In a July 2025 decision, the California Court of Appeal for the Fifth Appellate District ruled that so-called “headless PAGA” lawsuits are allowed—actions in which a plaintiff drops their own Labor Code claims but continues to pursue penalties on behalf of other employees under the Private Attorneys General Act (PAGA). This holding, in CRST Expedited v. Superior Court, intensifies an existing split among California appellate courts and sets up a definitive ruling by the California Supreme Court in Leeper v. Shipt, Inc.

Here are five things California employers should know about this growing legal divide and its implications:

1. What Is a “Headless” PAGA Case?

A “headless PAGA” case refers to a situation where a PAGA plaintiff disclaims or dismisses their individual claims—typically to avoid arbitration pursuant to an agreement to arbitrate all employment issues—and instead continues only with representative claims on behalf of other allegedly aggrieved employees. These plaintiffs argue that they may proceed solely as proxies for the State of California to enforce the Labor Code, even if they no longer pursue any relief for themselves.

This procedural strategy aims to bypass arbitration agreements that contain a class action waiver and require the plaintiff to arbitrate their individual claims prior to being a representative in a PAGA case.  These arbitration agreements have been upheld by the US Supreme Court in Viking River Cruises v. Moriana. 

2. CRST Expedited v. Superior Court: The Fifth District Approves Headless PAGA Claims

In CRST Expedited, the plaintiff initially asserted both individual and representative PAGA claims. After the court compelled the individual portion to arbitration, the plaintiff voluntarily dismissed those claims and proceeded in court with the representative portion alone—thus rendering the case “headless.”

The employer argued this stripped the plaintiff of standing. The appellate court disagreed, finding that the statutory phrase allowing an aggrieved employee to bring a civil action “on behalf of himself or herself and other employees” was ambiguous. The court reasoned that the word “may” is permissive, and to promote PAGA’s core purpose of Labor Code enforcement, the word “and” could reasonably be read as “and/or.”

In short: the Fifth District held that plaintiffs may bring representative PAGA claims even after discarding their own, at least under the version of PAGA in effect before the July 1, 2024 amendments.

3. Leeper v. Shipt, Inc.: The Second District Says “No” to Headless PAGA

In a prior case, the Second District Court of Appeal reached the opposite conclusion in Leeper v. Shipt, Inc., holding that every PAGA action inherently includes both individual and non-individual claims. According to Leeper, a plaintiff cannot surgically remove their own claim to avoid arbitration and still retain standing to prosecute claims on behalf of others.

The court emphasized that under the ordinary reading of the statute, the phrase “on behalf of himself or herself and other employees” requires inclusion of both types of claims. It argued that allowing purely representative (headless) actions rewrites the statute and undermines legislative intent.

4. The California Supreme Court Will Decide: Leeper Now Under Review

On April 16, 2025, the California Supreme Court granted review in Leeper, even though neither party petitioned for it. This rare move reflects the urgency and importance of resolving this issue, which is also been addressed in Williams v. Alacrity Solutions Group, which is also under review pending Leeper.

The Court has asked the parties to address two key questions:

  1. Does every PAGA action necessarily include both individual and non-individual PAGA claims, regardless of whether the complaint expressly alleges them?
  2. Can a plaintiff choose to bring only a non-individual PAGA action?

Employers across California should closely watch for this decision, which could significantly reshape how PAGA claims are structured and litigated.

5. Key Takeaways and Employer Action Items

While the legal landscape remains uncertain, California employers should:

  • Review arbitration agreements carefully. Language and structure still matter—and may determine how courts handle bifurcated claims.
  • Proactively audit wage-and-hour practices. The best defense to PAGA claims remains full compliance and routine audits and training to potentially cap PAGA penalties at 15%. Learn more about how employers can reduce their liability by routine audits in our prior article here.
  • Track the Leeper and CRST developments closely.
  • Consider the cost of delay and dual-forum litigation.
  • Consult experienced employment counsel to tailor strategies to this shifting environment.

Final Thoughts

The CRST Expedited ruling and the issue of headless PAGA cases will impact California’s PAGA landscape. With the California Supreme Court set to resolve the issue in Leeper, now is the time for employers to audit their arbitration agreements, examine potential PAGA exposure, and stay informed.

Need help reviewing your policies or responding to a PAGA notice? Our team is actively helping clients defend PAGA claims as well as advising on proactive steps to mitigate PAGA exposure. 

In today’s employment climate, workforce scheduling isn’t just an operational issue—it’s a legal one. With increasing scrutiny over wage and hour practices, California employers must understand the boundaries when it comes to scheduling flexibility. While California has not adopted “predictive scheduling” mandates on a statewide level, that doesn’t mean employers are in the clear. Local ordinances, case law, and existing Wage Order obligations all come into play.

