What’s the biggest legal risk facing your business right now? Is it a harassment claim? A downturn in the economy? Another public health disruption? While those risks are real, there’s another threat quietly costing California employers millions every year: Wage and hour class and PAGA lawsuits.
COVID-19 and economic uncertainty may have made this issue worse, but the truth is that wage and hour claims have been climbing for years. Today, roughly 25 new wage and hour lawsuits are filed in California every day on average, and settlements often reach six, seven, or even eight figures. Even Fortune 500 companies—with sophisticated HR teams and top-tier legal counsel—have been hit multiple times.
The surprise for many employers is that these cases don’t usually stem from intentional misconduct. Instead, they arise from small, technical violations of California employment law and wage orders—mistakes that often seem trivial until multiplied across dozens or hundreds of employees.
Here are the top 10 wage and hour violations that employers face in California, why they matter, and how to avoid them.
Meal and Rest Break Traps
- Meal Period Violations. California requires a 30-minute unpaid meal period if an employee works more than five hours, with a second meal break after 10 hours. The rules are unforgiving. For example, if a lunch break starts one minute late—after the fifth hour—or is only 29 minutes instead of 30, it’s noncompliant. If employees carry a device they may have to answer during a meal period, the break may be deemed “on duty” and therefore unlawful.
- Rest Break Violations. Paid rest breaks must be at least 10 minutes for every four hours worked or major fraction thereof. For example, an employee working a six-hour shift is entitled to one 10-minute break. Problems often arise when employees are pressured to stay nearby, respond to texts, or skip breaks altogether.
- Extra Breaks for Longer Shifts. Longer workdays trigger more breaks. Unless on an Alternative Workweek Schedule, an employee working over 10 hours must receive a second 30-minute meal break and a third 10-minute rest break. Many employers with otherwise solid practices miss these extra obligations.
- Meal/Rest Period Premiums. When a meal or rest break is missed, late, short, or interrupted, the law requires the employer to pay a one-hour premium at the employee’s Regular Rate of Pay (RROP). This was reinforced by the Donohue v. AMN Services (2021) decision, which forbids rounding of meal periods and shifts the burden of proof to employers. If you don’t pay premiums correctly, you’re inviting litigation.
Timekeeping Errors
California law requires precise, minute-by-minute tracking of all time worked. Any gaps in timekeeping can trigger lawsuits.
- Inaccurate Timekeeping. Employees often record identical start, stop, and meal times every day, which raises suspicion of underreporting. Courts view these patterns as potential evidence of noncompliance.
- Rounding Time. Some employers use systems that round start and end times to the nearest five or 15 minutes. While convenient, this violates California law, which requires payment for every minute worked.
- Off-the-Clock Work. Seemingly small tasks can create big liability. For example, time spent booting up a computer before clocking in, locking doors after clocking out, or answering texts after hours must be counted as work time. Even a few minutes a day, multiplied across employees and pay periods, can add up to significant claims.
Compensation Complexities
Paying overtime and alternative pay models correctly is more complicated than many employers realize.
- Overtime Violations and Bonuses. Overtime in California must be calculated using the employee’s RROP, which includes non-discretionary bonuses, commissions, and incentive pay. For example, if an employee earns a $300 productivity bonus in a week, that amount must be factored into their overtime rate. Many employers—large and small—miscalculate this, opening the door to costly lawsuits.
- Alternative Compensation Models. California allows flexibility through systems like piece-rate pay, make-up time, or alternative workweek schedules such as 4/10s. But each model has strict requirements under the Labor Code and IWC Wage Orders. For example, if an AWS (alternative workweek schedule) is not properly adopted through a two-thirds employee vote and DLSE filing, hours 9 and 10 on a 10-hour shift must be paid as overtime.
Modern Risks: Remote Work and Expenses
The rise of hybrid and remote work has introduced new compliance challenges. California requires reimbursement for all necessary business expenses, even small ones.
- Expense Reimbursement and Remote Workers. If your employees have any expenses that are even remotely work related, you must compensate them for it. For example, if an employee occasionally uses their personal cell phone to answer text messages from their supervisor, a portion of their phone bill must be reimbursed. Remote workers are also entitled to reimbursement for internet, utilities, or equipment reasonably required for their job. While the dollar amounts per employee may seem small, failing to reimburse can lead to class or PAGA actions with huge exposure.
Why Small Violations Add Up
On their own, these violations may seem minor. But California’s penalty structure is punishing. Each violation can generate a penalty per employee, per pay period. Multiply that across an entire workforce and a year or two of payroll cycles, and what looks like a $50 mistake can quickly snowball into hundreds of thousands—or even millions—in liability.
This is why wage and hour lawsuits continue to surge, and why plaintiffs’ lawyers view them as some of the most lucrative cases in California.
Protecting Your Business
Employers have more tools in 2025 than ever before to reduce risk. The 2024 PAGA reforms reward companies that take “reasonable steps” to comply—like conducting payroll audits, updating policies, and training managers—by reducing potential penalties by up to 85%. Courts also now have explicit authority to limit unmanageable PAGA claims.
But those protections only work if you’ve built compliance into your operations and have documentation to prove it. That means:
- Training employees and managers in wage and hour compliance
- Auditing timekeeping and payroll systems
- Correcting violations quickly and paying premiums when owed
- Reimbursing employees fairly for expenses
Wage and Hour Compliance is No Longer an Afterthought in California
Wage and hour compliance is no longer an afterthought—it’s a frontline business risk. The employers most at risk are not the ones intentionally breaking the law, but those overlooking small technical details.
Experienced employment litigators help California employers design compliance plans that stand up in court. At Cal Comply, we complement those plans with litigation-tested wage and hour training for managers and employees. Together, we help employers turn California’s complex wage and hour rules from a confusing and scary maze into a clear path forward.
