1. Decide Whether the Role Is Employment or Independent Contracting
Review duties, supervision, tools, and work location before choosing employee onboarding or a service agreement. The worker’s preference for contractor status does not settle the classification.
Match the Classification Test to the Working Relationship
Labor Code § 2775 generally requires the hiring business to satisfy each part of the ABC test: freedom from control, work outside its usual business, and an independently established trade or business. Exceptions may require another standard, including the Borello multifactor test, without automatically establishing contractor status. A worker classification review compares agreed terms with actual operations. A vendor contract, invoices, or the worker’s LLC does not settle the issue. Federal classification rules can differ depending on the statute and purpose of the inquiry.
Review Overtime Exemption Separately
Employee status and overtime exemption require separate decisions. A salary or managerial title alone does not remove overtime obligations. Common executive, administrative, and professional exemptions require qualifying duties and compensation, plus other applicable conditions. Identify the relevant Industrial Welfare Commission wage order and assess state and federal requirements separately. For nonexempt roles, configure applicable daily and weekly overtime rather than relying solely on a 40-hour weekly threshold.
2. Prepare Hiring Documents and Required Notices
Written terms clarify expectations, but statutory wage, leave, and workplace rights apply even when an offer letter omits them. Distinguish agreed terms from required notices and retain delivery records.
Keep the Offer Letter and Wage Notice Distinct
Identify the employer, position, start date, compensation, and intended employment arrangement without unintended promises about duration or termination. Employees covered by Labor Code § 2810.5 must receive a standalone wage notice at hiring. It covers pay rates, payday, employer details, workers’ compensation coverage, and other required information. Exceptions include qualifying overtime-exempt employees. Mentioning salary in an offer letter does not by itself satisfy the notice requirement. Give the wage notice in the language normally used for employment communications.
Identify Required Notices and Workplace Procedures
Check applicable wage, sick leave, workers’ compensation, and workplace-rights notices and postings. The Workplace Know Your Rights Act requires a standalone notice upon hire and annual distribution. Employees hired after March 30, 2026 must also have an opportunity to designate an emergency contact. Establish procedures for breaks, leave, expense reimbursement, and workplace concerns. Address applicable safety requirements, including the Injury and Illness Prevention Program. A handbook alone does not fulfill those obligations.
3. Set Up Employer Requirements Around the Start Date
Insurance, tax registration, verification, and new-hire reporting have different triggers and deadlines. Assign each task to a responsible person and confirm which obligations the payroll provider handles.
Arrange Workers’ Compensation and Payroll Registration
Put required workers’ compensation coverage in place before work begins. For an ordinary business, EDD registration generally becomes required when wages exceed $100 in a calendar quarter. Register within 15 days of becoming a subject employer. Household employment has different thresholds. Obtain federal employer identification information and configure withholding, deposits, and reporting. Assign someone to review payroll tax compliance, including filing and payment confirmations.
Separate Federal Verification from State Hiring Reports
For federal Form I-9, employees generally complete Section 1 by the first day of paid work. Employers complete Section 2 within three business days afterward, or by the first day for employment lasting less than three business days. Employees choose acceptable documents from the authorized lists. Federal Form W-4 and state Form DE 4 address withholding. Separately, submit EDD’s DE 34 new-hire report within 20 calendar days of the first workday. Payroll enrollment does not confirm submission.
4. Build Timekeeping and Check the First Payroll
Set up a way to record work, report missed time, and correct errors before the first shift. At payroll, compare the records with the payment and wage statement.
Record Work Time and Handle Corrections
For nonexempt employees, record actual work start and end times, meal periods, and daily hours as the applicable wage order requires. Include compensable training, preparation, and after-hours calls or messages. Paid rest breaks generally count as work time and should not be deducted. Explain how to report missed punches or interrupted meals, preserve correction history, and assess any required break premiums. Advance-approval rules do not excuse payment for compensable overtime actually worked.
Compare Payroll with the Promised Terms
Compare payroll with the offer, wage notice, time records, and applicable state, local, or industry pay requirements. Check ordinary and overtime pay, deductions, reimbursements, and sick leave balances. Confirm the wage statement meets Labor Code § 226 and payment follows the applicable schedule. A wage and hour review should account for bonuses or multiple pay rates where relevant. Apply the appropriate retention rules to payroll and personnel records, and document corrections when figures conflict.
30 Oct, 2026