Here are five key scheduling considerations that sophisticated employers in California must understand:

1. No Statewide Predictive Scheduling—Yet

There is currently no state-level law requiring predictive scheduling in California. However, that hasn’t stopped individual municipalities from stepping in.

Local Ordinances to Watch:
Los Angeles’ Fair Work Week Ordinance mandates that certain retail employers provide 14 days’ advance notice of schedules and penalizes last-minute changes. Other jurisdictions, like San Francisco and Emeryville, have enacted similar rules for specific industries.

Legislative Landscape:
The California Legislature regularly considers predictive scheduling proposals—SB 878 (2016) being one of the more ambitious attempts. It would have required 28 days’ advance scheduling for retail, grocery, and restaurant workers. While no such bill has become law as of 2025, employers should expect continued efforts in this area.

Key Takeaway:
Even in the absence of a statewide mandate, California employers should proactively monitor local developments and consider adopting consistent scheduling practices across jurisdictions to mitigate risk.

2. Reporting Time Pay Obligations Remain a Trap for the Unwary

Under California’s Wage Orders, “reporting time pay” rules create de facto scheduling obligations.

Basic Rule:
If an employee reports to work but is not provided at least half of their usual or scheduled day’s work, they must be paid for at least half the day—no fewer than two hours and no more than four—at their regular rate (not below minimum wage).

Second Reporting Rule:
If the employee is asked to return later that same day and receives less than two hours of work during the second shift, the employer must pay two hours at the regular rate.

Best Practice:
Avoid scheduling practices that result in employees being sent home early unless you’re prepared to pay for their time. Review timekeeping systems and scheduling workflows to ensure compliance.

3. Mandatory Meetings and On-Call Calls May Trigger Reporting Time Pay

Several recent cases have expanded what it means to “report for work,” with serious implications for on-call practices and short-notice meeting requests.

Court Guidance:

  • Ward v. Tilly’s, Inc.: Requiring employees to call two hours before a potential shift was deemed a form of “reporting,” triggering reporting time pay.
  • Price v. Starbucks: Calling employees into work on a non-scheduled day, even for a short meeting, can obligate employers to provide two to four hours of pay depending on the employee’s usual shift.
  • Aleman v. AirTouch: No reporting pay is required when employees are scheduled for two hours or less and work at least half of that time.

Key Insight:
Employers relying on on-call scheduling or last-minute meeting attendance must review their practices to ensure they’re not inadvertently creating reporting time pay liabilities.

4. Split Shifts: Small Oversight, Big Risk

California’s Wage Orders define a split shift as a schedule interrupted by unpaid, employer-mandated breaks (excluding bona fide meal or rest breaks). These arrangements can trigger additional compensation requirements.

Split Shift Premium:
Employees must be paid one extra hour at the state (or local) minimum wage rate. However, if the employee earns enough over minimum wage, this can offset the premium.

Example:
An employee earning $10/hour works two separate shifts totaling 8 hours in one day. As an example, if the applicable minimum wage is $8/hour, the $16 in “excess wages” earned over minimum wage offsets the split shift premium.

Compliance Tip:
Review shift structures in retail, hospitality, and food service operations, which often use staggered schedules. Even if you’re paying above minimum wage, it’s critical to document how those wages are calculated to offset the premium.

5. On-Call and Travel Time: Control Is the Key Metric

Time spent on-call or traveling may be compensable—even if no actual work is performed—if the employee is under the employer’s control.

Critical Cases:

  • Mendiola v. CPS Security Solutions, Inc.: Security guards required to stay overnight in trailers were entitled to pay for all hours on call, including sleep time.
  • Morillion v. Royal Packing Co.: Agricultural workers required to ride employer-provided buses were entitled to compensation for the travel time.

Strategic Consideration:
If your employees are subject to mandatory check-ins, required to remain on premises or use company-provided transportation, their “non-working” time may still be compensable. Review on-call policies and travel logistics to ensure proper wage payments.

Final Thoughts

In a state with aggressive wage and hour enforcement and a high volume of class and PAGA actions, employers must treat scheduling as a compliance priority. While predictive scheduling isn’t law statewide, the legal framework already imposes several indirect but significant scheduling obligations through reporting time pay, split shift premiums, and case law.

Proactive audits, strong documentation, and clear policies are your best defense. Make sure your legal and HR teams are aligned—and stay alert to the legislative horizon.

The financial strain caused by federal taxes on tips and overtime pay has long been a burden for service workers and the employers who support them. In a historic bipartisan move, the “One Big Beautiful Bill” has been signed into law, delivering on promises to eliminate federal income tax on tips and overtime.

