A California employment contract replaces the state’s default at-will rule with whatever terms the parties negotiate, but only within limits the Legislature has drawn tightly around non-competes, forum selection, commissions, inventions, and arbitration. Getting those pieces right matters more here than in most states, because provisions employers use freely elsewhere are void on arrival in California, and some carry their own penalties for even trying.
What a Written Contract Changes About At-Will Employment
Under Labor Code Section 2922, any job with no set duration is presumed at-will: either side can end it at any time, for almost any reason, with no notice.1California Legislative Information. California Code Labor Code 2922 – Termination of Employment A written agreement can override that by fixing a term, requiring cause for termination, mandating advance notice, or guaranteeing severance.
The contract does not have to rewrite every aspect of at-will to be worth signing. A simple agreement guaranteeing a base salary for twelve months gives the employee a breach-of-contract claim if the employer terminates without cause during that window. Section 2922 treats an employment for a “specified term” as one longer than a month; anything shorter still falls under the at-will presumption unless the written agreement says otherwise.
Core Terms Every Contract Should Cover
Beyond identifying the parties, the position, the duties, and the work location, a California contract needs to address several items that carry specific legal weight:
- Exempt or non-exempt classification, and the basis for it. California applies both state Wage Orders and the federal Fair Labor Standards Act to decide who qualifies as exempt.
- Compensation: base salary or hourly rate, payment frequency, bonuses. California requires wages to be paid at least twice per calendar month, with specific deadlines tied to the pay period.2Department of Industrial Relations. Paydays, Pay Periods, and the Final Wages
- Term and termination: fixed period or indefinite, grounds for termination, and notice each side must give.
- Benefits: health insurance, retirement contributions, paid time off, equity or stock option grants and their vesting schedules.
California’s minimum wage is $16.90 per hour as of January 1, 2026, and certain cities and counties set higher local rates.3Department of Industrial Relations. California Minimum Wage MW-2026 Any contract setting pay below the applicable minimum is unenforceable on that point.
Overtime and Exempt Classification
California’s overtime rules go beyond the federal 40-hour weekly rule. Non-exempt employees earn time-and-a-half after eight hours in a day and double time after twelve, plus overtime on the seventh consecutive day of work in a workweek. Whether a position is exempt from those rules depends on both a salary threshold — at least twice the state minimum wage for full-time work — and the employee primarily performing executive, administrative, or professional duties as defined by the applicable Wage Order.4Department of Industrial Relations. Exemptions From the Overtime Laws
Misclassifying a non-exempt employee as exempt is one of the most expensive errors an employer can make here. Liability includes unpaid overtime, meal and rest break penalties, and waiting-time penalties if the employee has already left. State the classification in the contract, and be sure it holds up against both the salary and duties tests.
Commission Agreements Must Be Separate and Written
If any part of compensation involves commissions, Labor Code Section 2751 requires a separate written contract spelling out how commissions are calculated and when they are paid. The employer must give the employee a signed copy and get a signed receipt.5California Legislative Information. California Code Labor Code LAB 2751
When a commission agreement expires and both sides keep working under its terms, the original is presumed to remain in effect until it is replaced or the employment ends. Disputes commonly arise when an employer changes the commission structure informally and the employee later argues no agreement was ever reached on the new terms. Put every change in writing and get a fresh signature.
The Wage Notice Employers Must Hand Over at Hiring
Separate from the contract itself, Labor Code Section 2810.5 requires employers to give every non-exempt employee a written wage notice at the time of hire. It must cover:
- Pay rate and basis (hourly, salary, piece rate, commission, or otherwise), plus applicable overtime rates.
- The regular payday.
- The employer’s legal name and any “doing business as” names.
- The employer’s physical address (and mailing address if different) and phone number.
- The workers’ compensation carrier’s name, address, and telephone number.
- A statement that the employee may accrue and use paid sick leave and cannot be retaliated against for doing so.
6California Legislative Information. California Code Labor Code 2810.5 – Obligations of Employer The notice must be in whatever language the employer normally uses to communicate employment information to the worker. Leaving items blank or skipping the notice altogether can bring administrative penalties. The Labor Commissioner publishes an official template (DLSE Form NTE) that most employers use.
Provisions California Won’t Enforce
Non-Compete Clauses
Business and Professions Code Section 16600 declares void any contract restraining someone from working in a lawful profession, and California courts read the statute broadly to cover every employment non-compete, no matter how narrowly drafted.7California Legislative Information. California Code Business and Professions Code 16600
Two recent laws sharpened the prohibition. SB 699, effective January 1, 2024, added Section 16600.5 and made it a civil violation for an employer to enter into or attempt to enforce a void non-compete, including one signed in another state. Workers can sue for injunctive relief, actual damages, and attorney’s fees.8California Legislative Information. Senate Bill 699 AB 1076 added Section 16600.1 and required employers to send written notice by February 14, 2024, to current and former employees (employed after January 1, 2022) who had signed non-competes, informing them the clauses are void.9California Legislative Information. Assembly Bill 1076 Including a non-compete in a California contract is not just wasted ink; it exposes the employer to a lawsuit.
