Waivers Are Valid

The court ruled that written, revocable waivers signed in advance are valid, so long as the employee:

  • Voluntarily consents,
  • Understands the waiver,
  • Can revoke the waiver at any time, and
  • Is not coerced into signing it.

3. Why This Matters

California’s wage and hour laws are notoriously strict. But this decision gives employers a practical, compliant way to manage short shifts without unnecessary administrative burdens. This is especially helpful for industries with variable or part-time scheduling.

4. What Employers Should Do Now

Review Your Waiver Forms – Ensure they are written clearly, state that employees can revoke them at any time, and apply only to shifts of 6 hours or less.

Audit Time Records – Make sure you’re either providing a meal break or have a valid waiver on file for applicable shifts.

Train Managers – They need to understand that waivers are voluntary and that employees can revoke them without any retaliation.

5. Don’t Confuse “On-Duty” Meal Agreements with Meal Period Waivers

The waivers for shifts 6 hours or less that was dealt with in Bradsbery are different than on-duty meal period agreements. Employers need to be sure not to confuse these two different items.  The Wage Orders provide for an “on duty” meal period that is an exception to the required meal break if the following requirements are met:

An “on duty” meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

Wage Order No. 4-2001(a)(emphasis added). Unfortunately, the definition of the “nature of the work” is not clear, and has been construed very narrowly against employers.  For example, the Department of Labor Standards Enforcement (“DLSE”) has issued an opinion letter addressing whether a shift manager in a fast food restaurant working the night shift would be allowed to take a “on duty” meal period.  The DLSE concluded that based on the facts presented in the situation of the fast food restaurant, the nature of the work in the restaurant should not prevent the shift manager from being relieved of all duties for 30 minutes, and therefore the on-duty meal period would not be valid in this context. Click here to download the opinion letter.

Watch the Full Breakdown

I dive deeper into the legal reasoning and practical implications of this new case in this week’s video. You can watch it here:
>>>> Watch on YouTube

As we move deeper into 2025, it’s the perfect time for California employers to return to the fundamentals. With ever-evolving employment laws and aggressive enforcement—especially around wage and hour issues—getting the basics right can mean the difference between smooth operations and costly litigation.

As a preview to our upcoming webinar, “Wage and Hour Back to Basics for California Employers?”—a practical, no-nonsense session covering the most critical issues employers face in 2025, this article is focusing on five common wage an hour issues California employers should routinely audit. Please join us for a deeper dive into these and other key wage and hour issues for California employers, plus all attendees receive a 2025 PAGA Compliance Certificate.  Register for the webinar here. 

Whether you’re scaling a team or managing a legacy workforce, use this as a checklist to stay compliant and protect your business.

1. Payroll Compliance: The Foundation

Payroll isn’t just about issuing paychecks on time. Employers must ensure their systems and practices comply with California’s detailed legal requirements:

  • Established Workweeks and Paydays: Are your workweeks clearly defined and paydays consistently scheduled within required timelines?
  • Wage Statements: Do your itemized wage statements meet all statutory requirements? Common issues include missing hours worked, incorrect rates, or omitting the employer’s name and address.
  • Sick Leave Accruals: Each pay period must include an update on accrued and used paid sick leave as required under California law and may local city and county jurisdictions throughout California. 
  • Vacation Tracking: Ensure vacation policies are documented, accurately tracked, and accrued benefits are reflected properly.

2. Wages and Deductions: Avoiding Costly Errors

Missteps in deductions or reimbursements can lead to major penalties.

  • Permitted Deductions: Only a narrow list of deductions is allowed under California law. Err on the side of caution and consult counsel before withholding anything beyond taxes and benefits.
  • Expense Reimbursement: Are employees reimbursed for work-related expenses such as uniforms, personal cell phone use, mileage, and tools?
  • Final Paychecks: For terminations, final pay must include all wages and accrued vacation, and must be provided according to the requirements under California law.

3. Employee Classification: Exempt vs. Nonexempt (and Contractors)

Improper classification continues to be a top litigation trigger.

  • Exempt Status Review: Ensure duties and salaries meet California’s specific tests for exempt employees. Titles alone don’t determine exemption.
  • Independent Contractors: Use caution post-AB 5. Apply the ABC test to confirm true independent contractor status.

4. Timekeeping: Precision Prevents Problems

Timekeeping issues are among the most frequently litigated wage and hour claims.

  • Overtime Tracking: Ensure nonexempt employees are paid correctly for all overtime, and that policies prohibit unauthorized off-the-clock work.
  • Training Managers: Managers should know how to identify and prevent off-the-clock work—and understand the consequences of ignoring violations.
  • Time Rounding: If rounding is used, the policy must be neutral and not result in underpayment over time.  Employers should note that meal breaks cannot be rounded pursuant to Donohue v. AMN Services, and whether California employers may use time rounding at all is currently being reviewed by the California Supreme Court. Employers are cautioned about using time rounding given these cases.