Zaller Law Group and TipHaus are proud to have supported this effort, advocating for legislation that directly improves the lives of millions of American workers and strengthens the hospitality industry. Here’s what you need to know:

1. A Landmark Win for Workers — and Bipartisan Cooperation

The “No Tax on Tips and Overtime” policy had rare bipartisan momentum:

  • Donald Trump, who made it a campaign pledge.
  • Kamala Harris, who voiced strong support during her own run.
  • President Biden, whose administration confirmed he would sign the legislation if passed.

On Friday, July 5, 2025, the bill was officially signed into law. This is a transformative moment for the hospitality sector, acknowledging the critical role that tipped and overtime-reliant workers play in the U.S. economy.

2. What’s in the Law: How the Deductions Work

 No Tax on Tips

  • Workers can now deduct up to $25,000 in tip income above the line on their federal return.
  • Applies to tips that are voluntarily paid — not mandatory service charges.
  • Available from tax years 2025 through 2028.
  • Phases out for individuals earning more than $150,000 (or $300,000 for couples).

 No Tax on Overtime

  • Deduction of up to $12,500 per individual, or $25,000 for couples filing jointly.
  • Only applies to FLSA-defined overtime — not state-only or contractual OT. Therefore, California’s daily overtime earned for work over eight hours in one day would not be eligible for this tax benefit.
  • Follows the same income and time limits as the tips provision.

While state/local taxes and payroll taxes still apply, the federal income tax relief is estimated to save workers thousands annually.

3. Implementation Still in Progress

The IRS and Treasury Department will now begin the process of writing the rules that guide:

  • Which jobs and positions are eligible.
  • How tips and OT must be reported.
  • What counts as a qualified tip or overtime payment under the law.

Employers should be ready to adapt their payroll and reporting systems — and expect further clarification in the coming months.

4. Zaller Law and TipHaus: Supporting the Hospitality Industry

From the beginning, Zaller Law Group and TipHaus have been strong advocates for tax policy that reflects the reality of working in the service sector and are proud to have submitted over 4,000 signatures in support for the no tax on tips and overtime bill. This win represents:

  • A culmination of months of engagement with stakeholders and policy leaders.
  • Continued legal and payroll support for restaurant operators and hospitality employers.
  • A clear opportunity to retain staff, reduce turnover, and attract top talent through a more financially rewarding work environment.

We’re proud to have helped shape the conversation and push for smart reforms.

5.  What’s Next for Employers

While the law offers much-needed relief, it also brings new considerations:

  • Reworking W-2 classifications to reflect tip/overtime separation.
  • Determining which staff fall within the qualified categories.
  • Preparing documentation to support employees who take the new deductions.

As new rules emerge, Zaller Law Group will continue to advise employers on compliance, risk management, and payroll readiness. And TipHaus remains committed to giving operators the tools to track and report tip earnings with clarity and precision.

A Win for Workers, A Boost for Business

The “No Tax on Tips and Overtime” law is not just a political victory — it’s a practical one. It makes the hospitality industry more competitive, puts more money in workers’ pockets, and reflects long-overdue recognition of how these jobs power our economy.

Zaller Law Group and TipHaus will continue to champion forward-thinking solutions that support employers and elevate the employee experience in hospitality.

We would like to thank the over 4,000 people and businesses who signed our petition to support this effort. Your voices helped drive this important change, and we’re honored to have worked alongside you to make it happen.

I have published this post since 2015 (I cannot believe this year marks a decade of publishing this article) recognizing the Fourth of July. This is one of my favorite holidays.  Hopefully I’ll be able to keep publishing it for many years to come.  Wishing you a great Fourth, and hope you have some time to put aside your work for a bit and enjoy some time with your family.  Happy Fourth of July!

Five things I’m thankful for this Fourth of July:

1.     For the great risk and sacrifice our Founding Fathers took to establish the country. 

When learning about the Founding Fathers in high school history class I did not have a perspective about the risks the Founders took in establishing the country.  Only now that I have a business, a family, and am relatively successful, can I realize the huge risks the Founders took.  By all means, they were the establishment, the elite of the American society, and if anyone had an interest in preserving the status quo, it was them.  Their sacrifices of life (theirs and their family members) and their fortunes helped build the foundation we benefit from today.

2.     The ability to speak freely and practice (or not practice) any religion I want.

It is great being able to freely speak your mind and believe in whatever you want.  It is also great be free to practice (or not) any religion you want.  We live in a very tolerant society, and it is even better when the government is not telling you how to live your life.  It is important to remember that throughout history, this is the exception for how a government normally behaves.

3.     Our Country’s ability to attract creative people.

Creative and productive people want to practice their trade where the government will basically leave them alone and provide a good environment to protect their gains derived from their hard effort (see item #5 below).  The U.S. provides this environment, and that is why so many people come to the U.S. to create a business or to practice their trade.  It is also important to recognize how lucky we are to be in the U.S.

