The distinction is Salary vs. Hourly, or more specifically, Exempt vs. Non-Exempt (Software Engineers / Founders are definitely Exempt, which mandates that they're paid at least 2x the minimum wage in California).

The difference between the two:

http://career-advice.monster.com/salary-benefits/salary-info...

And California-specific regulations:

http://www.calchamber.com/california-employment-law/Pages/ex...