California Employment Law Counsel for Out-of-State Companies
Your company isn’t based here. Your employee, your contractor, or the claim is. Employer Guidance Group PC advises and defends employers on the California side of that problem — before a dispute starts and after one lands on your desk.
- Employer-side only
- California employment law
- Claims · compliance · contracts
Why out-of-state companies call us
Most of these calls start the same way: someone in another state opens a letter with a California caption and asks, “Why does this apply to us?”
A demand letter from a California employee’s lawyer
It typically cites California statutes your home-state policies were not written around, and it sets a deadline. We read it first, size the exposure, and answer it.
A PAGA notice naming your company
PAGA lets an employee pursue civil penalties on behalf of coworkers. One notice can put your whole California workforce at issue, not just one person.
A Labor Commissioner wage claim
The Labor Commissioner handles wage claims through its own hearing process. It runs on its own deadlines, and the first one is on the notice.
A Civil Rights Department complaint
Discrimination, harassment and retaliation complaints under California’s FEHA can be filed with the Civil Rights Department up to three years after the conduct (Gov. Code § 12960(e)(5)).
A California lawsuit — and a contract that says disputes go elsewhere
Your home-state venue and governing-law clause may not hold for a worker who primarily lives and works in California (Lab. Code § 925).
A California hire or 1099 contractor you never set up for California
Pay timing, wage statements, sick leave, expense reimbursement and worker classification rules follow where the work is done — not where your headquarters is.
Which California rules reach an out-of-state employer?
There is no single rule. California courts ask the question one statute at a time: what connection to California is enough to trigger this particular protection? For the wage-and-hour rules below, the answer starts with one fact — where the person actually does the work.
| Topic | What California law says | Authority |
|---|---|---|
| Pay timing and wage statements | These rules apply when the employee’s principal place of work is California: the employee works a majority of the time in California or, for interstate transportation workers whose work is not primarily performed in any single state, California is the base of work operations. A worker based elsewhere who is in California only episodically, for less than a day at a time, is not covered by them. Residency alone does not decide it. | Lab. Code §§ 204, 226; Ward v. United Airlines and Oman v. Delta Air Lines (Cal. 2020) |
| Overtime | The California Supreme Court applied California overtime law to nonresidents who worked full days and weeks in California — in a case against a California-based employer. Expect the argument to be made against you, and expect the analysis to be statute-specific. | Sullivan v. Oracle Corp. (2011) 51 Cal.4th 1191 |
| Paid sick leave | An employee who works in California for the same employer for 30 or more days within a year from the start of employment is entitled to paid sick days. Accrual is at least one hour for every 30 hours worked, and the employer must allow use of 40 hours or five days each year. | Lab. Code § 246 |
| Independent contractors | The ABC test is the default: unless the hiring entity shows all three prongs, the worker is an employee. Statutory exemptions, such as bona fide business-to-business relationships and certain professional services, send the question to the multi-factor Borello test instead. Willful misclassification carries civil penalties of $5,000–$15,000 per violation, and $10,000–$25,000 per violation for a pattern or practice. Those penalties are pursued by the Labor Commissioner or through a PAGA claim, because the statute creates no private right of action. | Lab. Code §§ 2775, 2776, 2778, 226.8; S. G. Borello & Sons (1989) 48 Cal.3d 341; Noe v. Superior Court (2015) No. B259570 |
| Non-compete agreements | A contract void under California’s non-compete law is unenforceable regardless of where and when it was signed. Entering into or trying to enforce one is a civil violation. Including a non-compete in an employment contract is itself unlawful, and employers were required to notify affected current and former employees in writing by February 14, 2024. | Bus. & Prof. Code §§ 16600.5, 16600.1 |
| Venue and governing-law clauses | For an employee who primarily resides and works in California, an employer cannot require, as a condition of employment, adjudication (litigation or arbitration) outside California or loss of California’s substantive protections. A noncompliant clause is voidable at the employee’s request. The statute does not apply where the employee was individually represented by counsel in negotiating those terms, and it reaches contracts entered into, modified, or extended on or after January 1, 2017. | Lab. Code § 925 |
| Discrimination, harassment, retaliation | FEHA’s general definition of employer is any person regularly employing five or more persons. For harassment, the definition is any person regularly employing one or more persons. Whether FEHA reaches a given set of facts turns on the connection between the conduct and California. | Gov. Code §§ 12926(d), 12940(j)(4)(A) |
| Workers’ compensation | Every employer except the state must secure payment of compensation by one of the methods the statute lists. Confirm your policy actually responds to California workers. | Lab. Code § 3700 |
| Being sued in California | A California court may exercise jurisdiction on any basis not inconsistent with the state or federal constitution. Whether a particular court can reach you depends on your contacts with California. | Code Civ. Proc. § 410.10 |
General summary for orientation, not a substitute for advice on your facts. Statutory text and case law change; we verify current law before advising.
