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When an employer discharges an employee, the Labor Code makes the earned and unpaid wages due:
- A At the time of discharge Correct
- B Within 72 hours of discharge 72 hours is the deadline in section 202 for an employee who quits without notice, and it has no application to a discharge.
- C On the next regular payday Section 201 does not let a discharge wait for the next payday; the wages are payable at the time of discharge.
- D Within seven calendar days Seven calendar days is the allowance in section 204(d) for a weekly, biweekly or semimonthly payroll, not a final pay deadline.
At the time of discharge: wages earned and unpaid when an employee is fired are due and payable immediately (Lab. Code s. 201(a)). Holding the final check for the next regular payday makes the employer late already.
Lab. Code s. 201(a)
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How soon must final wages be paid to an employee without a definite-term written contract who quits with no notice?
- A At the time of quitting Payment at the time of quitting is owed only where the employee gave 72 hours previous notice of the intention to quit.
- B Within 24 hours of quitting The section states no 24 hour deadline; the only figure it sets for a quit without notice is 72 hours.
- C Within 72 hours of quitting Correct
- D On the next regular payday Section 202 does not permit final wages to wait for the next regular payday.
Within 72 hours: an employee without a written contract for a definite period who quits with no notice must be paid no later than 72 hours after quitting (Lab. Code s. 202(a)). Pay at the moment of quitting is owed only when the employee gave 72 hours' notice first.
Lab. Code s. 202(a)
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A contractor willfully withholds a discharged worker's final pay for 45 days. At $240 a day, the waiting time penalty is:
- A $2,400 $2,400 is 10 days at the daily rate, and the section fixes no 10 day figure; the penalty runs until payment, capped at 30 days.
- B $7,200 Correct
- C $10,800 $10,800 is the full 45 day delay, but the wages shall not continue for more than 30 days.
- D $14,400 $14,400 is 60 days at the daily rate, and the section stops the penalty at 30 days.
$7,200: a willfully withheld final paycheck runs on as a penalty at the same daily rate, but the law caps it at 30 days, and 30 days at $240 is $7,200 (Lab. Code s. 203(a)). Counting all 45 days of the delay overshoots the cap.
Lab. Code s. 203(a)
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A contractor wants to pay its hourly field crews once a month for the prior month's work. How often must it pay them?
- A Monthly, on a payday set in advance Designating the payday in advance satisfies only part of the section; wages are still due twice during each calendar month.
- B Twice each calendar month Correct
- C Monthly, within seven days of month end The seven day allowance in subdivision (d) applies to a weekly, biweekly or semimonthly payroll, and a monthly payroll is none of those.
- D Every week The section sets a twice monthly floor, so weekly pay is permitted but never required.
Twice each calendar month: hourly crews must be paid for the 1st to the 15th between the 16th and the 26th, and for the rest of the month by the 10th of the next (Lab. Code s. 204(a)). A single monthly payday, even one set in advance, pays the first half of the month too late.
Lab. Code s. 204(a)
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Which item must an employer show on the itemized wage statement furnished to each employee?
- A Gross wages earned Correct
- B Full social security number Item (7) allows only the last four digits of the social security number, or another employee identification number, so a full number is the opposite of what the section requires.
- C Year to date vacation balance A vacation balance appears nowhere in the nine items the section lists.
- D The employee's home address Item (7) asks for the employee's name and only the last four digits of the social security number or an employee identification number; the employee's address is not among the nine items.
Gross wages earned is one of the nine items the itemized wage statement must show (Lab. Code s. 226(a)). The statement may carry only the last four digits of the social security number, never the full number.
Lab. Code s. 226(a)
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When must a new contracting business register with the Employment Development Department after becoming a subject employer?
- A Within 30 days The guide gives 15 days, not 30, for registering after becoming a subject employer.
- B 15 days after its first payday The trigger is becoming a subject employer, so the count starts there and not at the first payday.
- C Within 15 days Correct
- D By the quarter's last day The guide sets a day count from subject employer status rather than a quarter-end deadline.
Within 15 days: a new employer must register with the Employment Development Department (EDD) within 15 days of becoming a subject employer (EDD DE 44 (2026), p. 10). The count starts at subject employer status, not at the first payday.
EDD DE 44 (2026), p. 10 Reference document, not law.
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Which two California payroll taxes are employer contributions due quarterly rather than amounts withheld from employee wages?
