Hiring Your First Employee in a California Therapy Practice: What the Law Requires, and When
A Guide to the Duties That Start With the First Employee
A therapy practice that adds one part-time administrator crosses a line that has nothing to do with clinical licensing. From that point the practice is an employer under several different bodies of California and federal law, each with its own registration, its own filing schedule and its own penalty for missing one. None of it is announced by the Board of Behavioral Sciences, because none of it is the Board's subject.
The duties are not difficult individually. What makes them a recurring source of trouble is that they all attach at once, at a moment that feels administrative rather than legal, and that the shortest of the clocks runs in days rather than months. This guide sets out what each one requires and when it starts.
The separate question of who may employ and pay a registered associate, and what an associate's own advertising and disclosure duties are, is covered in the guide to AMFT employment rules in California.
Payroll filings recur on their own schedule, separate from anything the Board requires. California Therapist Rules & Deadlines sets the employer filings beside the licensing deadlines so both calendars can be seen at once.
This guide summarizes published statutes, regulations and agency guidance, and it is not legal advice. Anyone who needs to know how a rule applies to a particular practice should consult their own attorney. Rules verified as of September 20, 2026.
Workers Compensation: Owed From the First Employee
The requirement is stated without a threshold. Labor Code section 3700 provides that "Every employer except the state shall secure the payment of compensation in one or more of the following ways," and then names two routes for a private employer: being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in the state, or securing a certificate of consent to self-insure from the Director of Industrial Relations.
The Department of Industrial Relations states the position plainly for small employers: "If a business employs one or more employees, then it must satisfy the requirement of the law." There is no small-employer exemption and no minimum number of hours.
The consequence of not securing coverage is criminal rather than administrative. Section 3700.5 provides that "The failure to secure the payment of compensation as required by this article by one who knew, or because of his or her knowledge or experience should be reasonably expected to have known, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium ... but not less than ten thousand dollars ($10,000), or by both that imprisonment and fine." A second or subsequent conviction carries a fine of triple the premium and not less than $50,000.
The term employee is defined broadly for this purpose. Labor Code section 3351 provides that "Employee means every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed," and the definition expressly reaches minors and persons who are not citizens or nationals of the United States.
Registering With the Employment Development Department
Registration is a separate act from reporting the hire, and it comes first. Unemployment Insurance Code section 1086 provides that "Each employing unit within 15 days after becoming an employer as defined in this part shall register with the department on a form prescribed by the department."
What makes an employing unit an employer is defined at section 675, which provides that "Employer means any employing unit, which for some portion of a day, has within the current calendar year or had within the preceding calendar year in employment one or more employees and pays wages for employment in excess of one hundred dollars ($100) during any calendar quarter."
Read together, the threshold is low and the window is short. A practice with one employee that pays more than $100 in wages in a calendar quarter is inside the section 675 definition, and section 1086 gives 15 days from becoming an employer to register.
Reporting the New Hire
The New Employee Registry report is a third and separate step. The Employment Development Department states that "Employers report their newly hired employees to the NER within 20 calendar days of their start-of-work date."
The window is twenty calendar days rather than working days, and it runs from the start of work rather than from the offer or the signed paperwork, which makes it shorter than a monthly payroll cycle.
The report is separate from registering as an employer and separate again from the quarterly payroll returns, and each of the three carries its own deadline.
The Quarterly and Annual Filings
Once a practice has employees, payroll filings run on a fixed calendar.
- DE 9 and DE 9C, quarterly. The returns fall due on the first day after each quarter ends, with a delinquency date about a month later. The Employment Development Department's 2026 calendar lists a due date of October 1 that is delinquent if not filed by November 2, 2026, and a due date of January 1, 2027 that is delinquent if not filed by February 1, 2027.
- Form W-2, annually. The Internal Revenue Service instructs employers to "Mail or electronically file Copy A of Form(s) W-2 and Form W-3 with the SSA by February 1, 2027," for tax year 2026. The Internal Revenue Service gives February 1, 2027 as the date for that tax year.
- Form 1099-NEC, annually. For payments to independent contractors, the Internal Revenue Service states that "Section 6071(c) requires you to file Form 1099-NEC on or before January 31," by paper or electronic filing.