5. Meal and Rest Breaks: Small Breaks, Big Liability

Meal and rest break violations are usually a key claim for PAGA and class action lawsuits.

  • Handbook and Reminders: Policies must be clearly documented and regularly communicated to employees.
  • Timely Breaks and Premium Pay: Breaks must be timely, and any missed meal or rest periods must be compensated with premium pay (and properly noted on wage statements).
  • Recordkeeping and Training: Are employees recording their meal breaks? Are managers trained to monitor compliance and escalate issues?

Final Thought: Routine Audits Are a Must

Employment laws don’t stand still—and neither should your compliance practices. Schedule a semiannual audit or partner with employment counsel to review these core areas. A proactive approach in 2025 will reduce risk, improve operations, and reinforce your commitment to treating employees fairly.

In the medical world, a fomite is an inanimate object—like a doorknob or keyboard—that can transmit infectious agents from one person to another. While not inherently harmful, fomites become dangerous when they carry viruses that infect new hosts.

This concept has surprising relevance in the workplace. At Zaller Law Group, we’ve seen firsthand how workplace culture can be affected by similarly subtle carriers—employees, habits, or practices that unintentionally spread dysfunction. In this article, we explore how understanding fomites in the workplace can help employers diagnose, manage, and protect company culture.

1. What Is a Workplace Fomite?

Reimagined for the employment context, a fomite is a person, behavior, idea, or workplace practice that carries and spreads negativity, poor morale, or toxic dynamics—often without bad intent.

They are not the source of the problem (the “virus”), but they are the mechanism by which it spreads. Recognizing these fomites allows managers to treat the root cause without alienating valued team members.

Example: An employee who constantly expresses cynicism about leadership might not violate policy, but they may still erode trust and morale over time.

2. Forms Fomites Can Take in the Workplace

Workplace fomites are not limited to people. They can include:

  • Informal routines that bypass official procedures
  • Managers with poor communication styles
  • Client relationships that normalize disrespect
  • Legacy practices that no longer reflect company values

Example: A “star” employee who ignores documentation requirements may influence others to follow suit—putting the company at legal risk despite their strong performance.

Example: A group Slack channel where sarcasm and gossip are the norm can quickly shape team dynamics, even if no policy is technically broken.

3. Fomites Are Not the Virus—So Treat the Contagion, Not the Carrier

It’s crucial to understand that fomites are not inherently toxic. They may be unaware of their impact and often respond well to coaching.

Toxic employees, on the other hand, intentionally disrupt the workplace and typically require a more direct approach, including potential separation.

Example: A supervisor who uses humor to deflect accountability may think they’re building rapport—but might actually be modeling irresponsibility for the entire team.

Correcting the underlying behavior (the “virus”) is often more effective than removing the person (the “fomite”)—especially when that person is otherwise aligned with company values.

4. Fomites Can Import External Contagions Into the Workplace

Just like medical fomites can introduce new pathogens from outside environments, workplace fomites can bring external negativity into the company. These can include:

  • Stress or conflict from personal life
  • Polarizing political discussions
  • Burnout or resentment from previous jobs
  • Viral trends on social media

Example: An employee consumed by divisive news topics might regularly bring those conversations into meetings, shifting focus from business to personal ideology.

While a completely sterile workplace isn’t realistic—or even healthy—leaders must watch for when external issues begin to damage team cohesion or productivity.

5. Some Fomites Are Critical to the Company’s Health

In the medical sense, skin is a fomite—but we obviously can’t function without it. Similarly, some workplace fomites may be high-performing team members or foundational practices that have simply gone unchecked.

Example: A senior leader whose direct style has historically “gotten things done” might now be perceived as abrasive by younger employees—spreading disengagement despite their results.

The goal here isn’t removal. It’s awareness and intervention. The most valuable fomites can become the most powerful allies once they recognize their influence and adjust their approach.

How Employers Can Address Workplace Fomites

Employers can reduce workplace contagion and strengthen company culture by:

  1. Monitoring impact over intention. Focus on how behaviors affect culture—not whether they’re “meant” to be harmful.
  2. Coaching early and often. Most fomites are unaware of their influence and will respond well to clear, constructive feedback.
  3. Evaluating systemic fomites. Practices, traditions, or routines can spread dysfunction even when no one person is at fault.
  4. Encouraging immune-building exposure. Don’t overcorrect. Some discomfort and new ideas are healthy—just watch how they’re transmitted.
  5. Promoting cultural hygiene. Reinforce company values in onboarding, training, and performance management to build resilience.

