Legal Question in Employment Law in California

On its face, there appears to be nothing illegal about it, particularly if there is a business related reason for it (such as the need for workers to be close to a worksite). But if there were evidence that the intended consequence is to discriminate against otherwise eligible workers because of race, the practice could be questioned in court.

There are some situations where the employer MUST hire people from a certain location. For example, some government contracts give bid preferences to bidders who commit to a local hire quota. Also some redevelopment projects and urban development arrangements require businesses to "hire local" in order to qualify for tax breaks.