The Employment section: payroll, hours and paperwork
20% of the Law and Business exam, second only to Contracts. It tests California labor law and federal payroll tax, and it tests them exactly.
Many contractors who sit this exam have run crews for years, but someone else ran payroll. That is the gap this section finds. The questions are rarely about what feels fair; they are about what Wage Order 16, the Labor Code, EDD and the IRS actually say, with their exact hours and days.
What CSLB says it covers
The official study guide lists four topics under Employment Requirements (20%):
- Hiring employees — W-4, DE 4, I-9, new-hire reporting, employee or independent contractor.
- Supervising and training employees — hours, overtime, breaks, harassment prevention training.
- Evaluation and record-keeping — what to keep, for how long, and what employees can ask to see.
- Payroll — withholding, deposits, final pay.
The numbers that get asked
| Rule | Number |
|---|---|
| Time and a half: after Wage Order 16 §3 | 8 h a day / 40 h a week |
| Double time: after Wage Order 16 §3 | 12 h a day |
| 7th consecutive day: first 8 h / after 8 h Wage Order 16 §3 | 1½× / 2× |
| First meal period: work period over / length at least Wage Order 16 §10 | 5 h / 30 min |
| Second meal period: work over Wage Order 16 §10 | 10 h |
| Paid rest: per 4 hours or major fraction Wage Order 16 §11 | 10 min |
| Missed meal or rest period premium Labor Code §226.7 | 1 hour's pay per workday |
| Final pay, quit without 72 hours' notice Labor Code §202 | within 72 h |
| Waiting time penalty, maximum Labor Code §203 | 30 days' pay |
| Paid sick leave: accrual / wait before use Labor Commissioner FAQ | 1 h per 30 h / 90 days |
| Report a new hire to EDD (DE 34) DE 44 | 20 calendar days |
| Monthly vs semiweekly depositor, lookback taxes IRS Pub 15 | $50,000 |
| Deposit next business day once taxes accumulate to IRS Pub 15 | $100,000 |
| Keep payroll records (EDD and IRS) DE 44; Pub 15 | 4 years |
| Harassment prevention training required at Gov. Code §12950.1 | 5+ employees |
IWC Wage Order 16; Labor Commissioner (DLSE) FAQs on overtime, meal periods, final pay and paid sick leave; EDD California Employer's Guide (DE 44, 2026); IRS Publication 15 (2026). Checked 28 September 2026.
Where people lose points
- California overtime is daily, not just weekly. A worker who does four 10-hour days has 8 hours of overtime even though the week is only 40 hours. And the seventh consecutive day in a workweek is overtime from the first hour.
- Fired, quit with notice, quit without. Discharged: all wages, including accrued vacation, immediately. Quit with at least 72 hours' notice: on the last day. Quit without notice: within 72 hours. The exam will swap them.
- The waiting time penalty is a day's pay per day, capped at 30 days. It applies when the employer willfully fails to pay final wages on time. Not being able to afford it is not a defense; a good-faith dispute about what is owed is.
- Your deposit schedule is not your payroll schedule. Whether you deposit monthly or semiweekly depends on the taxes you reported in the lookback period (July 1 to June 30): $50,000 or less is monthly, more is semiweekly. How often you pay your crew has nothing to do with it. This is a sample question in CSLB's own study guide.
- Meal periods start by the end of the fifth hour. A first meal can be waived by mutual consent only if the whole day is six hours or less. A second meal can be waived only if the day is 12 hours or less and the first meal was not waived.
- Different agencies, different record periods. EDD and the IRS: payroll records at least 4 years. Wage Order 16 time and pay records: at least 3 years. Personnel files: at least 3 years after termination. If you are asked “how long”, check whose rule it is.
- Employee until proven otherwise. Under the ABC test a worker is an employee unless the hiring business proves all three parts: free from its control, doing work outside its usual business, and in an independently established trade.
- Twenty days, and rehires count. New hires go to EDD on the DE 34 within 20 calendar days of the start-of-work date, and that includes rehires after a separation of at least 60 consecutive days.
How the questions tend to read
A worker, a week of hours or a way of leaving the job, and a question about what is owed and when. Some are calculations. Two examples of our own, written the same way (not actual exam questions):
A carpenter earning $30 an hour works four 10-hour days, Monday to Thursday. The week totals 40 hours. How much overtime pay is owed?
$360: 8 hours at $45. Each day has 2 hours over 8, and in California that is overtime whatever the weekly total. “Nothing, it is only 40 hours” will be one of the choices.
An employee quits on a Monday without any notice. When are final wages due?
Within 72 hours. With at least 72 hours' notice they would be due at the time of quitting; if the employee had been fired, immediately.
How to study it
- Read Wage Order 16 sections 3, 10 and 11. Overtime, meals and rest. They are short, and they are the construction-specific version of the rules.
- Read the “Required forms” and “Recordkeeping” parts of EDD's DE 44 and section 11 of IRS Publication 15 on deposits.
- Do the overtime math by hand for a dozen weeks with long days, short days and a seventh day, until you stop double-counting.
- Skip memorizing dollar amounts that change every year (minimum wage, wage bases, SDI rate) unless your study material marks them for the current year.
- Budget. In our study plan Employment gets about 3½ hours in two weeks and 5½ in four.
Common questions
Is federal overtime tested?
California's rules are stricter and they are the ones Wage Order 16 sets for construction, so study those. We do not cover federal-only overtime rules on this page.
Do I need to know tax rates?
Know how the system works — forms, deposits, deadlines. Rates and wage bases change yearly; learn only the current ones your material gives you.
Does unused sick leave have to be paid out?
No, not unless the employer's policy provides for it. It must be restored if the employee is rehired by the same employer within 12 months.
Last reviewed 28 September 2026 against IWC Wage Order 16, the Labor Commissioner's FAQs (overtime, meal and rest periods, paydays and final pay, waiting time penalty, paid sick leave, independent contractors, personnel files), the EDD California Employer's Guide (DE 44, 2026), IRS Publication 15 (2026) and the Labor Commissioner's summary of the harassment training rules in Government Code §12950.1. Laws and amounts change; confirm with the agency. Study guidance, not legal or tax advice. We are not affiliated with CSLB or PSI.