What is Per Diem Pay?

In California, “Per Diem Pay” describes two very different ways of getting paid. Depending on the job, it either refers to a daily allowance to cover travel costs or a specific type of flexible employment where you work on an “as-needed” basis.

• For Travelers: It is a tax-free reimbursement for meals, lodging, and incidental expenses while you are away from home on business.

• For Flexible Workers: It refers to per diem hours, where you aren’t a traditional 9-to-5 employee but instead pick up shifts as they become available.

How Does Travel Per Diem Work in California?

Per diem payment is generally not considered part of an employee’s wages; instead, they are reimbursements rather than taxable income (as long as it falls within government-approved rates). The Internal Revenue Service (IRS) usually sets the standard per diem rate, and California employers typically adhere to it when compensating employees for travel expenses and incidental costs.

If per diem expenses exceed the federal or state guidelines, the excess amount may be taxable. Employers are required to keep accurate records of per diem allowance amounts, including dates, locations, and the purpose of the trip, to ensure compliance.

Per Diem Employee Rights in California

Aside from traveling workers receiving a diem rate, other per diem employees, or “on-call” or temporary workers, are regularly employed in industries like healthcare, education, and hospitality. Per diem employees are typically hired on an as-needed basis, meaning they do not work regular schedules but instead are called in when additional help is required. While per diem workers in California enjoy flexibility, they also have certain rights and protections under state law, just like full-time employees.

What is the Stay-or-Pay Ban? New 2026 Protections:

The stay-or-pay ban is a law that prevents employers from using “debt” or training-repayment costs to trap workers in their jobs.

As of January 1, 2026, California has significantly expanded the rights of per diem employees. The new rights come from AB 692, more commonly known as the “Stay-or-Pay Ban.” But what is the stay-or-pay ban exactly? In short, it is a law designed to prevent employers from “trapping” flexible workers in their jobs using debt as a tether.

In the past, many workers taking on per diem hours were forced to sign “Training Repayment Agreement Provisions” (TRAPs). TARP contracts required the worker to pay back thousands of dollars in training or “onboarding costs” if they left the company before a certain date.

How the Ban Protects Per Diem Workers

The new 2026 legislation effectively outlaws many predatory practices. Here is how it impacts per diem workers’ rights:

• No “Quit Fees”: Employers can no longer charge a “liquidated damages” fee or a “quit fee” simply because an employee decided to stop accepting per diem hours.

• Training is Free: If a facility requires employees to undergo specialized training to work there, they cannot bill employees for that training if they leave.

• Freedom of Movement: The ban ensures that the core benefit of per diem work—flexibility—isn’t undermined by hidden debts.

Exceptions to the Rule

While the ban is broad, it is important to understand what pay per diem is in the context of bonuses. Under the new law, employers can still ask for a “clawback” of a sign-on or retention bonus, but only if they follow strict 2026 rules:

1. The repayment terms must be in a separate agreement from the main contract.

2. Employees must be given at least five business days to consult an attorney before signing.

3. The amount must be prorated, meaning the longer an employee stays, the less they owe back.

If an employer is threatening to withhold your final per diem payment to cover “training costs,” they may be in direct violation of the new 2026 law.

Wage and Hour Protections

Minimum Wage: Per diem employees in California are entitled to at least the state-mandated minimum wage. As of 2026, the minimum wage is set at $16.90 per hour for all employers. Per diem workers must be paid for every hour they work, including any required training time.

Overtime Pay: Even though per diem employees do not have regular schedules, they are still eligible for overtime pay if they work more than 8 hours in a day or 40 hours in a week. California’s overtime laws mandate that employees be compensated at 1.5 times their regular rate of pay for any overtime hours, and double pay after 12 hours in a day.

Per Diem Meal and Rest Breaks

Per diem employees in California are entitled to the same meal and rest breaks as regular employees. If they work more than 5 hours in a day, they must receive a 30-minute unpaid meal break. Additionally, for every 4 hours worked, they are entitled to a 10-minute paid rest break. If employers fail to provide breaks, they must pay an additional hour of pay as a penalty.