Diagnose the Real Problem, Don’t Blame the Carrier

At Zaller Law Group, we counsel California employers through the legal and cultural challenges of managing people. Identifying and addressing workplace fomites is a powerful tool in preserving a positive, compliant, and productive environment and reducing litigation exposure.

The first 90 days of employment are more than just an adjustment period—they’re a critical window to engage new hires, reduce turnover, and avoid legal risks. For California employers, where employment laws are especially protective of workers, effective onboarding is both a best practice and a compliance must.

Here are the top five things every California employer should focus on during the onboarding process:

1. Make a Strong First Impression—And Keep It Going

Many employees decide in the first weeks whether they’ll stay long term. Start with a warm welcome, clear orientation, and a structured 30-60-90 day plan. Don’t just hand over paperwork and leave them to figure things out—regular check-ins and mentorship help new hires feel supported and connected.

Stat: Organizations with strong onboarding improve new hire retention by 82% and productivity by 70%.

2. Be Clear on Policies—and California Compliance

California has unique onboarding requirements. Make sure new hires receive the required documents, such as:

Being transparent early helps prevent misunderstandings—and lawsuits—later.

3. Set Cultural Expectations and Build Connection

Culture matters. Use the onboarding process to communicate your mission, values, and behavioral expectations. Include the employee in team lunches, assign a “buddy,” and encourage relationship-building across departments. When employees feel like part of the team, they’re more likely to stay—and less likely to sue.

Stat: Employees who felt onboarded effectively were 18x more likely to feel committed to their employer.

4. Train Early and Often

Don’t let onboarding be a one-day event. Break training into manageable stages. Teach job-specific tasks, workplace safety, and compliance expectations. In restaurants and fast-paced industries, shadowing, checklists, and gradual independence help new employees thrive.

Tip: Use a 30-60-90 day plan to build skills, monitor progress, and reduce overwhelm.

5. Document Everything

Good documentation protects your business. Keep records of all signed policies, training completions, and performance check-ins. If a termination becomes necessary, documented onboarding efforts and feedback provide helpful evidence against wrongful termination or retaliation claims.

Final Thought:

In California’s legal landscape, strong onboarding is not just smart—it’s essential. By investing in a clear, structured, and supportive onboarding experience, you boost retention, limit risk, and help new hires become successful, long-term contributors to your team.

Need help reviewing or building your onboarding process? Contact our team for a compliance check-up and customized support.

California employers must begin preparing now to meet the May 14, 2025 deadline for the state’s pay data reporting obligations. As mandated by California law, private employers with 100 or more employees and/or 100 or more workers hired through labor contractors in the prior calendar year must submit detailed pay data reports to the California Civil Rights Department (CRD). This requirement applies even to employers based outside of California if they have at least one employee working in or assigned to a California establishment.

By requiring annual submission of pay data, California aims to promote transparency and voluntary compliance with equal pay and anti-discrimination laws by identifying wage patterns along gender, racial, and ethnic lines.

1. Deadline to File is Wednesday, May 14, 2025

The CRD Pay Data Reporting Portal opened on February 3, 2025. All reports must be submitted and certified through this portal no later than May 14, 2025. Submissions outside the portal or in non-digital formats will not be accepted and will be deemed non-compliant​.

2. Who Must File

Private employers must file if they meet either of the following thresholds in the 2024 calendar year:

  • Employed 100 or more payroll employees (part-time and full-time), with at least one working in or assigned to California.
  • Had 100 or more labor contractor employees (i.e., workers provided by a staffing agency), with at least one working in or assigned to California.

An employer is also required to report if they are part of an integrated enterprise that collectively employs 100 or more workers across affiliated entities​.

3. What to Include in the Report

The required reports must include:

  • Median and mean hourly pay rate by establishment, job category, pay band, sex, race, and ethnicity.
  • Total hours worked in the 2024 reporting year.
  • Classification of remote workers, including:
    • Remote workers located in California.
    • Remote workers outside of California assigned to a California establishment​.

The Snapshot Period for determining which employees to include in the report is any single pay period between October 1 and December 31, 2024.

4. Remote Worker Reporting Requirements

Employers must distinguish between fully remote employees and hybrid workers. Remote workers are defined as those with no expectation to regularly report in person to a physical worksite. If an employee reports to a physical establishment—even occasionally—during the Snapshot Period, they are not classified as a remote worker​

All employees working remotely in California, or working outside California but assigned to a California establishment, must be included in the report.

5. Labor Contractor Employee Reports

If a business used 100 or more labor contractor workers in 2024, it must file a separate Labor Contractor Employee Report. This applies even if these workers were not on the business’s payroll.

