2026: New Year, New Laws for California Employers

Dozens of new laws impacting employment issues were passed recently in California, with several intended to offset actions being taken by the current federal administration. Below is a summary of several new laws with broad impact that will require updates to policies, practices and procedures. Unless otherwise noted, these new laws become effective Jan. 1, 2026.

Minimum Wage Increases: The minimum wage in California is increasing to $16.90 per hour; higher minimum wages apply to fast food restaurants and specified health care facility workers. In addition, various localities have higher minimum wages that will be increasing in the new year, including San Diego ($17.75 per hour) and San Jose ($18.45), among many others.

• Action Items: Review employee wage rates to ensure compliance with new state and local requirements. Also ensure that you understand the subtleties of the local minimum wage requirements; for instance, employees who perform at least two hours of work in a particular week within the City of San Jose are entitled to be paid the San Jose minimum wage for time worked in the city, regardless of their city of residence or standard work location. And ensure that all federal, state and local workplace postings are updated as applicable.

Exempt Employee Salary Threshold Increases: California’s salary thresholds (which are higher than federal salary thresholds) will increase in 2026. By way of example, the salary threshold for the white-collar exemptions (administrative, executive and professional) will rise to $70,304 per year, and the computer professional exemption salary threshold increases to $122,573.13. Keep in mind that the salary threshold is just that—a threshold; employees still must meet the “duties” requirements of the applicable exemption under California law.

• Action Items: Review employee compensation to ensure compliance. For employees who might currently be misclassified as exempt, the increase in the salary threshold provides an opportunity to assess and correct any potential classification issues while raising fewer red flags.

Gratuities (SB 648; Labor Code section 351): Under existing law, California employers are prohibited from (among other things) collecting, taking or receiving any gratuity or portion thereof that is provided by patrons, and the law addresses impermissible deductions (for instance, related to credit card charges) and the timing of payment of gratuities. As amended, the law strengthens employee protections and allows the Labor Commissioner’s Office to investigate and issue citations or file civil actions for gratuities taken or withheld in violation of applicable law.

• Action Items: Review policies and training materials for managers and payroll staff regarding payment of tipped gratuities to employees to ensure that no improper deductions are being made and that payments are being made in a timely manner.

Pay Equity and Transparency Requirements (SB 642; Labor Code sections 432.3 and 1197.5): This bill amends Labor Code sections 432.3 and 1197.5 to expand pay transparency requirements for covered employers. Among other things, the amendment expands the definition of “wages” and “wage rates” for purposes of this law to include “all forms of pay, including, but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits,” rather than just straight salary or hourly wage rate. This significantly expands the information that must be provided in job postings. The law also clarifies that the “pay scale” requires a “good faith estimate” of the salary or wage range the employer expects to pay for the position “on hire.” In addition, the amendment replaces “opposite sex” to “another sex” to make it more inclusive. The limitations period for pursuing claims has been expanded from 2 to 3 years (even in the absence of a willful violation), and employees can now seek back pay for the entire period during which a violation occurred, up to a maximum of 6 years.

• Action Items: Ensure that job postings include not just the base salary or hourly rates for the position, but also reference the benefits and other compensation required by the amended law, that the pay range is reasonably narrow and established in good faith, and that records of such compensation and benefits are appropriately maintained.

The “Workplace Know Your Rights” Act (SB 294; Labor Code sections 1550 to 1559): This act is intended to provide workers with a “strong understanding” of their rights as workers, as well as their constitutional rights, in light of the increase in immigration enforcement actions. The new law requires employers to provide a stand-alone written notice to current employees and new hires advising them of their constitutional rights when interacting with law enforcement, including regarding due process, unreasonable searches and seizures and self-incrimination. The law specifies the information that must be provided in the notice, such as protections against unfair immigration-related practices, workers’ compensation benefits and union rights. It also specifies the permitted methods and timing for delivery, as well as the requirement to provide employees with a list of state agencies where they may file claims related to labor, fair employment, data privacy or civil rights. The deadline to provide the initial notice is Feb. 1, 2026, and it must thereafter be provided annually. A template notice is to be posted on the Labor Commissioner website by Jan. 1, 2026, and will be updated annually. The notice must be provided in the language the employee normally uses to communicate employment-related information if the Labor Commissioner has a template notice in that language. Records of compliance with these requirements must be maintained for 3 years.

