.svg)
You incorporated in Delaware. Your first hire works from San Francisco.
Standard startup setup. Also the start of a compliance checklist most founders do not see coming.
Delaware is where your company lives. California is where your employee works. California employment law applies to anyone working in California, regardless of where the company is incorporated.
California law applies by location
The rules that govern your employee's rights are based on where they perform work. Not your state of incorporation. Not your headquarters address.
If your employee is in California, California rules apply. Every single one.
Non-competes are void
California Business and Professions Code Section 16600 makes non-compete agreements unenforceable against employees.
Do not include non-compete clauses in California employment documents. Do not try to enforce them through choice-of-law provisions. California courts will not honor them.
Confidentiality agreements and invention assignment agreements are enforceable. Non-competes are not.
Final paycheck timing
When you terminate an employee in California, the final paycheck is due on the last day. Not the next pay cycle. Not "within 72 hours" (that applies only to voluntary resignations with no notice).
Penalties for late payment accrue daily under Labor Code Section 203. Up to 30 days of wages.
PTO payout
California treats accrued, unused PTO as earned wages. At termination, you must pay it out in full.
"Use it or lose it" policies are illegal in California. You can implement a reasonable accrual cap. But you cannot forfeit accrued PTO at termination.
Overtime and meal breaks
California overtime rules are stricter than federal requirements.
Daily overtime: 1.5x after 8 hours in a day. 2x after 12 hours. Federal law only triggers overtime after 40 hours in a week.
Meal breaks: A 30-minute unpaid meal break is required for shifts over 5 hours. A second meal break for shifts over 10 hours. Missed breaks trigger one hour of premium pay per violation.
Rest breaks: A paid 10-minute rest break for every 4 hours worked.
These rules apply to non-exempt employees. Most early-stage startup employees are non-exempt unless they meet California's specific exemption criteria.
California-specific hiring requirements
Offer letters. Must include pay rate, pay frequency, and work schedule.
Workers' compensation. Required from day one. No waiting period. No minimum employee count.
Sexual harassment training. Required within 6 months of hire. Two hours for supervisors. One hour for others. Every two years.
Pay transparency. Salary ranges required in job postings for companies with 15 or more employees.
The bottom line
Delaware incorporation does not shield you from California employment law. If your employees work in California, you need California-compliant offer letters, termination procedures, and workplace policies from day one.
The gap between "we incorporated in Delaware" and "we comply with California employment law" is where most startup employment disputes begin. Close it early.
We help founders set up employment infrastructure across state lines. If you are hiring in California, reach out at Fellow.
