Updated July 29, 2020: 

Small business laws California include SB 269, which gives small business a grace period to free themselves from liability; AB 1616, which enables pastry and bakery businesses to operate from home without zoning permits; and AB 908, which increases paid family leave benefits.

Tax Laws in California

  • The California Competes Tax Credit (CCTR): This credit, an extension of the California Business Tax Code, allows California businesses to recoup some of their capital expenditures if they meet certain projected milestones. Under the arrangement put in place starting in the 2014 tax year, small businesses with gross receipts of less than $2 million are not subject to a GO-Biz review. The CCTR will remain in place until January 2025.
  • California Homemade Food Act of 2012: The law, also known as AB-1616, enables home-based pastry, bakers, and chefs to run businesses without the need to use commercial kitchen space. Such businesses are no longer subject to tough zoning laws and other regulatory rules. The businesses may still be required to get the usual business licenses and permits.

Employee Remuneration Laws

  • AB 908 on Paid Family Leave (PFL) law went into effect in 2018 and increased the paid family leave benefits from 55 percent of earnings to up to 70 percent. The law puts in place a maximum weekly benefit on the amount received. The law removes the seven-day waiting period before an employee receives PFL benefits.
  • Minimum wage laws: From Jan. 1, 2017, California enacted a new law that governs employee minimum wages. Businesses that employ 26 or more people are required to pay a minimum wage of $10.50 per hour. The businesses must increase their wages to $15 per hour by 2022. Smaller businesses with fewer than 26 employees can maintain the $10-per-hour rate but are still required to pay $15 per hour by 2023. Local laws may take precedence over this act, and you may need to check with a local business lawyer to know the minimum wage in your area.
  • The Fair Pay Act, which went into effect in 2016, prohibits underpaying employees based on their race, gender, or previous earnings.

Employee Notification Laws in California

  • A recent law that went into effect in 2017 mandates all California businesses to inform their employees if they are eligible for the federal earned income tax credit (EITC) and the California EITC. The notification must be done around the time the employer gives the employee Form W-2 or Form 1099.
  • AB 2337 mandates all employers with 25 or more employees must give all employees a written notice explaining the rights of victims of domestic violence, sexual assault, and stalking. The law also requires employers to inform their employees of their right to take time off for medical treatment or legal proceedings.

Employee Background Check Laws and Immigration Protections

California law limits the ability of employers to conduct criminal background checks on potential employees. A new law increases these restrictions by prohibiting employers from asking about a job candidate's juvenile criminal history and using such information in determining conditions for employment. Los Angeles, San Francisco, and other jurisdictions have other laws that increase the restrictions.

Assembly Bill 1008 strengthens the 2013 “ban-the-box” initiative that banned employers with five or more employees from inquiring about the criminal history of employees and using such information when making an offer. The Bill enables a job candidate to challenge an employer who revokes a job offer based on the candidate's criminal history.

The U.S. Citizenship and Immigration Services revised Form I-9, and all employers are required to use the new version. A new state-level law increases the protections afforded to immigrants and supports the federal requirements of employers asking for more documentation other than the one required by Form I-9.

Other new laws that may have a bearing on small businesses in California include:

  • he All-Gender Restrooms and Signage Requirement Laws require all single-user toilet facilities to be labeled “all gender.”
  • The SB 269 law was developed to plug loopholes in the Unruh Civil Rights Act that enabled entities to extort large payouts from California businesses. The law enables a small business to be free from liability by hiring a Certified Access Specialist (CASp) and to obtain a 120-day grace period to fix small violations. The law also provides a grace period of 15 days before a penalty can be imposed on small businesses as a result of minor signage and surface display violations.

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