4.     My right to practice any profession and access unlimited resources to learn required skills.

No one is dictating what students need to be after they graduate high school or college.  Everyone is free to pursue their interest, and the market decides the value of the effort.  With basically any information freely available on the Internet, anyone can learn almost any skill, and like no other time in human history individuals have an almost free method to sell their services or products over the Internet.  In your mid-40’s and want to make a career change?  Perfect, and you don’t even need to go back to school as the information is freely available on the Internet.  Didn’t finish college and are 20 years old with an idea?  Perfect.  Venture capitalists don’t care about your pedigree, they are only interested if you work hard and don’t give up.

5.     Our legal system.

Yes, it sounds trite.  But while I don’t think our legal system is perfect by any means, it is the best system established in the history of mankind.  Everyone living in the U.S. presently is very lucky to have this benefit.  It is a foundation for many of the items I mentioned above.  Because people have a good basis for predicting the outcomes of their actions, such as being able to retain property legally obtained, and knowing if someone breaches a contract there will be repercussions, it creates an environment that attracts hard effort and the best talent from around the world.  This is why the U.S. has been the leader in ideas and new businesses.  However, just because the system is established does not mean our work is done.  We have to be vigilant not to lose the fairness, reasonableness, and lack of corruption in the legal system.

Happy Fourth of July!

AI is no longer just a buzzword—it’s actively transforming the workplace. Whether employers are aware of it or not, AI tools are being embedded into daily operations across industries. With California pushing forward with proposed regulations that could take effect as early as July 1, 2025, employers must begin understanding the implications now. Here are five essential points to keep in mind:

1. AI Is Already in the Workplace—and Use Is Expanding

Many California employers are already using AI—even if only in limited ways. One of the most common use cases is resume screening. Large employers facing thousands of applications use AI to quickly sort resumes and identify the most qualified candidates. AI is also being used to:

  • Draft employee communications: HR teams are using tools like ChatGPT to write performance reviews, disciplinary notices, or coaching emails.
  • Assist in onboarding: Chatbots can guide new hires through paperwork, benefits enrollment, and training schedules.
  • Enhance recruiting: Some available tools use video analysis and natural language processing to assess applicant responses.

Even managers are using AI to brainstorm better ways to give feedback or handle difficult conversations.

Example: An HR manager struggling to coach an underperforming employee may use ChatGPT to draft a constructive and empathetic email, saving time and ensuring the message is clear and legally sound.

2. California Is Leading with New AI Employment Regulations

California’s proposed Automated Decision Systems (ADS) regulations aim to ensure that AI tools used in employment decisions are fair, transparent, and compliant with anti-discrimination laws (see our prior article on the proposed regulations here). These rules are considering implementing the following:

  • Potentially require notice to applicants when AI tools are used
  • Mandate anti-bias testing and corrections
  • Impose a four-year recordkeeping requirement
  • Apply to vendors and hold employers legally responsible for third-party tools

The regulations are designed to prevent unintentional discrimination—such as AI tools screening out candidates with gaps in employment (which may affect women or caregivers more).

Example: If your company uses AI to rank candidates and the system deprioritizes people who’ve taken career breaks, that could result in a discriminatory impact. Under the new rules, you’d need to detect and fix that.

3. Employers Are Still Liable—Even When AI Makes the Decision

You can’t delegate legal responsibility to an algorithm. If an AI screening tool inadvertently excludes protected classes (e.g., based on age, race, or disability), your business is still liable under existing discrimination laws.

A current case in California, Mobley v. Workday, involves a 40+ year-old Black man who alleges he was repeatedly rejected by AI tools used by employers. The case is moving forward under current federal and state anti-discrimination laws.

Example: Even if a third-party software provider made the AI, if it screens out applicants unfairly, and your business uses it, your company can be sued under FEHA or Title VII.

4. AI May Actually Help Reduce Bias—When Used Correctly

There’s hope for AI to help level the playing field. A study by researchers at Stanford and USC found that AI-led hiring processes were more successful at identifying qualified candidates—particularly younger, less experienced, and female applicants—than traditional resume reviews and human interviews.

AI can promote a more “blind” evaluation process, reducing the potential for human bias related to names, photos, age, or education pedigree.

Example: A company replaces its initial resume screening with a structured AI interview system. The result? A more diverse candidate pool, selected based on skills and responses, not superficial traits.

5. Wearables and AI Tools Raise Serious Privacy Concerns

With tools like AI-powered glasses (like Google’s new Gemini glasses) and Zoom note-takers, privacy risks are growing. These tools can record conversations, analyze speech, and even recognize faces. California is a two-party consent state—recording without consent is illegal and could lead to criminal and civil penalties.

