New Year, New Rules: The California Employment Law Changes You Need to Know in 2026

CALIFORNIA EMPLOYMENT LAW  ·  2026 UPDATES

California just handed workers and employers a fresh stack of laws. Higher wages, banned “stay-or-pay” traps, AI hiring rules, expanded leave rights, a new ‘Know Your Rights’ notice, and much more. Here’s your plain-English guide to what changed and what it means for you.

Every January, California employers and workers wake up to a new stack of laws. Some years it’s incremental. Other years — like 2026 — the changes are sweeping enough that anyone who cares about their workplace rights needs to pay attention.

We’re talking about a higher minimum wage, a ban on “stay-or-pay” contract traps, new AI hiring regulations, expanded leave protections, a landmark ‘Know Your Rights’ notice requirement, strengthened pay equity rules, and dramatically higher penalties for employers who stiff workers on wages. And that’s not even all of them.

Whether you’re an employee wondering what you’re newly entitled to, or an employer figuring out what your handbook needs to say, this guide breaks down the most important California employment law changes for 2026 in plain English — no law degree required.

California didn’t slow down in 2025. The new laws taking effect in 2026 are among the most employee-protective the state has passed in years — and the compliance clock is already ticking.

The 2026 California employment law changes — at a glance

Here’s the master reference table. We’ll go law by law below, but bookmark this for a quick overview.

Minimum Wage	State minimum wage rises to $16.90/hr. Exempt employee salary floor rises to $70,304/yr. Many cities are higher.	Jan 1, 2026
SB 294	Workplace Know Your Rights Act: employers must give all employees a new annual written notice covering labor rights, immigration protections, and constitutional rights.	Feb 1, 2026
AB 692	Bans most “stay-or-pay” agreements requiring employees to repay training, relocation, or other costs if they leave employment.	Jan 1, 2026
SB 642	Pay Equity Enforcement Act: tightens pay scale definitions, extends Equal Pay Act statute of limitations to 3 years (lookback to 6), expands ‘wages’ definition.	Jan 1, 2026
SB 464	Pay data reporting expanded: mandatory penalties for non-filers, demographic data stored separately, 23 job categories (up from 10) starting 2027.	Jan 1, 2026
SB 513	Employees can now inspect and copy their education and training records as part of their personnel file rights.	Jan 1, 2026
SB 261	Employers with unsatisfied wage judgments face triple damages (3x the judgment) if unpaid after 180 days. Public prosecutors can pursue these claims.	Jan 1, 2026
AB 406	Expands paid sick leave use to jury duty, witness service, and judicial proceedings related to crime victim status. Also expands crime victim leave.	Oct 1, 2025 / Jan 1, 2026
SB 617	Cal-WARN notices for mass layoffs must now include CalFresh food assistance info, workforce board contacts, and a working employer phone/email.	Jan 1, 2026
FEHA AI Regs	New CRD regulations require employers using AI/automated decision tools in hiring to assess and mitigate bias under FEHA.	Oct 1, 2025
AB 288	Expands California’s PERB jurisdiction to hear labor disputes when the NLRB is delayed or inactive. Facing federal challenge.	Jan 1, 2026
AB 858	Extends COVID-era right-to-rehire protections for hospitality, airport, and event workers through January 1, 2027.	Jan 1, 2026
SB 590	Expands Paid Family Leave benefits to cover care of a “designated person” (anyone with a family-like relationship).	July 1, 2028

1. The minimum wage goes up — again

On January 1, 2026, California’s state minimum wage increased to $16.90 per hour for all employers, regardless of size. That also means the minimum annual salary for exempt employees — those who are not entitled to overtime — has risen to $70,304 per year (which is two times the state minimum wage multiplied by 2,080 hours).

But the state floor is just the beginning. California’s patchwork of local minimum wages means many employees are entitled to significantly more. A quick sample:

Select local minimums as of early 2026	Industry-specific minimums
•  San Jose: $18.45/hr •  San Francisco: $18.67/hr •  Santa Monica: $17.27/hr •  Los Angeles (city): $17.28/hr •  West Hollywood: $19.65/hr •  Berkeley: $18.67/hr	•  Fast food restaurants (covered by AB 1228): $20/hr •  Health care workers (SB 525): phased minimum up to $25/hr depending on facility type •  Various city/county living wage ordinances may be higher •  Always check the local wage order that applies to your industry and location

EMPLOYER ACTION REQUIRED

Review all employee wage rates — especially anyone earning close to the old minimum — and update offer letters, payroll systems, and any written compensation policies. Exempt employee salaries must also be reviewed against the new $70,304 floor. Employees who fall below the threshold lose their exempt status and become entitled to overtime.