- A Unemployment insurance and state disability insurance State disability insurance is withheld from employee wages, so it is not one of the two employer contributions.
- B Employment training tax and personal income tax Personal income tax is withheld from employee wages, so this pairing puts a withholding among the employer contributions.
- C Unemployment insurance and employment training tax Correct
- D State disability insurance and personal income tax Both of these come out of employee wages, and the guide says those withholdings 'may need to be deposited more often' than quarterly.
Unemployment insurance and the employment training tax are the employer's own contributions, due quarterly (EDD DE 44 (2026), p. 68). State disability insurance and personal income tax are withheld from employee wages, which is why they may need depositing more often.
EDD DE 44 (2026), p. 68 Reference document, not law.
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Which lookback period decides whether a Form 941 filer deposits federal payroll taxes monthly or semiweekly?
- A January through December this year The lookback period closes on June 30, before the calendar year starts, so the current year's own quarters are not it.
- B July 1 through June 30 Correct
- C January through December last year For a Form 941 filer the lookback runs from July 1 to June 30 across two calendar years, not over the immediately preceding calendar year.
- D The most recent single quarter The publication reads the total taxes reported across four quarters of the lookback period, so a single recent quarter does not set the schedule.
July 1 through June 30: a Form 941 filer's deposit schedule for the year is set by the taxes it reported in that lookback period (IRS Pub. 15 (2026), p. 32). The current calendar year is not the lookback period; the lookback that sets the schedule closes on the June 30 before the year starts.
IRS Pub. 15 (2026), p. 32 Reference document, not law.
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The Labor Code requires payroll records showing daily hours worked, wages paid and piece-rate units earned to be kept on file for at least how many years?
- A One One year is a third of the floor; the section keeps these records on file for not less than three years.
- B Two Two years falls below the statutory floor, which the section fixes at not less than three years.
- C Three Correct
- D Seven Seven years is longer than the three-year floor the section sets.
Three years: payroll records showing daily hours, wages and piece-rate units must be kept on file for not less than three years (Lab. Code s. 1174(d)). Two years falls short of that floor.
Lab. Code s. 1174(d)
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Until its account has a rating history, a new employer's unemployment insurance rate is:
- A 2.0% No employer may have a rate other than 3.4 percent until its reserve account has the history the section requires, so 2.0 percent is not the starting rate.
- B 3.4% Correct
- C 4.0% The section holds the rate at 3.4 percent, neither more nor less, until the account qualifies, so 4.0 percent overstates it.
- D 5.0% 5.0 percent is above the 3.4 percent the section fixes for an employer whose account has no rating history yet.
3.4 percent: no employer may have a rate above or below 3.4 percent until its reserve account has carried benefit charges for the qualifying period (Unemp. Ins. Code s. 982(a)). A different rate, such as 2.0 percent, can come only once the account has that history.
Unemp. Ins. Code s. 982(a)
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Which step must every employer take to verify that a new hire is eligible to work in the United States?
- A Completing Form W-4 The publication asks each new employee to complete a Form W-4 separately, and that form sets withholding rather than verifying eligibility for employment.
- B Using Social Security number verification The publication describes that service as something the employer may use to match a name to a social security number, and notes a person may have a valid number without being authorized to work.
- C Completing Form I-9 Correct
- D Checking the hire through E-Verify The publication says an employer may use E-Verify to confirm employment eligibility, so it is optional and does not replace the Form I-9.
Completing Form I-9, Employment Eligibility Verification, is the step every employer must take to verify a new hire's eligibility to work (IRS Pub. 15 (2026), p. 7). E-Verify and the social security number check are tools an employer may use, not the required form.
IRS Pub. 15 (2026), p. 7 Reference document, not law.
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Records of federal employment taxes, such as wage payment dates and amounts withheld, should be kept for at least how many years?
- A Two Two years is shorter than the retention the guide states, which is at least four years for employment tax records.
- B Four Correct
- C Five Five years is longer than the four years the guide asks employment tax records to be kept.
- D Ten Ten years is more than twice the four years the guide asks employment tax records to be kept.
Four years, because employers are told to keep all records of employment taxes for at least four years (IRS Pub. 15 (2026), p. 9). Two years falls short of that.
IRS Pub. 15 (2026), p. 9 Reference document, not law.
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Which signed withholding forms must a California employer obtain from a new hire and keep in its payroll records?
