I will preface this by saying I have never worked at google and have not seen their employment contract so perhaps they've found a way around it but from what I understand, California has well established laws in place protecting moonlighting. As long as you aren't coding up a search engine or something that directly competes with the company, you should be ok.
a search engine or something that directly competes with the company
That's a lot of things for Google these days, though. Not just search engines, but also: local search, video streaming, webmail, contextual advertising, maps, route planning, social networking, flight search, RSS aggregation, collaborative document editing, machine translation, VOIP, web browsers, mobile operating systems, app stores, programming languages/compilers/VMs, web frameworks, cloud-computing services, etc., etc.
Newspapers did a lot of things too. But it was Classified Ads that let them do it.
Once they lost that revenue stream -- every other part of the business suffers.
See the comment below, it's not "directly", it's "demonstrably anticipated research or development", which in the case of Google means anything (even games, thanks to Google+).
Also think for a minute about what "you should be ok" means in this context. Sure, if you are developing something in your spare time that kinda-mostly-doesn't-compete with what your employer is doing, and they find out, maybe they can't legally go after you.
But that doesn't mean that they're obligated to keep sending you a paycheck, either. California is an at-will employment state, and violating your employment contract tends to remove the "will" to employ you.
