In more than one phone call with customers, vendors, or other analysts in the HR technology industry, I’ve heard the claim that it’s hard to do business in the state of California.According to these conversations, the state is riddled with unnecessary compliance, too many hoops to jump through, a mountain of litigation risk, and constant changes to the rules. Business groups frequently cite labor, wage, and climate regulations as part of a broader, burdensome business environment.
So, I decided to take a look. Is the situation in California really as out of control as people claim?
Fact vs Fiction
To start, there is a significant kernel of truth behind these claims, especially when compared to the rest of the United States.
California’s 2025 statewide minimum wage is $16.50 per hour for all employers, with higher rates for fast food ($20) and certain healthcare workers. This sits leagues above the federal minimum wage of $7.25. California overtime pay kicks in after eight hours of work in a day and doubles after 12 hours, compared to federal law, which uses the 40-hour workweek as its baseline. Employers also owe a worker an extra hour of pay when they fail to provide required meal or rest breaks.
Worker classification in California also follows the “ABC test,” which presumes a worker is an employee unless the company can prove that the worker is independent, the work isn’t part of its primary business, and the worker operates their own business. If even one isn’t proven, the worker is an employee. This prevents misclassification, ensures proper pay and protections, and stops honest employers from being undercut.
As of 2023, recent climate laws also require large companies to disclose their greenhouse-gas emissions and climate-related financial risks, and employers with 100 or more employees to submit annual pay data to the California Civil Rights Department, detailing pay, demographics, and job categories.
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