The two year-end filings arrive within days of each other, and the 1099-NEC deadline reaches a practice that has no employees at all but pays contractors, which is why it catches practices that believe none of this applies to them.
What Changes on January 1, 2027?
Two figures move on the same date. The Department of Industrial Relations states that "California's statewide minimum wage will increase to $17.40 per hour," and that "an employee must earn an annual salary of at least $72,384 to meet the salary threshold for exemption."
The second figure is the one that catches a practice by surprise, because it moves with the minimum wage rather than independently. An administrator or practice manager classified as exempt and paid a salary that cleared the threshold in 2026 may not clear it in 2027 without a raise, and the consequence of falling below it is that the position is no longer exempt, which brings overtime, meal and rest period rules with it.
The figure the Department publishes is the statewide minimum. Where a city or county has adopted its own minimum wage ordinance, the rate that applies in that jurisdiction is a separate question from the statewide one.
What This Means for Your Practice
The four duties do not start at the same moment, which is what makes the order worth holding in one place. Labor Code section 3700 requires an employer to have secured the payment of compensation, registration with the Employment Development Department runs 15 days from becoming an employer, the New Employee Registry report runs 20 calendar days from the start of work, and the payroll filings begin at the end of the first quarter in which wages were paid.
Classification is the decision underneath all of it, and it is not a matter of preference. Whether a person is an employee or an independent contractor determines which set of duties applies, and the workers compensation definition of employee in section 3351 is broad enough to reach arrangements that were documented as something else.
The January 2027 exempt salary figure is the one that changes with the minimum wage rather than independently, and the response to it is a decision about compensation rather than a form.
A Closer Look at One Program: Sentio University's MFT Track
The following description of one specific MFT program is offered as a concrete example of how a program can prepare students for the legal and ethical demands of practice, not as a recommendation against evaluating other programs. Students should research multiple options and ask each one direct questions about how clinical skill is built and measured.
Sentio University, a nonprofit graduate school based in Los Angeles with a hybrid delivery model that serves students throughout California, offers a Master of Arts in Marriage and Family Therapy that meets the Board of Behavioral Sciences educational requirements for the LMFT. The program runs 20 months across 60 units at $1,120 per unit, with weekly online classes and one intensive in-person residency at the start of each semester, in cohorts capped at 24 students at a 4:1 student-to-faculty ratio. It is designed around deliberate practice methodology and is described in peer-reviewed work as the first graduate psychotherapy program to thoroughly integrate deliberate practice, with roughly half of nearly every class session dedicated to active skills training rather than lecture (Rousmaniere and Vaz, 2025, p. 2).
The business side of a therapy career is part of the curriculum rather than an afterthought. The 2026-2027 Academic Catalog describes Therapist Career Development (MFT564), taken in the final semester, as a course preparing students to start their careers in the field of marriage and family therapy, gain employment, and pursue career-long professional development. Practicum at the Sentio Counseling Center provides more than 400 hours of supervised clinical experience during the degree, in a clinic that is itself an employer, so students see how a real practice is staffed and run. Sentio also integrates AI literacy training through its AI certification program for therapists.
Sentio is a small, newer institution, admits only applicants who are California residents or willing to relocate to California and who intend to license in California, and its alumni network is still developing. Prospective students weighing Sentio alongside larger or older programs should factor that into their decision. Learn more at the Sentio MFT program overview, the tuition and fees page, and the Sentio FAQ page.
Making Your Decision
Secure workers compensation coverage before the first day of work rather than after it, and treat the 15-day registration and the 20-day new hire report as two separate items with two separate dates. Decide the employee or contractor question on the law rather than on the paperwork you would prefer, and revisit any exempt salary against the January 1, 2027 figure. If you are still choosing a graduate program, ask whether it teaches the business side of practice at all, and who teaches it. Program websites describe clinical training in similar language regardless of what is actually happening in classrooms and supervision rooms. Ask every program you are seriously considering whether you can attend a live or online class session before enrolling, and ask to speak with current students and recent graduates about how supervision and skill development function in practice. Reputable programs should welcome the request. Hesitation or refusal is informative on its own. Trust what you see in a classroom over what you read in promotional copy.