The law also requires that, no later than Mar. 30, 2026, current employees be provided with the opportunity to designate an emergency contact who must be notified by the employer in the event the employee is arrested or detained at the worksite or, to the extent the employer has actual knowledge of an arrest or detention, during work hours or while the employee is performing job duties elsewhere. New hires must be provided the opportunity to designate an emergency contact at the time of hire. The act authorizes penalties of $500 per day per employee for non-compliance, up to $10,000 per employee, and prohibits retaliation against employees seeking to enforce the law.

• Action Items: Promptly implement the notice for current employees once the template is posted by the Labor Commissioner and develop a plan to obtain employees’ designated contacts that allows for updates as may be needed going forward. Update the company’s onboarding process to ensure that new hires are provided with the notice and the opportunity to designate a contact person. Calendar issuance of new notices for all employees on an annual basis and maintain adequate records of compliance (including the method and date of transmittal of the notices) for three years.

Expanded Paid Sick and Safe Time and Unpaid Leave (AB 406; Government Code section 12945.8; Labor Code sections 230, 230.1, 230.2, 230.5, 246.5): Employees of covered employers will be entitled to take paid and unpaid leave for additional protected reasons under California’s Healthy Workplaces Healthy Families Act (HWHFA) and Government Code section 12945.8. The latest amendments expand both laws to allow employees to use leave if they or family members are victims of various designated crimes and are attending judicial proceedings related to those crimes, including such things as delinquency proceedings, post-arrest release decisions, pleas, sentencing, post-conviction release decisions and other proceedings where a right of that person is involved. “Victim” is broadly defined to include the person against whom the crime is committed, as well as a person who suffers direct or threatened physical, psychological or financial harm due to the actual or attempted commission of specified crimes or delinquent acts. In addition, HWHFA (paid) leave can be used for certain purposes previously covered only under the unpaid leave law, including employees who are victims of any crime and are appearing in court as a witness to comply with a subpoena or other court order. The amendment also removes the requirement that employees provide reasonable notice before taking time off to serve on a jury, although if using paid sick leave or job-protected leave, the employee must provide reasonable advance notice “unless the advance notice is not feasible.” (This portion of the law went into immediate effect, while the remainder becomes effective Jan. 1, 2026.) Prohibited retaliation extends to these new protected bases for leave.

• Action Items: Update applicable paid and unpaid sick leave policies to reference the expanded bases for use of protected leave. Ensure those responsible for responding to employee leave requests (including HR personnel and applicable supervisors) are familiar with the modifications to the law. Confirm that proper, updated notices are being issued to current employees and new hires, with annual notices issued thereafter and as may otherwise be requested.

Expanded Coverage of Paid Family Leave (SB 590; Unemployment Code sections 3301, 3302, and 3303): California’s Paid Family Leave (PFL) program provides up to eight weeks of partial wage replacement for employees who are caring for family members, bonding with a new child or attending to a military-related exigency. Effective July 1, 2028, PFL benefits will be expanded to cover employees caring for a “designated person,” defined as an individual related by blood or with a relationship equivalent to a familial one. When requesting benefits to care for a designated person, the employee must identify the designated person and attest under penalty of perjury the facts of the blood relationship or familial-equivalent relationship.

• Action Items: Ensure that the employer’s PFL policy is updated to reflect the new coverage for a “designated person” by July 1, 2028.

Use of Artificial Intelligence (AI) in Employment (Amended Regulations Regarding the Fair Employment and Housing Act (FEHA) and California Consumer Privacy Act): The California Civil Rights Department amended the FEHA regulations regarding the use of AI and automated-decision systems (ADS) in employment decisions, effective Oct. 1, 2025. Under the revised regulations, it is unlawful for an employer to use ADS or selection criteria (including a qualification standard, employment test, or proxy) in a manner that results in discrimination against applicants or employees, and employers are liable for discriminatory outcomes even where the ADS is developed or administered by a third-party agent conducting recruiting, screening, hiring, promotions, decisions regarding pay, benefits or leave, and other employment-related decisions on the employer’s behalf. ADS can be used for certain tasks, including (i) directing job advertisements or other recruiting materials to targeted groups; (ii) analyzing employee or applicant data acquired from third parties; (iii) screening resumes for particular terms or patterns; (iv) using computer-based assessment or tests (such as questions, puzzles, games or other challenges) to make predictive assessments about applicants or employees, measure applicants’ or employees’ skills, reaction time, personality traits, aptitude, etc., and/or screen, evaluate, categorize, or recommend applicants; and (v) other assessments. The revised regulations highlight that employers may need to provide reasonable religious or disability-related accommodations to applicants when using ADS, for example, when such use measures applicants’ dexterity or reaction time. In defending against discrimination claims, employers may cite reasonable and well-documented anti-bias testing, audits and other proactive measures. The regulations contain expanded record retention obligations that extend for four years and require retention of ADS data, which may include data used or resulting from the application of ADS and/or data used to develop or customize ADS for use. As a reminder, employee monitoring technologies often involve the use of AI; employers should remain aware that monitoring of employees is covered by the California Consumer Privacy Act (CCPA) where it involves the collection of employees’ personal information. Collection of such personal information requires notice and the disclosure of the processing purpose, and the collection must be reasonably necessary and proportionate.