Three home-state assumptions that don’t travel
For an employee who primarily resides and works in California, Labor Code § 925 makes that kind of provision voidable at the employee’s request, and a court may award the employee attorney’s fees. It applies to contracts entered into, modified, or extended on or after January 1, 2017, and carries an exception where the employee was individually represented by counsel in negotiating the venue or choice-of-law terms. It does not reach workers who live and work outside California.
Business & Professions Code § 16600.5 says a contract void under California law is unenforceable regardless of where and when it was signed, and an employer may not attempt to enforce it even if the employment occurred outside California. Affected workers can sue for injunctive relief or actual damages, plus attorney’s fees. A separate statute, § 16600.1, also made it unlawful to include a non-compete in an employment contract.
The ABC test (Lab. Code § 2775(b)(1)) asks whether the worker is free from your control and direction both under the contract and in fact, performs work outside the usual course of your business, and is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. Absent a statutory exemption, failing any prong makes the worker an employee. The label is not the test.
Employer-side counsel, on the California side
Claims and notices
We respond to demand letters, PAGA notices, Labor Commissioner claims and Civil Rights Department complaints — and tell you what each one is, what is due, and what it could cost.
Litigation and arbitration defense
We defend California lawsuits and arbitrations, including whether to contest jurisdiction or venue before you engage on the merits.
Classification audits
We test your California contractors against the ABC test, and against Borello where an exemption applies, before a plaintiff’s lawyer does. See our audit work.
California set-up for remote and hybrid hires
Pay timing, wage statements, sick leave, expense reimbursement, handbook addenda — the paperwork that keeps a California hire from becoming a California claim. Wage & hour.
Contracts that hold up in California
We review offer letters, venue and governing-law clauses, arbitration agreements and restrictive covenants for the California employees they cover.
PAGA exposure
Where a notice is on the table or a pattern looks likely, we map the exposure and the options. PAGA defense.
The first five moves
- Find the deadline. Every one of these notices carries a clock. Read the notice for the date before you read it for the merits.
- Preserve the records. Payroll, time records, contracts, offer letters, emails and messages about the worker. Suspend any auto-delete.
- Hold the status quo. Don’t change the employee’s pay, hours or status, and don’t contact them about the claim, without advice. A retaliation claim can be added to an existing dispute.
- Don’t answer it yourself. A well-meant reply to the other side’s lawyer can become evidence.
- Send us the paperwork. Contact us with the notice and we’ll tell you what it is, what is due, and your options.
A California readiness review for out-of-state employers
If you have even one worker in California, a short review usually tells us which California rules are already in play. We look at:
- Where each worker actually does most of their work
- Pay timing and wage statement format for California-based staff
- Paid sick leave for anyone working in California 30+ days a year
- Every 1099 relationship, tested against the ABC test and its statutory exemptions
- Expense reimbursement for home offices, phones and mileage
- Venue, governing-law and arbitration language in your templates
- Non-competes and other restrictive covenants
- Workers’ compensation coverage and payroll registrations, with your payroll and tax advisors
California employment law for out-of-state companies: FAQ
Do California employment laws apply to a company based in another state?
They can, and it depends on the statute. For wage statements and pay timing, the California Supreme Court looks to whether the employee’s principal place of work is in California (Ward v. United Airlines and Oman v. Delta Air Lines, 2020). For discrimination and harassment, FEHA’s general definition of employer is any person regularly employing five or more persons (Gov. Code § 12926(d)), and for harassment it is any person regularly employing one or more persons (Gov. Code § 12940(j)(4)(A)). Whether FEHA reaches a given set of facts turns on the connection between the conduct and California. A short review of where the person works and where decisions are made usually shows which rules are in play.