Frequently Asked Questions
Does a small therapy practice need workers compensation insurance in California?
Yes, from the first employee. Labor Code section 3700 provides that every employer except the state shall secure the payment of compensation, by insuring with an authorized insurer or by obtaining a certificate of consent to self-insure. The Department of Industrial Relations states that if a business employs one or more employees, then it must satisfy the requirement of the law.
What is the penalty for not carrying workers compensation in California?
Labor Code section 3700.5 provides that failure to secure the payment of compensation by one who knew, or should reasonably have been expected to know, of the obligation is a misdemeanor punishable by up to one year in county jail, or a fine of up to double the premium that would have been due but not less than $10,000, or both. A second conviction carries a fine of triple the premium and not less than $50,000.
When does a California practice have to register with the EDD?
Unemployment Insurance Code section 1086 requires each employing unit, within 15 days after becoming an employer as defined in that part, to register with the department on a prescribed form. Section 675 defines employer to include an employing unit that has one or more employees and pays wages for employment in excess of $100 during any calendar quarter.
How quickly must a new hire be reported in California?
The Employment Development Department states that employers report their newly hired employees to the New Employee Registry within 20 calendar days of their start-of-work date. The report is separate from registering as an employer and from the quarterly payroll returns.
When are the DE 9 and DE 9C due?
They are quarterly, falling due on the first day after each quarter ends. The Employment Development Department's calendar lists a due date of October 1, 2026 that is delinquent if not filed by November 2, 2026, and a due date of January 1, 2027 that is delinquent if not filed by February 1, 2027.
What is the California minimum wage in 2027?
The Department of Industrial Relations states that California's statewide minimum wage will increase to $17.40 per hour on January 1, 2027, and that an employee must earn an annual salary of at least $72,384 to meet the salary threshold for exemption. Some cities and counties have adopted their own minimum wage ordinances, which are a separate question from the statewide figure.
When are Form 1099-NEC and Form W-2 due?
The Internal Revenue Service states that section 6071(c) requires Form 1099-NEC to be filed on or before January 31, by paper or electronic filing. For tax year 2026, Copy A of Forms W-2 and Form W-3 are filed with the Social Security Administration by February 1, 2027, because January 31 falls on a Sunday.
Does hiring an AMFT change any of this?
Not for the employer duties described here, which follow from employing anyone. The rules about who may employ and pay an associate, whether an associate may be paid as an independent contractor, and what an associate's advertising must say are separate, and are covered in the guide to AMFT employment rules in California.
References
California Department of Industrial Relations. (2026a). California minimum wage to increase to $17.40 per hour on January 1, 2027 (news release 2026-66). https://www.dir.ca.gov/DIRNews/2026/2026-66.html
California Department of Industrial Relations. (2026b). Division of Workers Compensation frequently asked questions. https://www.dir.ca.gov/dwc/faqs.html
California Employment Development Department. (2026a). New hire reporting. https://edd.ca.gov/en/payroll_taxes/new_hire_reporting/
California Employment Development Department. (2026b). Payroll tax due dates calendar. https://edd.ca.gov/en/payroll_taxes/Due_Dates_Calendar/
California Legislature. (2026a). Labor Code section 3351. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=3351.
California Legislature. (2026b). Labor Code section 3700. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=3700.
California Legislature. (2026c). Labor Code section 3700.5. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=3700.5.
California Legislature. (2026d). Unemployment Insurance Code section 675. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=UIC§ionNum=675.
California Legislature. (2026e). Unemployment Insurance Code section 1086. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=UIC§ionNum=1086.
Internal Revenue Service. (2026a). Instructions for Forms 1099-MISC and 1099-NEC. https://www.irs.gov/instructions/i1099mec
Internal Revenue Service. (2026b). General instructions for Forms W-2 and W-3. https://www.irs.gov/instructions/iw2w3
Rousmaniere, T., & Vaz, A. (2025). Sentio's clinic-to-classroom method: Bridging deliberate practice and clinical training. Society for the Advancement of Psychotherapy. https://societyforpsychotherapy.org/sentios-clinic-to-classroom-methodbridging-deliberate-practice-and-clinical-training/
Sentio University. (2026). Academic catalog 2026-2027. https://sentio.org/academic-catalog-1