Example: An employee shows up wearing smart glasses that record everything they see and hear. If they record private conversations without the other party’s consent, it could violate California Penal Code section 632 and create liability for the employer.

Employers should start preparing policies or training on the use of wearables and AI tools in the workplace—even if a formal “AI governance policy” feels premature.

Final Thoughts

AI can help your business stay compliant, attract better candidates, and operate more efficiently—but only if you understand the risks and responsibilities. Think of it like a powerful new employee: it needs supervision, training, and accountability. Don’t wait until your competitors—and the regulators—are ahead of you.

Start small. Use AI to help HR draft communications or streamline workflows. Just be sure you pair every tool with legal oversight and human judgment.

As Tony P’s Dockside Grill prepares to close at the end of June, I’ve found myself reflecting on the profound impact Tony Palermo has had on my life — not just professionally, but personally and profoundly.

I first met Tony P when I was a newly minted lawyer in the early 2000s. My wife and I were having dinner on the patio at Tony P’s — a place that would soon become like a second home — when I heard about a golf tournament hosted by the California Restaurant Association. Knowing the law firm was working at had a connection to the CRA, I decided to cold call Tony and ask if I could join.

He didn’t hesitate. “Sure,” he said warmly, “I’ll set you up with a great foursome.” That simple act of generosity sparked a friendship — and a career trajectory — that I could have never predicted. The partner he placed me with, Greg McNally, became a friend, a client, and a key connection in my journey within California’s restaurant industry.  Greg and I still talk a lot and try to play together in the annual golf tournament. That was just Tony: welcoming, kind, and a connector of people.

A Mentor in Hospitality and Leadership

Tony’s influence extended far beyond that first golf tournament. In 2005, he was instrumental in encouraging me to join the California Restaurant Association Los Angeles Chapter Board of Directors. He believed in my potential when I was still finding my voice as a young attorney. And when I made the leap to start my first law firm in 2007, Tony was there with a smile and a signature Tony P line:

“Well, if it doesn’t work out… at least they can’t take your birthday away from you.”

That line has stuck with me ever since — a reminder to bet on yourself, and to keep your perspective no matter what.

A Place Full of Memories

Tony P’s wasn’t just a restaurant. It was our family’s place. Since my mom first met Tony in 1999 to plan my LMU graduation dinner, we’ve celebrated a lot of events there: birthdays, Friday night dinners, wedding parties, and law firm holiday gatherings.

My wife and I have likely shared over 500 dinners there with our three boys. That spacious, scenic outdoor patio was the perfect refuge for a young family — a place where our kids could be noisy, and we could relax, watch the boats drift by, and enjoy some “no bones about it” (my favorite), bread bowl clam chowder (some of the best I’ve had), burgers, or a round of Tony’s famous Mai Tais.

It became our go-to recommendation for visiting family and friends. Because when you brought someone to Tony P’s, you were bringing them into the heart of Marina del Rey.

The Interview That Said It All

In 2011, I had the privilege of sitting down with Tony for an interview as part of my video series Just Ship It. That conversation was a masterclass in hustle, heart, and the grit it takes to succeed in the restaurant business. Tony shared how he started working in kitchens at age 13 in Detroit, eventually building his culinary foundation through experience, grit, and mentors he called his “angels.”

From those early days — boning out lamb legs in a European-style kitchen, sleeping at the restaurant during remodels, to opening Teasers in Santa Monica and eventually Tony P’s Dockside Grill in 1997 — Tony’s story is an American success story. No silver spoon, no shortcuts. Just hard work, long hours, and a deep love for hospitality.

He spoke candidly in the interview about the realities of the business:

“The restaurant business is hard — but it’s no secret. It’s good food, good service, reasonably priced, and giving people what they want. But to do that, you’ve got to work a lot.”

The video is something I’ll always treasure — a lasting testament to Tony’s wisdom, grit, and generous spirit. You can watch it below.

More Than a Restaurateur — A Community Builder and an “Angel”

Tony wasn’t just running a restaurant; he was building a community. He preached getting involved: in the local chamber, in nonprofit work, and in the CRA. In that same interview, he said:

“Most restaurant guys are the mayor of their own city — but you’ve got to reach out to the other cities.”

Tony and his business partner, Dan Ringwood, didn’t just talk about giving back — they lived it. From fundraisers and legendary beer dinners (where Tony crafted everything on the menu, even the ice cream) to supporting over 400 nonprofits, their generosity rippled throughout the community. Tony P’s wasn’t just a restaurant on the water — it was the heart of Marina del Rey. That spirit extended to the next generation too: Tony and Danny hosted nearly every kindergarten class from St. Anastasia, giving local kids an unforgettable field trip filled with behind-the-scenes tours, laughter, and hands-on learning. For so many, their first real taste of the restaurant world — and of community — began at Tony P’s.

