This paper examines California's labor laws, widely regarded as among the strictest in the United States, and analyzes their effects on the state's business environment. It covers key provisions including overtime regulations, meal break requirements, minor employment rules, anti-discrimination protections, and layoff notice requirements. The paper also evaluates how these laws affect California's business climate through survey data and economic studies, and concludes with a focused discussion of the apparel industry—where labor law enforcement has had particular significance due to widespread wage theft, unsafe conditions, and the prevalence of immigrant workers in garment manufacturing.
The state of California possesses some of the strictest labor laws and enforcement practices in the United States—a factor that significantly affects the state's business climate. County health departments, such as the California Department of Industrial Relations – Occupational Safety and Health Administration (Cal-OSHA), enforce and protect California labor laws, acting against all businesses that violate them (West Group, 1999).
This essay discusses some of California's most important and current labor laws, outlining how each law affects the state's business climate. It also determines whether these labor laws are beneficial or detrimental to the apparel industry.
The following section outlines some of California's labor laws, which are considered among the most stringent in the nation.
California's overtime laws hold that any employee who works more than eight hours per day must be paid at 1.5 times his or her usual rate of pay (Sessions, 1999). Those who work more than 12 hours per day must be paid twice the usual rate.
If an employee works seven consecutive days, he or she must be paid 1.5 times the usual rate for the first eight hours, and twice the usual rate for any additional hours. The seventh consecutive day rule applies regardless of how many hours an employee worked during the previous six days. In addition, any hours over 40 in a week must be paid at time and a half.
In California, certain employees are exempt from overtime laws—specifically those who spend at least half of their working hours performing work that is mainly intellectual, managerial, or creative and requires the exercise of discretion and independent judgment. Therefore, these particular labor laws affect only industries that require manual labor, such as retail, apparel, food service, construction, and health care. Other types of businesses, including marketing firms and financial companies, are relatively unaffected by these laws.
Businesses that must adhere to California's overtime laws are required to be more conscientious of their work schedules, as the costs of scheduling employees for overtime can be tremendous. In addition, if an employee calls in sick or quits unexpectedly, these companies may have to cover that shift at a greater cost until a replacement is found.
There are some exceptions to overtime laws. If two-thirds of the workforce agrees to work according to an alternative work schedule—decided by secret ballot election—an alternative schedule of up to 10 hours per day may be implemented, provided it does not surpass 40 hours per week. If an individual employee is unable to work the alternative schedule, the employer must make a reasonable effort to accommodate that employee. Additionally, if an employee submits a written request to work between 8 and 10 hours per day, that schedule may be adopted.
If an employee takes time off for personal reasons and wishes to make up for lost time later in the week, the employer is not required to pay overtime unless the employee works more than 11 hours during the make-up day. The employer is also not obligated to allow the employee to make up those hours.
California's labor laws extend to meal periods. An employee who works more than five hours is entitled to an unpaid thirty-minute meal break. However, this requirement does not apply if the employee works fewer than six hours and both the employer and employee agree to waive the meal break. If an employee works more than 10 hours, a second thirty-minute meal break must be provided. However, if the employee works fewer than 12 hours and both parties agree, the second meal period may also be waived. Under current law, an employer who requires an employee to work during a meal or rest period must pay the employee one additional hour of pay for each workday that the meal or rest period is not provided.
California's labor laws also address minors in the workforce. All minors under the age of 18 must obtain a work permit to gain employment, and any employer that hires minors must hold a permit authorizing them to do so. These permits specify the maximum number of hours a minor may work per day and per week, the permissible hours of work during the day, occupational limitations, and any additional restrictions. A minor must be at least 14 years of age to work, though in some cases 12-year-olds may be issued work permits; however, few occupations are available to them.
There are exceptions to these requirements. High school graduates or minors who are at least 16 years old and have been awarded a certificate of proficiency are exempt from permit requirements. Minors who are self-employed—providing services such as babysitting or lawn mowing—also do not require permits. All minors must be paid at least the minimum wage as well as applicable overtime rates, and they cannot be employed in occupations declared hazardous by federal regulation.
Some recent changes to California labor laws have provoked criticism from employers, who contend that California has become excessively strict in its employment regulations (Aspen Publishers, 2002). In the past, persons who were harassed or discriminated against on the basis of sexual orientation could only be awarded back pay. Today, they may win back pay, front pay, compensatory damages, punitive damages, attorney's fees, and more. Labor laws have also expanded the definition of sexual harassment to include "sexual advances, solicitations, sexual requests, demands for sexual compliance, or other verbal, visual or physical conduct of a sexual or hostile nature, based on gender" (Aspen, pp. 211–216). As a result, businesses must establish and maintain strict company policies regarding discrimination and harassment.
California employers now face significant obligations when economic circumstances compel layoffs. New labor laws require 60 days' notice of a mass layoff or shutdown, or 60 days' pay and benefits in lieu of notice. If an employer fails to comply, an employee may sue and be entitled to damages, up to 60 days' pay and benefits, and attorney's fees. Under previous law, an employer could select higher-paid employees for layoff over lower-paid employees, even if this disproportionately affected older workers. New legislation rejects that practice, stating that the use of salary as the basis for termination may constitute age discrimination.
Federal law holds that immigration laws take precedence over labor laws and has determined that undocumented workers fired for union activities are not entitled to back pay, because they were not legally authorized to work in the United States. However, California law states that employment protections and anti-discrimination laws apply to undocumented workers and applicants on the same basis as other employees. As a result, California employers must comply with labor laws with respect to both documented and undocumented workers.