Right to Paid Sick Leave

Under California’s Healthy Workplaces, Healthy Families Act, per diem employees who work at least 30 days within a year are eligible for paid sick leave. Employees accrue one hour of paid sick leave for every 30 hours worked, which they can use for personal illness, medical appointments, or caring for a sick family member.

Anti-Discrimination Protections

Per diem employees are protected from discrimination, harassment, and retaliation under the California Fair Employment and Housing Act (FEHA). In other words, employees cannot be discriminated against based on race, gender, disability, age, or other protected characteristics. They are also protected from retaliation if they report workplace violations or unsafe working conditions.

Workers’ Compensation

Even as temporary workers, per diem employees are entitled to workers’ compensation benefits if they are injured on the job. Employers are required to provide coverage, and employees can file claims to cover medical expenses, wage loss, and rehabilitation costs.

Travel Per Diem and Labor Law Protections

While per diem covers travel-related expenses, employees should still receive regular wages for the hours worked, including overtime, if needed. In California, strict wage and hour laws ensure that workers are paid for their time spent working, even when traveling. Employers cannot use per diem to offset or replace regular wages.

When Is Per Diem Required To Be Paid? – FAQ

When is per diem required to be paid?

According to California travel and subsistence provisions, per diem policies for travel kick in usually on jobs that are 99 miles and beyond so that acceptable lodging must be provided. The employer is required to pay a per diem at the current County rates under the IRS guidelines in which the project is located for meals and incidental expenses.

How many hours can a per diem employee work?

Per diem method employees work the hours their employers assign to them, which can fluctuate. However, their pay must be in accordance with California labor law.

Do per diem employees get benefits?

Depending on the company, per diem workers may not qualify for the same benefits as full-time employees. However, per diem employees are still employees; their employers must reimburse them for work-related expenses AND pay them for the time they work.

How does per diem work in hospitals?

Per diem workers in California are offered a flexible work arrangement where employers hire them on an as-needed basis. Per diem employees do not have a regular schedule and instead work the hours their employer assigns them.

When is per diem required to be paid?

Per diem rates are required to be paid to workers who accrue travel expenses while working AND to workers who work on an as-needed basis.

Do per diem employees get holiday pay?

California law does not mandate that “an employer pay an employee a special premium for work performed on a holiday, Saturday, or Sunday, other than the overtime premium required for work performed in excess of eight hours in a workday or 40 hours in a workweek.” So, it is up to the employer’s discretion.

Do per diem employees get time and a half for holidays?

If the employer chooses to extend a special rate of pay for holidays, then they could get a special per diem rate for holiday pay.

Do companies have to pay per diem?

Yes, an employer must reimburse an employee for any expenses related to their job.

How does per diem pay work?

Per diem pay works as either a tax-free reimbursement for travel costs or a taxable wage for flexible, “as-needed” shifts. For travel, employers typically pay a set daily amount for meals and lodging based on federal GSA rates to keep the payment non-taxable. For shift work, you are paid for per diem hours at a daily or hourly rate that must still follow California’s 2026 minimum wage and overtime laws.

can per diem employees collect unemployment?

Yes, generally per diem workers can file for unemployment if they have a significant amount of work they completed for an employer.

What are the rules for paying per diem?

California employers should provide per diem employees reimbursement payments to cover business expenses they accrue while traveling for work.

Do per diem employees get overtime?

Yes, per diem employees are eligible for overtime pay.

Is per diem on call?

They can be. Different arrangements differ from company to company. Per diem employees are typically not guaranteed weekly hours or a fixed schedule. Instead, employers can call them when they need their services or skills and pay them a flat daily rate.

How many shifts is per diem?

It can depend on the employer’s need for the worker’s time or skills.

Is per diem included in workers’ comp?

If workers travel frequently, their additional payments might be eligible when it comes to receiving workers’ comp benefits.