Employers must:

  • Identify labor contractors used.
  • Report data for workers assigned to California establishments or working within California.
  • Provide each labor contractor’s name, FEIN, and Snapshot Period dates​

This reporting obligation does not apply to 1099 independent contractors.

Noncompliance may result in CRD seeking a court order and civil penalties of up to $100 per employee, and $200 per employee for subsequent failures. If a labor contractor fails to provide necessary data to a client employer, it may also be held liable​

All reports must be submitted via the CRD’s Pay Data Reporting Portal: https://pdr.calcivilrights.ca.gov
FAQs and updates are available at: https://calcivilrights.ca.gov/paydatareporting

Reports may be submitted using:

  • CRD’s Excel template,
  • CSV file upload, or
  • Online fillable forms.

For 2025, the CRD has placed a strong emphasis on certification, and certifying official of the employer—not a third-party HR provider—must review and certify the report before submission.

California’s 2024 reform to the Private Attorneys General Act (PAGA) was intended to ease the burden on employers—but only for those who can demonstrate a real, documented effort to comply with wage and hour laws.

Under the revised law, employers now face reduced penalties if they take proactive steps to comply:

  • 15% of the applicable penalties if the employer took reasonable steps to comply before receiving a PAGA notice or a request for employment records
  • 30% of the applicable penalties if the employer took reasonable steps to comply within 60 days after receiving a PAGA notice

In both cases, the key phrase is “reasonable steps to comply”—and that’s where a PAGA audit comes in.

A thorough internal review, supported by legal counsel if needed, helps employers identify and correct compliance issues before they result in a claim. And if a claim does arise, an audit report and supporting documentation may help reduce penalties and demonstrate good faith.

Our law firm’s PAGA Compliance Audit and Certification Program focuses on many aspects of compliance, and here are five key areas most California employer should evaluate as part of their compliance strategy:

1. Payroll and Timekeeping Practices

PAGA claims frequently target wage-related issues, especially rounding practices, inaccurate time records, or missed overtime. Employers should evaluate:

  • Whether time rounding practices comply with recent court decisions
  • Accuracy of timekeeping systems, especially for remote or mobile workers
  • Proper payment of all hours worked, including split shifts and reporting time pay

A payroll audit can reveal small technical issues that, when repeated across a workforce, lead to significant penalties.

2. Meal and Rest Break Compliance

Missed, short, or late breaks remain one of the most common sources of PAGA exposure. Employers must ensure:

  • Breaks are provided within the legally required windows
  • Premium pay is issued when breaks are not compliant
  • Policies match actual practice, and managers are properly trained

Even minor inconsistencies in this area can add up quickly in class and representative actions.

3. Wage Statement Accuracy

Labor Code section 226 violations are especially dangerous under PAGA because even small formatting or data errors can result in significant penalties. A compliance check should include:

  • Verifying that wage statements list all required items under Labor Code section 226
  • Ensuring that deductions and net pay are clearly and correctly listed
  • Confirming statements are issued in a timely and accessible format

A detailed review can help avoid “gotcha” claims over technical defects.

4. Employee Handbooks, Policies, and Manager Training

Written policies set the tone for compliance—but only if they’re current and enforceable. Employers should audit:

  • Whether policies reflect updated laws, including those from the 2024 legislative session
  • Consistency between the handbook and actual day-to-day operations
  • Manager training about the policies and procedures, and how to implement these in operations legally

Legal review of policies can also strengthen defenses if a claim arises.

5. Termination and Final Pay Procedures

Final pay violations—whether due to late checks, unpaid vacation, or other unpaid wages—can trigger penalties under multiple Labor Code sections. Employers should assess:

  • Timing and accuracy of final pay for both voluntary and involuntary separations
  • Documentation of final wages, including bonuses and unused PTO
  • Whether the process is clearly outlined and followed consistently across locations

An audit of exit procedures can prevent common errors that spark litigation.

Moving Toward Certification

Employers who take the extra step to correct issues identified during a PAGA audit can demonstrate a strong, documented commitment to compliance. Programs like the Zaller Law Group’s PAGA Compliance Audit and Certification not only help identify risks but also provide a certificate of compliance that may serve as a powerful tool in resolving or defending against PAGA claims.

While certification does not immunize a business from lawsuits, it can:

  • Show reasonable steps in court or settlement discussions and cap penalties
  • Support negotiations with plaintiffs’ attorneys
  • Prevent litigation before it arises

Final Thought

With PAGA reform shifting some control back to employers, now is the time to take advantage of the opportunity. Conducting a thorough PAGA audit isn’t just about checking boxes—it’s about building a culture of compliance and reducing risk across the board.

Employers of any size are vulnerable to PAGA claims, but the potential liability really starts to add up for employers with 20 or more non-exempt employees—especially in hospitality, retail, healthcare, and logistics—should consider a proactive review.

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.