While COVID continues to take a toll on Southern California, with substantial amount of the economic impact on small businesses, recent studies suggest that businesses are starting to recover. And since nearly 85% of all businesses in the Inland Empire are considered small or very small,[1] this recovery has been critical to our local economy.

How is the recovery going? According to a Spring 2022 Inland Empire Business Activity Index, the Inland Empire has outperformed many regions in California in terms of working to restore pre-COVID employment levels.[2] Although certain industries were hit particularly hard (including Accommodation/Food Service and Health Care/Social Assistance),[3] a surge in other areas, like e-commerce purchases presumably driven by an increase in social distancing, has boosted our local economy.[4] This trend has helped our region experience a relatively strong job recovery, and the strongest of any Southern California region—at least, in terms of employment rates, which, admittedly, may not adequately capture the whole picture.[5]

With employment levels rising, small business owners are turning more attention to employment law compliance. At Inland Counties Legal Services (ICLS), we recognize this can be a complicated topic, especially in California where state requirements are very different, and often much stricter, than federal ones. This blog will provide a few informational “tips”—although certainly not an exhaustive list—for small business owners in the areas of Job Applications & Interviews, Employment Contracts, Employee Rights & Protections, and Terminating Employees.

Job Applications & Interviews

• The California Fair Employment and Housing Act (FEHA) provides a complex set of employment laws, including a prohibition on discrimination, retaliation, and harassment, including as part of the hiring process.[6] Even though certain FEHA provisions apply only to businesses with 5+ employees, some provisions (e.g., anti-harassment provisions) apply to all employers. And it’s generally best practice to comply with all FEHA provisions, regardless of size.
• Under FEHA, among other things, employers cannot discriminate, retaliate, or allow harassment on the basis of race, religion, national origin, ancestry, physical or mental disability, medical condition, marital status, sex, gender, age, sexual orientation, and military status.[7]
• When hiring for an open position, it’s good practice to consider why any information sought from a job candidate will help determine whether they are qualified for the listed position. If the information does not help, it’s probably best to avoid asking about it.

Employment Contracts

• Employment contracts can be a useful tool to help define the scope of employment and help protect against liability should a legal dispute arise.
• A written employment contract is generally preferred. Be aware that you can accidentally create an employment relationship through words or actions, which can be very difficult to decipher if an employment dispute arises later. A written employment contract, in contrast, can more clearly set forth key details of a job position, responsibilities, classification (exempt or non-exempt), hours (part-time or full-time), start date, among other things.
• Written employment contracts can explain that employment is “at-will,” generally meaning an employer reserves the right to terminate an employment relationship at any time, even without notice (although, be advised that in some circumstances, notice may be beneficial, recommended, or even required, regardless of what your contract says).

Employee Rights & Protections

• Once hired, California employees have many (I repeat, many) rights and protections under California and Federal law.
• Unless “exempt” from overtime and other employment laws (which is a legal question, and often a complex one), employees in most industries are entitled to overtime compensation if they work more than 8 hours in a day, more than 40 hours in a workweek, or more than 6 consecutive days in a workweek.[8]
• “Non-exempt” employees (again, this is often a complicated legal question) are generally entitled to lunch breaks, including a 30-minute, uninterrupted meal period if they work over 5 hours in a day,[9] and a second 30-minute, uninterrupted period if they work over 10 hours.[10]
• “Non-exempt” employees are also generally entitled to paid rest breaks (and sometimes more than one) if they work more than 3.5 hours in a day.[11]
• You may want to hire a worker as an “independent contractor,” but be aware that California law is strict on who may be an “independent contractor” vs. an “employee,” and an incorrect decision as an employer can have costly legal consequences.[12]

Terminating Employees

• Although employment in California is generally characterized as “at-will” (see the above “Employment Contracts” section), this does not mean that you can fire an employee for whatever reason you want.
• As with hiring, California law prohibits termination in many circumstances, including when it’s based on protected characteristics (e.g., race, gender, age, etc.).[13] Employees should only be terminated for a valid business reason.
• It’s good practice to keep organized employee files, including documentation of performance reviews, warnings, and incident reports. In addition, objective investigations revealing underperformance or other legitimate job deficiency, prior to terminating an employee, can serve as useful evidence to establish that termination was not wrongful or discriminatory.
• Importantly, treat all termination proceedings consistent among employees, and be mindful of privacy and confidentiality considerations.

Employment law can be challenging for small business owners to navigate, especially as you work to restore growth to pre-pandemic levels. While this blog discusses some generalized tips, it does not provide even close to the level of detail you need to know, nor does it provide an exhaustive list of things you need to consider as a small business owner.

If you have specific legal questions, Inland Counties Legal Services (ICLS), a nonprofit legal-aid organization serving the Inland Empire, may be able to help.

For eligible small business owners, we offer free legal clinics where you can meet, 1:1, with a volunteer attorney to discuss legal issues relevant to your business. To apply (and please note there are eligibility requirements, including maximum income and business revenue thresholds), please visit (English) or (Español), or call our Intake Team at (888) 245-4257.

ICLS is also in the middle of our “Small Business Essentials” webinar series, where we’re hosting free informational webinars on core small business topics, including one most recently on Hiring & Terminating Employees (recording available here), and our next webinar on Entity & Formation and Contracts Basics, scheduled for July 6^th (registration is quick, easy, and free).

For more information about ICLS’s services, visit the ICLS Small Business Legal Clinic website: https://www.inlandlegal.org/get-help/smallbizclinic/. If you have any questions, please reach out to Matt Kugizaki at (951) 320-7516 or mkugizaki@icls.org.

Disclaimer: This material is a legal advertisement and has been prepared for informational purposes only. Simply registering for, or attending, a small business legal clinic or informational webinar does not automatically create an attorney-client relationship with the ICLS or any participating attorneys.

ICLS is a non-profit 501(c)(3) corporation serving Riverside and San Bernardino Counties and receives federal, state, and local county funding. Funders include the Legal Services Corporation, State Bar of California Interest on Lawyers’ Trust Accounts (IOLTA), State Bar of California Equal Access Funds, San Bernardino County Department of Aging and Adult Services and Riverside County Office on Aging. A full list of current funders is available upon request. See inlandlegal.org.

[1]University of California, Riverside, Business Size Matters, Analysis of Small Businesses in the Inland Empire (Aug. 22, 2019), https://inlandempire.us/business-size-matters-analysis-of-small-businesses-in-the-inland-empire/.

[2] University of California, Riverside, Inland Empire Business Activity Index, https://ucreconomicforecast.org/index.php/services-for-business/publications/inland-empire-business-activity-index/.

[3] Inland Center for Sustainable Development, Economic Impact of COVID-19 on Small Businesses in the Inland Region 2, 8 (June 2020).

[4] Supra note 3.

[5] Beacon Economics, Beacon Employment Report (June 17, 2022), https://ucreconomicforecast.org/index.php/services-for-business/publications/california-job-recovery-booms/beacon-employment-report-california-regional-overview/.

[6] See Cal. Gov’t Code § 12940(a).

[7] Cal. Gov’t Code § 12940(a).

[8] Cal. Lab. Code § 510(a).

[9] Cal. Lab. Code § 512.

[10] Cal. Lab. Code § 512.

[11] 8 C.C.R. § 11090(12)(a).

[12] https://www.dir.ca.gov/dlse/faq_independentcontractor.htm.

[13] https://www.dir.ca.gov/dlse/faq_independentcontractor.htm.