A Legacy That Will Outlive the Closing

The closing of Tony P’s Dockside Grill marks the end of an era, but Tony’s legacy lives on — in the careers he helped launch, the families he fed, the friendships he sparked, and the culture of community he championed. As someone who started as a customer, then became a mentee, friend, and forever fan, and an angel for me, I can say with deep gratitude: Thank you, Tony.

Thank you for welcoming a young lawyer into the restaurant world. Thank you for the laughter, the lessons, and the late nights filled with stories. Thank you for giving my family a place to grow up around a table.

Enjoy your well-earned retirement, Tony and Danny. You’ve fed a city — and you’ve filled our lives with joy.

— Anthony Zaller

The ramping up of enforcement by Immigration and Customs Enforcement (ICE) across California has been expected for some time now. We have hosted multiple webinars earlier this year with this expectation, and now is a good time to review the materials again. What we’re seeing now is not a surprise, and the focus on employer compliance, especially in high-risk sectors like hospitality, agriculture, and construction was anticipated since the end of 2024. Employers who take proactive steps now will be in a far better position to avoid disruption and penalties later.
Here are the key actions California employers should take now:

1. Should You Conduct an I-9 Audit Now?

Yes — and it’s never too early to start.

ICE has emphasized that employers are expected to self-police their I-9 compliance. Internal audits are not only allowed, they are encouraged, provided they are performed in a non-discriminatory manner and any corrections are well-documented.

Some best practices include:

  • Use the latest Form I-9 (dated 01/20/25).
  • Review all sections for completeness and accuracy.
  • Do not backdate changes — cross out errors, correct, and initial with today’s date.
  • Attach memos explaining corrections where necessary.
  • Retain I-9s separately from personnel files for quick access.

Employers must retain I-9s for three years after the date of hire or one year after the date of termination, whichever is later. See our prior post on Form I-9s: Navigating Compliance in 2025, for more information for employer’s responsibilities for Form I-9s.

2. Training Managers and Frontline Staff

Your frontline managers are your first line of defense — and often the first to interact with ICE agents.

Items to consider for training:

  • How to verify documents without discriminating based on nationality or appearance.
  • What to do if ICE arrives: Do not allow entry without a valid subpoena or judicial warrant. Direct agents to the designated company contact.
  • How to post notices (required under California Labor Code within 72 hours of receiving a Notice of Inspection).
  • Document retention and audit procedures.

Consider mock ICE audits or walkthroughs to familiarize managers with response procedures.

3. What Should Employers Say to Employees?

Clear and lawful communication with employees is essential.

When ICE Contacts You or Conducts a Raid:

  • Do not question employees about their immigration status.
  • Do not retaliate or take adverse action based solely on a Notice of Suspect Documents.
  • Post the required employee notification within 72 hours of receiving an inspection notice, per California law.

4. Preparing for ICE Raids or Audits

Create a response plan:

  • Designate a point person and a legal contact (internal or external).
  • Store I-9s centrally — not in personnel files — for fast retrieval.
  • Maintain electronic systems with audit trails and secure document transmission protocols.
  • Consider enrolling in E-Verify (required for remote I-9 verification).

During a raid or visit:

  • Do not voluntarily consent to searches or to allow ICE access to private areas of the business.
  • Do not let ICE into non-public areas without a judicial warrant.
  • Politely decline to provide records until legal counsel is consulted.
  • Keep a log of all interactions with ICE agents.
  • Provide documents only in accordance with the Notice of Inspection or subpoena.

5. Electronic I-9s and Remote Verification

If you use an electronic system to store I-9s:

For remote hires, only E-Verify-enrolled employers may use remote I-9 verification. Be sure to follow all steps, including live document review via video and storing secure copies.

Final Thought: Prepare Now, Avoid Disruption Later

An ICE audit or raid can disrupt the flow of business and may lead to fines for employers. By auditing now, training your team, and establishing clear procedures, you can protect your business from unnecessary penalties and ensure compliance with both state and federal law.

California employers were required by February 14, 2024, under AB 1076, to notify employees bound by noncompetition agreements that these agreements are void and unenforceable—unless a statutory exception applies. With this update to California law, many employers are rightly asking:

How can employers still protect their business interests, proprietary information, and customer relationships when noncompete clauses are no longer allowed?

Fortunately, California law continues to provide strong protections for employers through various statutory and common law doctrines—even without enforceable noncompetition agreements. Below is a discussion of a few key legal tools employers can rely on.

Key Labor Code Protections Still Available to Employers

1. Employees Must Follow Lawful Instructions

Labor Code § 2856

Employees are required to “substantially comply with all the directions of [their] employer” unless the direction is impossible, unlawful, or imposes unreasonable burdens. This gives employers a foundation to enforce clear internal policies about protecting company property and confidentiality.

