California Paid Sick Leave: A Small Business Guide

A salon owner in Costa Mesa asked me about paid sick leave last year. She had four employees, gave them "a few sick days if they really need them," and figured she was compliant. She was not. California has had a mandatory paid sick leave law on the books since 2015, and in 2024 the state expanded it significantly. She owed back sick pay to workers who had used unpaid days and did not even know it.

This is not a law designed to catch you. Most small business owners who get it wrong just never read it carefully. This post fixes that.

What California's Paid Sick Leave Law Requires

Every California employer is required to provide paid sick leave to employees who work 30 or more days in a calendar year. That includes part-time workers, seasonal workers, and temporary workers. There is no small business exemption. If you have one employee who clears 30 days, you are covered.

Under SB 616, which took effect January 1, 2024, the minimum went from 3 days (24 hours) to 5 days (40 hours) per year. That is the state floor. Some cities have higher requirements. If you operate in the city of Los Angeles or San Francisco, check your local ordinance. For most Orange County cities, the state minimum applies.

The law covers employees who work for you at least 30 days in a 12-month period. They cannot start using sick leave until day 90 of employment, but they begin accruing it from their first day of work.

Contractors do not earn paid sick leave under this law. But if you have been misclassifying employees as contractors, fixing that classification also means they were entitled to this benefit the whole time. More on California AB5 worker classification if you are not sure where your workers stand.

Three Ways to Give Employees Their Sick Leave

You have flexibility in how you deliver paid sick leave. There are three approaches, and which one you choose affects your administrative overhead.

Option 1: Front-load it. At the beginning of each year, you give every eligible employee 40 hours of paid sick leave upfront. It is available immediately after the 90-day waiting period for new hires. If they do not use it, you do not have to carry it over to the following year.

This is the simplest method for most small businesses. You know exactly what you are providing, you do not have to track accrual by the hour, and it is clean. For a restaurant or retail shop with hourly employees, front-loading is often the easiest system to run.

Option 2: Standard accrual. Employees earn one hour of paid sick leave for every 30 hours worked. Under this method, you must allow unused time to carry over into the following year. You can cap the total accrual balance at 80 hours (10 days), but you cannot cap annual usage below 40 hours.

For a part-time employee working 20 hours a week, this means they earn about 34 hours of sick leave over the course of a year. The law accounts for slower accrual: employees must have at least 24 hours available by their 120th day of employment, and at least 40 hours by their 200th day.

Option 3: Alternative accrual formula. You can use a different accrual schedule as long as it hits those same two benchmarks: 24 hours by day 120 and 40 hours by day 200. This gives payroll software more flexibility to match your pay periods. Most small business owners will not need this option.

Who Can Use It and What For

After 90 days of employment, an eligible employee can use their accrued sick leave for their own illness, injury, or medical appointment. They can also use it to care for a sick family member, which California defines broadly: child, parent, spouse, registered domestic partner, grandparent, grandchild, or sibling.

Preventative medical care counts. Situations related to domestic violence, sexual assault, or stalking count. And starting in 2026, jury duty and judicial proceedings for crime victims are covered too.

A few things you cannot do:

You cannot require an employee to find their own replacement before they take a sick day. You cannot require documentation for absences under three days unless you have that policy in your handbook. And you cannot discipline, dock pay, or reduce hours for legitimate use of paid sick leave.

The anti-retaliation piece is not a technicality. Complaints go directly to the California Labor Commissioner, and the penalties are real. If you write someone up for using sick leave or cut their hours the week after they called in, that is a violation.

The 2026 Notice Requirement Most Owners Have Not Heard About

Starting February 1, 2026, every California employer is required to give each employee a standalone "Know Your Rights" notice. This is a separate document, not just a line in your handbook. It covers paid sick leave rights, immigration protections, workers' compensation, and union organizing rights.

The California Labor Commissioner has a template. You can download it directly from the California Department of Industrial Relations.

You must give this notice to new employees at the time of hire, to all current employees if you have not already distributed it, and annually going forward.

If you are onboarding someone this week, add the notice to your onboarding packet. If you have not given it to current employees yet, do it now. It takes about five minutes to print and hand out.

