Hiring employee number one converts your business into a California employer — one of the most regulated statuses in American law — overnight. Most first-hire mistakes are paperwork mistakes: registrations skipped, notices never given, paystubs missing required items. Each is cheap to do right and expensive to fix later. Here is the checklist, in the order you will need it.
Before the first day
- Confirm the person is actually an employee. California's ABC test under Labor Code § 2775 presumes workers are employees, and misclassifying your first hire as a 1099 contractor is the single most expensive shortcut in this area. When in doubt, classify as an employee.
- Get an EIN from the IRS if you do not already have one.
- Register with the EDD. Employers must register (Form DE 1, filed through e-Services) within 15 days of paying more than $100 in wages in a calendar quarter. This sets up your state payroll accounts for unemployment insurance, employment training tax, state disability insurance withholding, and personal income tax withholding.
- Buy workers' compensation insurance. Labor Code § 3700 requires coverage for every employer with even one employee. Operating without it is a criminal offense and exposes you to stop orders, penalties, and uninsured-injury liability that can dwarf the premium. Have the policy in force before the first hour worked.
- Set up compliant payroll. Whether software or a payroll service, confirm it produces California-compliant wage statements — more on that below.
Day-one paperwork
A first-day packet should include, at minimum:
- Form I-9 — federal work authorization verification. The employee must complete Section 1 no later than the first day of employment, and the employer must complete Section 2 within three business days of the start date.
- Federal W-4 and California DE 4 — the state has its own withholding certificate; do not assume the W-4 covers both.
- Labor Code § 2810.5 wage theft prevention notice — a written notice, at hiring, stating the rate and basis of pay, overtime rates, regular payday, allowances claimed, the employer's legal name, addresses, and phone, the workers' compensation carrier, and paid sick leave information. Most non-exempt employees must receive it, and changes must be re-noticed within seven days unless reflected on a timely wage statement.
- Required pamphlets and postings — state and federal law require distributing several pamphlets (including workers' compensation rights, disability insurance, paid family leave, and sexual harassment information) and displaying workplace posters.
- New-hire reporting — report the hire to the EDD on Form DE 34 within 20 days of the start-of-work date.
Paying correctly from payday one
California wage law is unforgiving, and penalties can attach per violation, per pay period:
- Minimum wage. The statewide floor adjusts annually, and dozens of cities set higher local rates — apply the highest rate covering the worksite.
- Overtime. Non-exempt employees earn daily overtime after 8 hours and double time after 12, plus weekly overtime after 40 hours — daily overtime surprises employers arriving from other states.
- Wage statements. Labor Code § 226 requires each paystub to show nine categories of information, including gross and net wages, all hourly rates and hours at each rate, dates of the pay period, the employer's name and address, and the employee's name and identifying number. Missing items can trigger statutory penalties and are a staple of employee-side lawsuits, including PAGA actions.
- Meal and rest breaks. Non-exempt employees are generally entitled to a 30-minute unpaid meal period before the end of the fifth hour and paid 10-minute rest breaks. Failure to provide required meal periods can require one extra hour of premium pay per workday, and rest-period violations can require a separate extra hour.
- Paid sick leave. State law requires at least 40 hours or five days per year, whichever is more, with local ordinances sometimes requiring more.
Build the foundation now, not at employee ten
A short at-will offer letter, a basic handbook covering harassment, discrimination, and leave policies, and clean timekeeping habits cost little at one employee and reduce the risk of common disputes later. Keep personnel and payroll records organized from the start — California gives employees inspection rights and multi-year retention rules apply. As you grow, new thresholds arrive (harassment prevention training at five employees, additional leave obligations at larger sizes), so calendar a compliance review at each growth stage. Our regulatory compliance practice builds these first-hire packages routinely, and for founders who want ongoing coverage as headcount grows, an outside general counsel arrangement keeps the checklist current without a full-time hire.
Talk to a California business attorney
If your first hire is on the calendar, a free consultation can confirm your registrations, notices, and payroll setup are in order before day one instead of after a claim. Schedule a free consultation or call (949) 418-2113.
This article is attorney advertising and provides general information only. It is not legal advice and does not create an attorney–client relationship. The law changes, and this article reflects the law as of its publication date. Every situation is different — contact us to discuss how the law applies to your exact circumstances. See our full disclaimer.