2. Employees Must Exercise a Reasonable Level of Skill

Labor Code §§ 2858–2859

Employees are bound to:

  • Use reasonable skill in their work unless their lack of skill was disclosed at hiring.
  • Apply all the skill they possess as required by their position.

This provision supports employer expectations for quality work and responsible conduct with sensitive information.

3. Employees Owe a Duty of Loyalty While Employed

Labor Code §§ 2860, 2863

California law still imposes a duty of loyalty. Specifically:

  • Anything an employee acquires by virtue of their employment—except earned compensation—belongs to the employer.
  • Employees with overlapping personal business interests must give preference to the employer’s business.

This means employees may not:

  • Compete with their employer while still employed,
  • Share confidential company information for personal gain,
  • Retain or use company information after separation.

Legal Remedies Beyond the Labor Code

4. Conversion Claims Against Misappropriation

Civil Code § 1712

Employers may bring a conversion claim when an employee wrongfully takes, retains, or fails to return company property (e.g., documents, plans, client lists). Even if consent was initially granted, it can be rescinded—requiring the return of the items.

5. Additional Civil Causes of Action

Employers may also consider the following legal avenues:

  • Unfair Business Practices (Business & Professions Code § 17200) – For deceptive or unfair acts affecting competition.
  • Intentional Interference with Prospective Economic Advantage – When former employees disrupt relationships with customers or prospects.
  • Fraudulent Concealment / Misrepresentation – For knowingly misleading the employer or hiding material facts.
  • Trade Secret Misappropriation (California Uniform Trade Secrets Act – Civil Code § 3426 et seq.) – For the misuse of protected business information.

To qualify as a trade secret, the information must:

  • Derive value from not being generally known, and
  • Be subject to reasonable efforts to maintain secrecy (e.g., NDAs, access controls, internal policies).

Practical Takeaways for Employers

Even though California has outlawed noncompetition agreements, you can—and should—still take action to safeguard your business:

  • Audit employment agreements for compliance and confidentiality clauses.
  • Implement internal policies clearly restricting use and disclosure of proprietary data.
  • Train employees on confidentiality and post-employment obligations.
  • Use NDAs and invention assignment agreements where applicable.
  • Consult legal counsel before pursuing claims to ensure all facts and legal grounds are documented.

Conclusion

Noncompetition agreements may be dead in California—but protecting your business isn’t. With proactive steps and strategic legal tools, employers can still deter unfair competition and preserve the value of their confidential information and client goodwill.

July 1 is just around the corner, and with it comes a series of local minimum wage increases across Southern California. For employers operating in multiple jurisdictions, staying compliant can be complex—but it’s essential to avoid costly penalties and maintain employee trust.

Below is a breakdown of the new rates, followed by a practical compliance checklist tailored for California employers. While this is usually a Friday’s Five article, we’re stretching a bit into seven key steps to keep you covered.

Minimum Wage Increases in Southern California (Effective July 1, 2025)

  • Los Angeles County (Unincorporated Areas): $17.81/hour
  • City of Los Angeles: $17.87/hour (increased from $17.28/hour)
  • Pasadena: $18.04/hour (increased from $17.50/hour)
  • Santa Monica: $17.81/hour (increased from $17.27/hour)
  • West Hollywood (Hotel Workers): $20.22/hour (note: non-hotel employees must be paid $19.65/hour and this rate will be in effect until December 31, 2025)
  • City of San Diego: $17.25/hour has been in effect since January 1, 2025

Note: Other jurisdictions throughout California also have their own minimum wage ordinances. Employers should verify all applicable rates based on their workforce’s location.

7-Step Compliance Checklist for Employers

1. Identify All Applicable Jurisdictions

Determine where your employees are performing work. Local minimum wage ordinances are typically based on work location, not where the business is headquartered.
Tip: For employees who work across multiple cities, you must pay the highest applicable minimum wage.

2. Update “Notice to Employee” Forms (Labor Code 2810.5)

Employers are required to provide non-exempt employees with written notice of wage rates. Update these notices to reflect the new local minimum wage amounts.

3. Review and Adjust Pay Stubs

Pay stubs must accurately reflect current hourly rates. This includes updates to wage lines for hourly workers and any overtime calculations.

4. Post Updated Workplace Notices

Most cities require employers to post official local minimum wage notices in a conspicuous place at each worksite. Make sure your postings are current and legible.

5. Audit Multi-Jurisdiction Work

For employees working in more than one city or county with different minimum wages, ensure your payroll systems and HR teams are calculating wages based on the higher rate.