This is exactly the kind of quick-and-easy violation that shows up in a Labor Commissioner audit. Do not skip it.

What Goes on the Pay Stub

California law requires that every non-exempt employee's pay stub show the total paid sick leave hours accrued, hours used, and hours available. If you use the front-load method, showing the fixed balance is enough.

If you run payroll through software like Gusto, QuickBooks Payroll, or ADP, this is typically handled automatically once sick leave is set up correctly in your account. If you process payroll manually, you need to add this information to every paycheck.

I spoke with a coffee shop owner in Costa Mesa who had been running payroll in a spreadsheet. Sick leave tracking was not in it. That is a violation, even if the employees were receiving their sick days and never complained. The pay stub requirement is separate from whether sick leave is actually being given.

What OC Small Business Owners Most Often Get Wrong

Using an informal policy. "Take time when you need it" is not a compliant system. You need a documented policy, a method of tracking usage, and pay stub entries that reflect actual balances.

Not counting part-timers. Every part-timer who crosses 30 days of work in the year earns paid sick leave. A Friday-Saturday barista who works 20 hours a week qualifies without question. This trips up a lot of small restaurant and retail operators.

Not updating policies after SB 616. If your employee handbook was last updated before 2024, your sick leave policy probably still says 3 days. Update it. The employee handbook guide walks through what to include if you need to do a full revision.

Confusing the waiting period with zero entitlement. Employees start accruing sick leave on day one. They just cannot use it until day 90. That is different from saying they earn nothing for 90 days.

Forgetting about seasonal workers. A summer hire who works June through August will clear 30 days easily. They accrue sick leave. If you let them go in September and never tracked or provided it, you have a liability.

What Compliant Looks Like in Practice

A taco shop in Huntington Beach with six employees. Three full-time, three part-time. The owner front-loads 40 hours at the start of each year for full-time employees and uses standard accrual for part-time staff because their hours are irregular.

New hires get the sick leave policy on day one, along with the Know Your Rights notice. Both are printed and clipped to the onboarding packet. The employee signs an acknowledgment. This fits naturally into the rest of the onboarding process, right alongside the I-9, tax forms, and direct deposit setup.

Sick leave balances show up on every paycheck through Gusto. The owner does not track it manually; the software handles it. When someone calls in sick, she marks it as paid sick leave in the system. She does not ask for a doctor's note unless the absence runs more than three consecutive days, and she has that policy in writing.

That is it. It is not complicated once the system is in place. The setup takes a few hours; the ongoing maintenance is minimal.

The Cost in Real Numbers

For a full-time employee making California's $16.50 state minimum wage, 40 hours of paid sick leave represents about $660 in potential liability per year. Most employees do not use all of it. Utilization across hourly roles tends to run well under 50%.

For a restaurant with five employees averaging 30 hours a week, your worst-case exposure is around $3,300 per year across all five if everyone used every hour. Budget it as a predictable cost the same way you budget workers' comp or payroll taxes. If you are not already thinking about labor costs this way, the labor cost percentage guide gives you a framework for doing it right.

This is not a budget-breaking number. It is also not optional.

Getting Compliant If You Are Behind

If you have not been tracking sick leave properly, here is the practical path:

1. Decide which method you are using. Front-load is easiest for most small businesses.

2. Set up tracking in your payroll system and confirm sick leave balances appear on pay stubs.

3. Update your employee handbook to reflect the current 40-hour requirement.

4. Print the Know Your Rights notice and distribute it to every current employee.

5. Add the notice to your new hire packet going forward.

For businesses still putting together their hiring and onboarding process, My Friendly Staff helps Orange County small business owners build out the full hiring pipeline, from screening applicants to getting the right paperwork in place when someone starts. Getting compliance right from day one is a lot easier than correcting it after a Labor Commissioner complaint.

One More Thing

Paid sick leave is one piece of a broader compliance picture in California. The meal and rest break laws are the other piece that catches small businesses off guard most often. And if you have any workers you pay as contractors, make sure the AB5 classification rules are not creating a sick leave liability you have not accounted for.

California is not a light-regulation state. But most of these rules are not hard to follow once you understand them. The businesses that get hurt are usually the ones that never read the law, not the ones that read it and tried.