I don't know how hard it was to find this job, but if you have options, this seems like a good hint that this is the WRONG employer to work for. If they would pull this lousy trick on you, imagine what more they have in store for you later. I'd keep looking.
This is a common practice in other states and in Europe/UK, so you maybe just have an ill-informed employer, rather than a bad guy. It is absolutely not OK in California, though, so he ought to stop this practice immediately.