Can an out-of-state company be sued in California?
A California court may exercise jurisdiction on any basis not inconsistent with the state or federal constitution (Code Civ. Proc. § 410.10). Whether a particular court can reach your company depends on your specific contacts with California. We analyze that before recommending whether to contest jurisdiction or venue.
Can I require a California employee to arbitrate or sue in my home state?
Labor Code § 925 bars an employer from requiring an employee who primarily resides and works in California, as a condition of employment, to adjudicate outside California a claim arising in California, or to give up the substantive protection of California law for a controversy arising in California. “Adjudicate” includes both litigation and arbitration. A noncompliant provision is voidable at the employee’s request, and a court may award attorney’s fees. The statute does not apply where the employee was individually represented by counsel in negotiating the venue or choice-of-law terms, and it applies to contracts entered into, modified, or extended on or after January 1, 2017. Whether a specific arbitration clause survives can also turn on federal law, which is why we review each one.
Is my non-compete enforceable against a California employee?
Under Business & Professions Code § 16600.5, a contract that is void under California’s non-compete law is unenforceable regardless of where and when it was signed, and an employer may not attempt to enforce it regardless of whether the contract was signed and the employment was maintained outside California. Entering into or attempting to enforce such a contract is a civil violation, and affected workers can sue for injunctive relief or actual damages plus attorney’s fees. California also made it unlawful to include a non-compete in an employment contract, and required employers to give affected current and former employees written notice by February 14, 2024 (Bus. & Prof. Code § 16600.1). If your standard agreement contains a non-compete, have it reviewed for California before a dispute forces the question.
Is my California contractor really an independent contractor?
California’s default is the ABC test, under which the hiring entity must show all three prongs (Lab. Code § 2775(b)(1)). The first asks whether the worker is free from your control and direction both under the contract and in fact, so a signed contractor agreement does not answer the question by itself. Statutory exemptions, such as bona fide business-to-business relationships (Lab. Code § 2776) and certain professional services (Lab. Code § 2778), send the question to the multi-factor Borello test instead, which is why each relationship is worth testing individually. Willful misclassification carries civil penalties of $5,000 to $15,000 per violation, and $10,000 to $25,000 per violation for a pattern or practice (Lab. Code § 226.8), pursued by the Labor Commissioner or through a PAGA claim.
We only have one employee in California. Do these rules still apply?
One California worker can be enough to bring some California rules into play. Paid sick leave, for example, is triggered by working in California for the same employer for 30 or more days within a year (Lab. Code § 246), and pay timing and wage statements turn on the employee’s principal place of work (Ward; Oman). FEHA’s general definition of employer carries a five-person threshold, though its harassment provisions apply to an employer regularly employing one or more persons (Gov. Code §§ 12926(d), 12940(j)(4)(A)); how that plays out for a multi-state workforce is one of the questions a review sorts out.
We received a demand letter, PAGA notice or Labor Commissioner claim. What should we do first?
Find the deadline on the notice, preserve payroll, time, contract and email records, avoid changing the employee’s pay or status without advice, and send us the paperwork before you respond. We will tell you what it is, what is due, and what your options are.
Do you represent companies located outside California?
Yes. Employer Guidance Group PC is a California employment law firm that represents employers only. Companies based elsewhere with California workers or California claims are the situation this page addresses. Contact us and we will confirm scope and next steps.
Tell us what you received — or what you’re planning
Whether it’s a letter that just arrived or your first California hire, we’ll tell you which California rules apply and what to do about them.
Or email contact@employerguidancegroup.com
Disclaimer. This page is general information about California law. It is not legal advice, and reading it does not create an attorney-client relationship. Employer Guidance Group PC is not your attorney unless and until you have signed a written engagement agreement with the firm.
California employment law changes constantly. The information here may be incomplete, out of date, or inapplicable to your facts, and outcomes turn on facts. Do not act, or refrain from acting, on the basis of this page. Consult a licensed attorney about your own situation before making any employment decision.
This communication may constitute attorney advertising. Prior results do not guarantee a similar outcome.
Out-of-State Employers