For business owners, hiring the first employee is a significant milestone. It is a sign that the business is viable, profitable, and ready to expand, improve, or become more successful. However, you must meet specific legal requirements before hiring your first employee. If you operate a business in California, you must take several critical legal steps to ensure compliance and success.
Here are some of the things California employers are legally required to do before hiring their first employee;
In California, if an employer is subject to employment tax laws, they must register with the Employment Development Department (EDD) to get an Employer Identification Number (EIN). This step is necessary to ensure compliance with state employment tax regulations. To get started, submit a DE-1 Registration Form to the EDD. Once you obtain the identification number, you will also receive information about all state-required taxes and reporting requirements. You can write to the EDD at their Sacramento address or contact your local Employment Tax District Office for more information.
In addition to obtaining the state EIN, you must also obtain a Federal Employer Identification Number (FEIN) from the IRS. This number is needed to report federal payroll taxes and issue W-2s and other tax documents to employees.
California Labor Code Section 3700 requires all employers to have workers’ compensation. You can get workers’ compensation insurance from a private company or the State Compensation Insurance Fund. If you are a big business with enough resources, you can apply for state approval to self-insure the required benefits. You could be subjected to significant penalties if you do not have workers’ compensation and are not authorized to be self-insured.
In California, employers must provide specific notices to new employees. These notices ensure compliance with state laws and inform employees about their rights and benefits. One of the most important notices is the Notice of Rights for Victims of Domestic Violence, Sexual Assault, and Stalking. Other notices California employers must provide to new employees include;
Before you hire your first employee, you must understand California’s wage and hour laws, including minimum wage and overtime rules. Ensure you classify workers correctly as employees or independent contractors to avoid misclassification issues. Additionally, under California Labor Code Section 2810.5, you must provide notices to employees of their pay rates, designated payday, and your details.
The law requires that you post certain notices in the workplace where employees can easily see them, including minimum wage notices, workers’ compensation notices, paid sick leave notices, and whistleblower protections. These postings are available and can be printed online.
Hiring your first employee is thrilling. However, you must pay careful attention to legal requirements. From registering for an EIN to posting workplace posters, each step is crucial for protecting your business and maintaining a compliant, well-structured workplace. Taking time to ensure compliance can help you avoid costly legal issues later and set your business up for long-term success.
If you are an employer in California looking to hire your first employee, contact our experienced business attorneys at SAC Attorneys LLP for help navigating the legal requirements.