6. Review Industry Applicable Rates

Certain sectors, such as fast food, healthcare, and hotel workers, have distinct minimum wage requirements. For instance, fast-food workers are entitled to a minimum wage of $20.00 per hour under AB1228, which may be increased soon in 2025. Also, certain healthcare workers will see their minimum wage increase to $24.00 per hour effective July 1, 2025. Click here to see the recently updated DIR’s FAQs for Health Care Workers.  Also in the news is LA City’s recent bill to increase hotel and airport worker’s minimum wage to $30 per hour by 2028.  However, there has been a referendum petition filed against this new bill. 

7. Communicate with Your Workforce

Transparency is key. Let your employees know when changes will take effect, why they’re occurring, and what adjustments they can expect to see.

Final Thoughts

California’s patchwork of local wage laws continues to grow more complex. By reviewing your policies and procedures now, you can avoid last-minute headaches and ensure you’re on solid legal footing. Make sure your HR, payroll, and management teams are aligned and up to date.

Need help auditing your current wage practices or navigating overlapping jurisdictions? Reach out to legal counsel with expertise in California employment law for tailored guidance.

In a first-of-its-kind move, California has finalized groundbreaking regulations that directly address the use of artificial intelligence (AI) and automated decision systems (ADS) in employment. These rules, approved by the California Civil Rights Council in March 2025, signal a clear message: while AI tools can be valuable in recruitment, hiring, and workforce management, they must not be used in ways that discriminate against applicants or employees.

These regulations are expected to take effect later this year, once approved by the Office of Administrative Law. Here’s what California employers need to know.

1. Purpose and Scope of the New Regulations

The regulations aim to ensure that the increasing use of technology in employment decisions complies with the Fair Employment and Housing Act (FEHA). In essence, the rules extend traditional anti-discrimination protections to the digital age by:

  • Defining when and how automated systems are covered under California employment law
  • Prohibiting discriminatory impacts stemming from ADS
  • Setting recordkeeping and notice obligations for employers using these technologies

2. What Is an Automated Decision System (ADS)?

The regulations define an ADS as: “A computational process that makes a decision or facilitates human decision-making regarding an employment benefit,” including tools that rely on AI, machine learning, algorithms, or statistics.

Examples of ADS:

  • Resume screeners
  • Automated interview scoring systems that make predictive assessments about applicant or employee, measure applicant’s or employee’s skills, abilities or characteristics, measure an applicant’s or employee’s personality trait, aptitude, and/or cultural fit, or screen, evaluate, categorize, and/or recommend applicants or employees
  • Video software that analyzes voice or facial expressions
  • Tools that prioritize or rank candidates
  • Systems that direct job ads to certain groups

Excluded: Basic tools like word processors, spreadsheets, and security software—as long as they don’t make or influence employment decisions.

3.  Key Prohibitions and Requirements

No Discrimination: The regulations provide that, “It is unlawful for an employer or other covered entity to use an automated-decision system or selection criteria (including a qualification standard, employment test, or proxy) that discriminates against an applicant or employee or a class of applicants or employees on a basis protected by the Act, subject to any available defense.” 

Specific High-Risk Areas – Criminal Background Checks: Employers may not use ADS to screen for criminal history before a conditional offer. Even after an offer, they must perform individualized assessments and cannot rely solely on automated outputs

Duty to Provide Accommodations: If an AI tool may disadvantage a candidate with a disability or protected characteristic, the employer must offer a reasonable accommodation (e.g., alternative assessment formats).

Third-Party Vendors May Create Liability: If a vendor or recruiter uses an ADS tool on your behalf, you may still be legally responsible. Contracts should clarify compliance responsibilities and include indemnification provisions.

4. Documentation and Compliance Requirements

Employers using ADS must:

  • Retain relevant data, including results of automated decisions and demographic data, for at least four years
  • Keep records separate from personnel files
  • Conduct and document anti-bias testing on AI tools
  • Respond appropriately to testing outcomes

5. Next Steps for Employers

If the regulations are adopted in California, employers should:

  • Review All ADS and AI Tools in Use – Conduct an audit of technologies used in recruiting, hiring, promotions, and discipline.
  • Engage Legal Counsel or Compliance Experts – Evaluate whether the tools are likely to have a discriminatory impact or violate FEHA.
  • Request Transparency from Vendors – Ask for information on bias testing, training data, and system logic.
  • Implement Notice and Accommodation Policies – Clearly inform applicants when ADS will be used and how they can request an accommodation.
  • Use Human Oversight – Do not rely exclusively on AI for employment decisions. A human should review and approve final decisions.

If these regulations are adopted, California could join jurisdictions like New York City, Illinois, and Colorado in regulating workplace AI. While the federal government is still developing its approach, states like California could begin regulating how AI can be used in employment decisions. 

Employers operating in California must treat AI and automation with the same care and diligence as any other employment practice subject to anti-discrimination laws.