Out-of-State Forum and Choice-of-Law Clauses
Employers with headquarters outside California sometimes try to route disputes to another state’s courts or arbitrators, or apply another state’s law. Labor Code Section 925 blocks both moves. An employer cannot require a California-based employee to resolve disputes outside the state or waive California law protections for claims arising here.10California Legislative Information. California Code Labor Code 925
If the contract includes one of these provisions, the employee can void it, the dispute defaults to California courts and California law, and the employer may be ordered to pay the employee’s attorney’s fees. One narrow exception: Section 925 does not apply if the employee was individually represented by their own lawyer when negotiating the forum-selection or choice-of-law clause.
The Employee Invention Carve-Out
Invention-assignment clauses cannot reach as far in California as they do elsewhere. Under Labor Code Section 2870, an assignment does not apply to inventions the employee developed entirely on their own time, without using the employer’s equipment, supplies, or trade secret information, provided the invention does not relate to the employer’s current or anticipated business and did not result from work performed for the employer.11California Legislative Information. California Code Labor Code 2870 – Inventions Made by an Employee
Section 2872 pairs that protection with a notice requirement: any contract containing an invention-assignment provision must also include written notification telling the employee the assignment does not cover inventions qualifying under Section 2870.12California Legislative Information. California Code Labor Code LAB 2872 If you are reviewing a contract with a broad invention clause and no reference to Section 2870, flag it. The reference is required.
Trade Secret Immunity Notice
Any employment contract that addresses trade secrets or confidential information must include a whistleblower immunity notice under the federal Defend Trade Secrets Act. The notice tells the employee they will not face criminal or civil liability for disclosing trade secrets to a government official or attorney to report a suspected legal violation, or in a court filing made under seal. An employer that skips the notice loses the ability to recover enhanced damages or attorney’s fees in any federal trade secret lawsuit against that employee.13Office of the Law Revision Counsel. 18 U.S. Code 1833 – Exceptions to Prohibitions
The language does not have to appear word-for-word inside the contract; a cross-reference to a separate policy document describing the employer’s reporting procedures will satisfy the requirement. One way or another, the immunity language needs to reach the employee.
Arbitration Clause Limits
Mandatory arbitration provisions remain generally enforceable under the Federal Arbitration Act, but two limits matter for California contracts.
The federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act gives employees who allege sexual harassment or assault the right to reject any pre-dispute arbitration agreement and take the claim to court. The choice belongs entirely to the employee, and a court, not an arbitrator, decides whether the law applies to a given dispute.14Office of the Law Revision Counsel. 9 USC 402 – No Validity or Enforceability
Section 925 also reaches arbitration clauses: an employer cannot require a California-based employee to arbitrate outside the state.10California Legislative Information. California Code Labor Code 925 Contracts with arbitration provisions should specify a California venue, or the employee can void the whole clause.
Severance Agreements at the End
When employment ends, the departing employee is often asked to release legal claims in exchange for a payment. Those agreements have their own rules.
If the employee is 40 or older, the federal Older Workers Benefit Protection Act requires the employer to give them at least 21 days to review the agreement before signing, or 45 days if the severance is part of a group layoff. After signing, the employee gets a seven-day window to revoke, and the agreement is not enforceable until that period expires.15Office of the Law Revision Counsel. 29 USC 626 – Recordkeeping, Investigation, and Enforcement Pressuring the employee to sign faster, or skipping the waiting periods, risks having the waiver thrown out.
Confidentiality and non-disparagement clauses in severance agreements also face limits. The National Labor Relations Board has ruled that broad versions of those clauses, offered to non-supervisory employees, violate the NLRA if they restrict employees from discussing workplace conditions, cooperating with labor investigations, or assisting coworkers with workplace issues. Narrowly tailored provisions that protect only genuinely proprietary information are more likely to survive.
Signing, Copies, and Recordkeeping
California recognizes electronic signatures under the Uniform Electronic Transactions Act, so neither party needs to sign on paper for the contract to be valid.16California Legislative Information. California Code Civil Code 1633.1 – Uniform Electronic Transactions Act Whichever method is used, the employer should give the employee a complete copy of the signed agreement. If a dispute surfaces later and the employee does not have a copy, the employer’s credibility suffers immediately.
California requires employers to maintain personnel records for at least three years after termination.17Department of Industrial Relations. Personnel Files and Records If a charge or lawsuit is filed, all related records must be preserved until the matter is fully resolved, regardless of the standard retention period.