“I’m hiring my first employee in California, what do I actually need to do?”
“I just need to pay someone to help me… how complicated can it be?”
If you’ve thought that, you’re not alone.
For most founders, the first hire feels like a simple milestone. In California, it’s not. It’s a legal event with compliance requirements that start before your employee’s first day.
Miss a step, and you’re not just fixing paperwork later; you’re exposing your company (and sometimes yourself) to penalties, tax issues, and regulatory scrutiny.
Here’s what actually matters when you make your first hire.
What founders need to do (before and right after hiring)
1. Register as an employer with the EDD
Before running payroll, you need a California employer payroll tax account number by filing Form DE-1 with the Employment Development Department (EDD).
No registration = no legal payroll.
2. Report your new hire within 20 days
You’re legally required to file a Report of New Employee (Form DE-34) within 20 days of the employee’s start date.
Miss it, and penalties apply, $24 per employee, or up to $490 if the failure is intentional.
This is one of the most commonly missed steps.
3. Have workers’ comp insurance in place (before Day 1)
California requires workers’ compensation coverage for every employer, even with just one employee.
No exceptions. No grace period. Failure to carry coverage isn’t just a compliance issue; it can be treated as a criminal violation.
4. Set up payroll and tax withholding
You’re responsible for:
- Federal income tax withholding
- California state income tax
- Social Security and Medicare
- California State Disability Insurance (SDI)
Most founders underestimate this. A payroll provider (e.g., Gusto, Rippling) can reduce risk early.
5. Deliver required onboarding documents
At minimum, your new hire should receive:
- IRS Form W-4
- California Form DE 4
- Wage notice (pay rate, payday, employer info)
- Workers’ compensation notice and pamphlet
- Paid sick leave notice
- Benefits/COBRA information (if applicable)
California also requires specific “time of hire” pamphlets explaining benefits and workers’ comp rights.
6. Provide required workplace notices
Even if your team is remote, you still need to provide (physically or digitally):
- Wage and hour posters
- Anti-discrimination notices
- OSHA/safety information
This is often overlooked by remote-first startups.
3 mistakes founders make on their first hire
Mistake #1: Treating it like an informal arrangement
Paying someone “off the books” or delaying setup is one of the fastest ways to create liability.
There’s no “startup grace period” in California employment law.
Mistake #2: Misunderstanding “at-will” employment
Yes, California is an at-will state.
No, that doesn’t reduce your obligations.
“At-will” helps with termination flexibility, not compliance with wage laws, notices, or onboarding requirements.
Mistake #3: Skipping the offer letter
You’re not required to have a written contract, but skipping an offer letter creates risk.
A simple, well-drafted offer letter clarifies:
- Compensation
- Role and title
- Start date
- At-will status
Without it, disputes become subjective, and harder to resolve.
Your 10-minute first-hire compliance checklist
Before your employee starts, you should be able to check every box:
- ☐ Registered with the California EDD (Form DE-1)
- ☐ Obtained a Federal EIN
- ☐ Filed (or scheduled) Form DE-34 (within 20 days)
- ☐ Purchased workers’ compensation insurance
- ☐ Set up payroll with proper tax withholding
- ☐ Prepared onboarding documents (W-4, DE 4, wage notice, etc.)
- ☐ Prepared workers’ comp pamphlet
- ☐ Provided required workplace notices (physical or digital)
- ☐ Drafted and signed an offer letter
- ☐ Confirmed any industry-specific licensing requirements
Bottom line
California doesn’t give founders a learning curve on employment law.
The rules apply from your very first hire, even if it’s just one person.
The upside?
If you set this up correctly from the start, you avoid the kind of issues that slow companies down later: audits, penalties, and preventable disputes.
Need help getting your first hire right?
We’re hosting a webinar on April 14, Hiring & Building Your Startup Team: A Practical Playbook for Scaling Across States – Without Compliance Risks.
Reserve your Spot: https://primumlaw.com/hiring-and-building-your-startup-team/?post_type=page