Other new laws have further expanded employer obligations, including strengthened jury duty rights, protected leave for domestic violence victims, and requirements to accommodate pregnant workers. California employment laws now regulate a broad range of matters—from the types of questions employers may ask job applicants to how employees are to be treated in the workplace. In most respects, California employment laws are more stringent than their federal counterparts, which has led some businesses to avoid operating in the state.
According to a study conducted by the Civil Justice Association of California, one in every five California businesses reported restricting hiring due to the threat of employment lawsuits (Sullivan, 1996). Nearly half of all businesses surveyed stated that California labor laws—particularly employment termination laws—have made liability insurance more expensive, while approximately 10 percent reported that labor laws have caused an actual reduction in the number of employees on payroll.
Businesses also reported that labor laws have made it more difficult to obtain reference information on prospective employees, and more than half indicated they will not provide references on former employees. Under previous law, employers were protected from libel or slander suits for statements made in good faith about a former employee's job performance or qualifications. As amended, employers may inform a prospective employer whether they would rehire a former employee; however, the volume of lawsuits arising from employee references has made employers reluctant to do so. Giving references by telephone continues to carry legal risk, and as a result, most employers provide only written references limited to dates of employment, positions held, and wage or salary information—and only when the prospective employer submits a signed release from the employee in question.
"The wheels of justice are badly out of alignment when it comes to California employment law," said John H. Sullivan, president of the Civil Justice Association of California (1996). "The outcome is that everyone is treated unfairly—businesses go out of their way to avoid hiring people for good positions with benefits, and they turn to using temporary help. By rewarding frivolous job lawsuits, our civil justice system discourages employers from expanding their operations and creating more employment for everyone."
A study conducted by the California Employment Law Council revealed that the state's strict labor laws have had a measurable negative effect on its business climate, producing the following outcomes (Sullivan, 1996):
53 percent of firms experienced increased costs in screening and hiring job applicants; 51 percent reduced terminations of employees for good cause; 28 percent reduced employee earnings and benefits; and 27 percent resisted expanding operations in California.
"The significance of these percentages is that they represent a sizable number of California businesses who believe the justice system is tilted unfairly against them," Sullivan noted. Additional studies have found that California's labor laws decreased the state's potential employment by as many as 171,000 jobs between 1970 and 1990, and reduced potential income by nearly $6 billion during the same period.
"Garment worker conditions, wage theft, and sweatshop enforcement"
Approximately 12,000 immigrants are employed in the Los Angeles apparel industry, many of whom earn between $350 and $1,000 per month. Many of these workers have reported instances of non-payment of wages. Of the 5,000 registered factories in Los Angeles—where roughly 140,000 garment workers are employed—67 percent violate minimum wage and overtime laws, and 98 percent violate health and safety laws. The majority of garment workers are paid per piece and receive compensation only for what they produce, meaning many earn less than the minimum wage. It is estimated that apparel employers owe $73 million in back wages to garment workers.
For these employees, California's strict labor laws are essential. The state dedicates significant attention and resources to ensuring workers' rights to fair wages, safe working conditions, and an efficient process for demanding reimbursement for labor law violations. Many California apparel manufacturers and contractors have argued that the state's labor laws are unreasonable; however, legislators maintain that strict enforcement is crucial, particularly in the apparel sector.
Labor laws serve to reduce the prevalence of sweatshops in California. According to research, California's garment industry is the largest in the country, generating $30 billion annually and employing 160,000 workers, many of whom are immigrants—creating significant opportunities for illegal labor practices, including sweatshop operations. California labor laws explicitly target the apparel industry, holding manufacturers directly responsible for ensuring that the workers who sew their garments are paid in accordance with state law.
State law mandates a "wage guarantee" in the garment industry, requiring apparel manufacturers and retailers to ensure that their contractors pay workers minimum wage and applicable overtime. In addition, garment workers are entitled to liquidated damages for minimum wage and overtime violations when the manufacturer acted in bad faith—for example, by setting a contract price too low to allow the contractor to comply with minimum wage and overtime requirements.
Recent California labor laws have also expanded civil liability for labor law violations by contractors to include garment manufacturers and retailers who sell garments bearing a label they own in whole or in part. These laws further establish successor employer liability, preventing garment factories from closing and reopening under a different name to avoid paying the wages owed to former employees.
As a result of these labor laws, the state of California has succeeded in shutting down many illegal operations in the apparel industry, including sweatshops, and in curbing the exploitation of immigrant workers. While the broader business community continues to debate the costs imposed by California's regulatory environment, the evidence from the garment sector demonstrates that robust labor law enforcement remains essential to protecting the state's most vulnerable workers.
Aspen Publishers Staff. (2002). California employer's guide: A handbook of employment laws and regulations. Aspen Publishers.
Bonacich, E. (2000). Behind the label: Inequality in the Los Angeles apparel industry. University of California Press.
Eaton, A., & Keefe, J. (2000). Employment dispute resolution and worker rights in the changing workplace. Industrial Relations Research Association.
Sessions, D. (1998). Employee rights in California. Pentium Press.
Sullivan, J. (August 6, 1996). New study demonstrates chilling effects of California's labor laws. Civil Justice Association of California.
West Group. (1999). California employment laws.
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