In addition, the California Privacy Protection Agency (CPPA) updated its regulations under the CCPA to address the use of automated decisionmaking technology (ADMT). As amended, the regulations impose new requirements on covered employers that use ADMT for a “significant decision” (such as those affecting employment terms and conditions), including issuing a Pre-Use Notice informing employees, applicants and other affected individuals about the company’s use of ADMT, opt-out rights and handling of requests to access ADMT. The regulations are detailed and complex. Covered entities using ADMT for significant decisions must be in compliance with the CCPA’s requirements by no later than Jan. 1, 2027.

• Action Items: In conjunction with legal counsel specializing in privacy and AI issues, audit current use of AI/ADS used in employment-related decisions, confirming that it is legally compliant, whether implemented by the employer or a third party, and conducting anti-bias and similar testing proactively. Provide appropriate training for individuals using AI/ADS in the employment context. Where third parties are used, confirm that the applicable agreement requires that the third party comply with statutory requirements and consider indemnification provisions running in favor of the employer. Also ensure that applicants and employees are timely receiving required notices and that appropriate records are being maintained.
  
  And while the new requirements with respect to ADMT do not become applicable until Jan. 1, 2027, employers should proactively begin preparing now; Brownstein will be issuing a more detailed client alert covering the ADMT regulations in mid-2026. For additional information regarding AI in the workplace, refer to our prior client alerts, AI in the Workplace: A Roadmap for HR Professionals and Planning for AI in the Workplace? 8 Things to Think About.

Bias Mitigation Training (SB 303; Government Code section 12940.2): Newly enacted Government Code section 12940.2 is intended to encourage employers to conduct “bias mitigation training” (in addition to mandatory anti-harassment training) and clarifies that such training does not, by itself, constitute unlawful discrimination under the California Fair Employment and Housing Act (FEHA). It further clarifies that an employee’s assessment, testing, admission or acknowledgment of their own personal bias that was made in good faith and solicited or required as part of such training does not, by itself, constitute unlawful discrimination. “Bias mitigation training” includes bias mitigation or elimination training, education and activities designed to educate employees on understanding, recognizing or acknowledging the influence of conscious and unconscious thought processes and their associated impacts.

• Action Items: Employers should ensure that they are timely providing legally required anti-harassment and “abusive conduct” (anti-bullying) training to California employees, as well as to those individuals outside of California who supervise California employees. Employers should consider the interplay between federal and state law in implementing bias mitigation training, whether incorporated into the legally mandated training or on a stand-alone basis.

“Stay or Pay” Provisions (AB 692; Business & Professions Code section 16608; Labor Code section 926): This law prohibits employers (and their parent companies, subsidiaries, affiliates, contractors and third-party agents, among others) from imposing provisions or requiring workers to enter into work-related contracts (verbal or written, express or implied) that impose financial penalties, repayment obligations or fees upon termination of the work relationship. The restrictions are contained in newly added Business & Professions Code section 16608, which applies to contracts entered into on or after Jan. 1, 2026 (existing agreements are not impacted). The term “workers” includes natural persons who are permitted to work for or on behalf of an employer or business entity or is permitted to participate in any other work relationship, job training program or skills training program, including but not limited to actual and prospective employees. (Notably, a prior version of the bill also referenced independent contractors, freelance workers, externs, interns, apprentices and sole proprietors in the definition of “workers”; those references do not appear in the final version.)