- A Form W-9 and DE 9 A Form W-9 collects a taxpayer identification number from a payee such as a subcontractor; a new employee completes a Form W-4.
- B Form 1099 and DE 542 A Form 1099 reports payments to someone who is not an employee, so it is not a withholding form a new hire signs.
- C Form W-4 and DE 4 Correct
- D Form I-9 and DE 34 The DE 34 is the employer's own report of a new employee to the state, not a withholding form the new hire signs.
The federal Form W-4 and the state DE 4: an employer must keep both in its payroll records (EDD DE 44 (2026), p. 25). The DE 34 is the new-hire report the employer files, not a form the employee signs.
EDD DE 44 (2026), p. 25 Reference document, not law.
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To whom must a California employer send the Forms W-2 and W-2C it issues each year?
- A Employees and the Franchise Tax Board The guide says not to send a copy of a W-2 or W-2C to the Franchise Tax Board.
- B Employees and the Social Security Administration Correct
- C Employees and the Employment Development Department The Employment Development Department already has the wage detail from the quarterly DE 9C, which is why the W-2 is not filed with it.
- D The Social Security Administration only Employees must receive their copies too, so the Social Security Administration is not the only destination.
Employees and the Social Security Administration get the Forms W-2 and W-2C (EDD DE 44 (2026), p. 79). The state already receives the wage detail on the quarterly DE 9C, which is why no copy goes to the Franchise Tax Board or the Employment Development Department.
EDD DE 44 (2026), p. 79 Reference document, not law.
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When must an employer deposit federal unemployment tax owed for a quarter that requires a deposit?
- A 15th of the month after the quarter The due date is the last day of the month following the quarter, not the fifteenth of that month.
- B With the annual Form 940 The tax is deposited quarterly; the annual return reports it and is not itself the deposit deadline.
- C With each payroll tax deposit Federal unemployment tax runs on its own quarterly schedule, not on the monthly or semiweekly schedule used for withheld income and social security taxes.
- D End of the month after the quarter Correct
By the last day of the first month after the quarter ends: federal unemployment (FUTA) tax owed for a quarter must be deposited by then (IRS Pub. 15 (2026), p. 44). The annual Form 940 reports the tax but is not the deposit deadline.
IRS Pub. 15 (2026), p. 44 Reference document, not law.
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An employee works 11 hours at $34 an hour on the only workday of the week. The gross pay owed is:
- A $374 This pays all 11 hours at the regular rate, but section 510(a) requires 'no less than one and one-half times the regular rate of pay' for work in excess of eight hours in one workday.
- B $425 Correct
- C $476 This doubles the three hours past eight, and section 510(a) reaches twice the regular rate only for 'work in excess of 12 hours in one day', which this workday never passes.
- D $561 This pays every one of the 11 hours at one and one-half, but the premium reaches only the hours in excess of eight; the first eight are paid at the regular rate.
$425: eight hours at the $34 regular rate, plus the three hours past eight at one and one-half times that rate (Lab. Code s. 510(a)). Double time starts only past 12 hours in a day, which this workday never reaches.
Lab. Code s. 510(a)
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Which factor decides whether an employer deposits its federal payroll taxes on a monthly or a semiweekly schedule?
- A How often it pays its crews Pay frequency does not set the schedule. The determination looks at the amount of employment taxes reported for the lookback period.
- B The number of employees it has Headcount is not the test. A small crew with a large payroll can owe more tax than a large crew with a small one, and the tax reported is what counts.
- C Its reported employment taxes Correct
- D How many years it has operated Time in business is not a factor the regulation names. The schedule for each year follows the taxes reported for the lookback period.
The taxes reported for the lookback period decide it, because whether an employer is a monthly or semiweekly depositor for a year is an annual determination based on the employment taxes it reported for that period (26 CFR s. 31.6302-1(b)(1)). How often the crew is paid does not enter into it.
26 CFR s. 31.6302-1(b)(1)
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A monthly schedule depositor must deposit the employment taxes on one month's wages by this day of the following month:
- A The 10th The monthly schedule gives until the 15th of the next month, not the 10th.
- B The 15th Correct
- C The 20th The 20th is five days past the monthly deadline, which falls on the 15th.
- D The 25th The 25th is ten days past the monthly deadline, which falls on the 15th; no deposit rule uses it.
The 15th is the deadline, because a monthly depositor must deposit the employment taxes accumulated on a calendar month's payments by the 15th day of the next month (26 CFR s. 31.6302-1(c)(1)). The 10th and the 20th are not dates the monthly schedule uses.
26 CFR s. 31.6302-1(c)(1)
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Employment taxes of $62,000 were reported for a contractor's lookback period. Which deposit schedule applies to it this year?
- A Monthly Monthly deposits are for a lookback total of $50,000 or less, and $62,000 is over that line.
- B Quarterly The regulation sorts every employer into one of two schedules, monthly or semiweekly. Quarterly is neither.
- C Next-day The next-day rule is set off by $100,000 piling up on a single day, not by the lookback total.
- D Semiweekly Correct
Semiweekly applies for the whole year, because an employer whose lookback-period employment taxes exceed $50,000 is a semiweekly depositor for the entire calendar year (26 CFR s. 31.6302-1(b)(3)). The monthly schedule is only for totals of $50,000 or less.
26 CFR s. 31.6302-1(b)(3)
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Federal unemployment (FUTA) tax applies to each employee's wages for the calendar year only up to:
- A $4,000 $4,000 stops the tax short of the $7,000 the statute counts.
- B $5,000 $5,000 is below the $7,000 base the statute sets for each employee.
- C $7,000 Correct
- D $10,000 $10,000 overstates the $7,000 base the statute sets.
The federal unemployment (FUTA) wage base is $7,000, because wages count for the tax only until $7,000 has been paid to the individual by the employer during the calendar year (26 U.S.C. s. 3306(b)(1)). A $5,000 base would leave the next $2,000 of a worker's wages untaxed.
26 U.S.C. s. 3306(b)(1)
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A drywall contractor pays a helper by the job to hang drywall on its own projects. Which ABC test condition do these facts show it cannot meet?
- A Freedom from its control The facts say nothing about who directs the helper's work, so they do not show this condition failing.
- B His own liability insurance Carrying insurance is not one of the three conditions of the ABC test.
- C Work outside its usual business Correct
- D An independent trade of his own The facts say nothing about whether the helper runs a trade of his own, so they do not show this condition failing.
The work is not outside the usual course of the hiring entity's business, because hanging drywall is the drywall contractor's own trade, and the ABC test requires the person to perform work outside that usual course (Lab. Code s. 2775(b)(1)(B)). Insurance of his own is not one of the three conditions at all.
Lab. Code s. 2775(b)(1)(B)
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A business becomes an employer for California unemployment insurance once it pays wages in a calendar quarter of more than:
- A $50 $50 is half the $100 quarterly figure the definition uses.
- B $100 Correct
- C $250 $250 is well past the point where the duty starts. Wages over $100 in a quarter make a business an employer.
- D $500 $500 is five times the $100 figure the definition uses.
The trigger is $100, because an employing unit with one or more employees becomes an employer when it pays wages for employment in excess of $100 during any calendar quarter (Unemp. Ins. Code s. 675). Lower amounts such as $50 are not figures the definition uses.
Unemp. Ins. Code s. 675
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To treat a worker as an independent contractor, which ABC test condition must the hiring entity prove?
- A A signed independent contractor agreement The condition looks at control both under the contract and in fact, so a signed agreement on its own does not meet it.
- B Freedom from the entity's control Correct
- C Payment by the job How the worker is paid is not a condition of the ABC test.
- D Ownership of the tools Owning the tools is not a condition of the ABC test.
Freedom from the entity's control is a condition it must prove, because the person has to be free from the hiring entity's control and direction in performing the work, both under the contract and in fact (Lab. Code s. 2775(b)(1)(A)). A signed agreement alone cannot show freedom in fact.
Lab. Code s. 2775(b)(1)(A)
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On a quarter's taxable wages of $44,000, the employer's own share of social security tax is:
- A $638 $638 applies 1.45 percent, which is the Medicare rate and not the social security rate.
- B $2,728 Correct
- C $3,366 $3,366 applies 7.65 percent, the employer's social security and Medicare shares added together, where the question asks for social security alone.
- D $5,456 $5,456 applies 12.4 percent, which is both halves of the social security tax, and the employer's own share is one of them.
$2,728: the 6.2 percent social security rate applies to the employer and the employee each, and the employer's 6.2 percent of $44,000 is $2,728 (IRS Pub. 15 (2026), p. 29). Adding the Medicare rate or the employee's half gives more than the employer's own share.
IRS Pub. 15 (2026), p. 29 Reference document, not law.
LBExam