There are certain limited exceptions to the prohibitions, including the following:

• Tuition repayment agreements for transferable credentials (in other words, a degree offered by a third-party institution that is accredited and authorized to operate in California, is not required for the worker’s current employment, and is transferable and useful for employment with other employers) that are offered separately from a contract for employment, do not require obtaining the credential as a condition of employment, specify the repayment amount before the worker agrees and do not exceed the actual cost to the employer, provide for a prorated repayment amount that is not accelerated upon separation, and do not require repayment in the event of termination except if the worker is terminated for misconduct, as defined in the Unemployment Insurance Code; and

• Discretionary or unearned monetary payments, including a financial bonus, at the outset of employment (essentially, a signing, retention or relocation bonus), provided the statutory conditions are met, including setting forth the terms in a separate agreement from the primary employment contract/offer letter, notifying the individual that they have a right to consult with an attorney regarding the agreement and providing at least five business days to do so prior to signing the agreement, not subjecting any repayment obligation for early separation to interest accrual and prorating the repayment based on the remaining term of the retention period (which cannot exceed 2 years), allowing the worker the option to defer receipt of the payment to the end of the full retention period without any repayment obligations, and requiring repayment only in the event of separation at the election of the employee or by the employer for misconduct. Certain of these provisions—not subjecting the repayment obligation to interest accrual and allowing deferral of receipt of the payment—can have significant tax implications if not handled appropriately.

Contracts entered into on or after Jan. 1, 2026 that violate these provisions are deemed to be in restraint of trade and void as contrary to public policy. Newly enacted Labor Code section 926 permits employees to bring civil actions to address violations, with the potential for actual damages or $5,000 per worker (whichever is greater), as well as injunctive relief, attorneys’ fees and costs.

• Action Items: If the employer contemplates entering into such an agreement, do so prior to Jan. 1, 2026, if possible. For agreements containing repayment obligations entered into on or after that date, work with legal counsel to ensure that the terms satisfy one of the designated exceptions, that they are separately and properly documented, that the specific procedural requirements for enforceability are met and that tax implications are properly addressed.

State Worker Adjustment and Retraining Notification (WARN) Act (SB 617; Labor Code section 1401): This amendment imposes new requirements for mass layoffs, relocations and terminations at a covered establishment as contemplated by the WARN Act, including the obligation to notify employees about the employer’s plans to coordinate workforce services, such as unemployment or career services through the local workforce development board or elsewhere, as well as information about public assistance programs and related matters.

• Action Items: Consult with legal counsel when implementing business actions that may implicate the California WARN Act to ensure compliance with applicable requirements, and keep in mind that WARN Act notices are publicly available.

Rehiring and Retention of Displaced Workers (AB 858; Labor Code section 2810.8): This law extends the sunset date from Dec. 31, 2025 to Jan. 1, 2027 with respect to COVID-19-related employee recall and reinstatement rights with respect to employees in the hospitality and services industries set forth in Labor Code section 2810.8.

• Action Items: When rehiring, employers in covered industries should ensure that individuals who were laid off due to COVID-19-related reasons (as broadly defined in the statute) receive consideration for recall and reinstatement as required under the statute.

Personnel Records (SB 513; Labor Code section 1198.5): California employers are required under current law to make available to employees for inspection personnel records related to the employees’ performance and grievances concerning such employees, subject to certain exceptions. This amendment adds education and training records to the documents required to be made available to employees, including the name of the employee and training provider, the duration and date of the training, the core competencies of the training. including skills in equipment or software, and the resulting certification or qualification.

• Action Items: Ensure that education and training records containing all of the required information are maintained as personnel records, and that the employer is making those records available when requests to inspect personnel files are received.

Pay Data Reporting Requirements (SB 464; Government Code section 12999): Covered employers are required to file an annual Pay Data Report with the California Civil Rights Department. As amended, the law (among other things) requires that employers collect and maintain employee demographic data (race, ethnicity and sex) separately from personnel files to reduce the risk of misuse and enhance privacy. It also requires (rather than permits) courts to impose civil penalties when enforcement is requested against a non-compliant employer. In addition, effective Jan. 1, 2027, the Pay Data Report will expand the number of job categories from 10 to 23 to more closely align with federal standards and allow more granular review of pay disparities.

• Action Items: Determine whether you are a covered employer, and if so, confirm compliance with the requirements as amended, including collecting and maintaining employee demographic information separately from other personnel data.

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