2. SB 294: The Workplace Know Your Rights Act

Effective February 1, 2026 for current employees (and at hire for new employees going forward), all California employers must provide a new standalone written notice to every employee — annually — covering a defined set of workplace and constitutional rights.

The California Labor Commissioner developed a template notice (available on the DIR website) that employers may use. The notice must cover:

•        Workers’ compensation benefits and how to contact the Division of Workers’ Compensation

•        Employee rights regarding immigration agency inspections — including the right to refuse access without a warrant and protections against unfair immigration-related practices

•        The right to organize and engage in protected concerted activity

•        A summary of employees’ constitutional rights when interacting with law enforcement at the worksite

•        Other material developments and enforcement agencies identified by the Labor Commissioner

The notice must be provided in the language ordinarily used to communicate with the employee, if the template is available in that language. It must be delivered through the usual communication method — email, physical posting, etc. — and must reasonably be expected to reach the employee within one business day.

SB 294 also requires employers to give all current employees the opportunity to designate an emergency contact by March 30, 2026. If an employee designates a contact, the employer must notify that contact if the employee is arrested or detained at the worksite — or during work hours if the employer has actual knowledge of it.

PENALTIES FOR NON-COMPLIANCE

Employers who fail to provide the required notice face civil penalties of up to $500 per employee per violation, and up to $10,000 per employee for certain violations. The Labor Commissioner will release explanatory videos employers may share by July 1, 2026. Employers must keep records of notice delivery for at least three years.

3. AB 692: The end of “stay-or-pay” traps

This one is a big deal. Effective January 1, 2026, AB 692 bans most “stay-or-pay” provisions in employment contracts — those clauses that require an employee to repay the employer if they leave before a certain date.

These provisions are common in contracts involving relocation assistance, training programs, professional certification costs, and other employer investments. Under the old framework, employees who accepted these benefits and then left — for any reason, including being laid off — could find themselves owing thousands of dollars back to their employer. AB 692 largely ends that.

Under AB 692, employers are prohibited from requiring workers to agree to any provision that:

•        Requires repayment of any debt (including employment-related costs, education-related costs, or consumer financial products) if employment ends

•        Allows a debt collector to resume or initiate collection upon separation from employment

•        Imposes any penalty, fee, or cost if the work relationship ends — including replacement hire fees, retraining costs, immigration/visa costs, liquidated damages, or lost profits

There are limited exceptions. Tuition assistance and certain upfront discretionary bonuses (like signing bonuses) can still include repayment provisions — but only if the agreement is in a standalone document (separate from the employment contract), the employee is given at least 5 business days to consult an attorney, repayment is interest-free and prorated over a period no longer than two years, and the employee has the option to defer receipt of the payment until it is fully earned.

AB 692 APPLIES TO NEW CONTRACTS ONLY

AB 692 is not retroactive — it only applies to agreements entered into on or after January 1, 2026. But any employment contract, offer letter, or bonus agreement signed from that date forward must comply. Employers should immediately audit their onboarding documents, training agreements, relocation packages, and bonus clawback provisions. Violations allow employees to sue for actual damages or $5,000 (whichever is greater), plus injunctive relief and attorney’s fees.

4. SB 642: The Pay Equity Enforcement Act

California’s Pay Equity Enforcement Act (SB 642) makes several important changes to how pay equity is defined, enforced, and litigated — all of them employer-side obligations that employees can use to hold companies accountable.

Key changes effective January 1, 2026:

•        Pay scale definition tightened: employers must now post a “good faith estimate” of the salary or hourly wage range they reasonably expect to pay “upon hire” — not just any internal pay range. Inflated or vague ranges that don’t reflect actual intended pay are now a compliance risk.

•        Expanded definition of “wages”: the Equal Pay Act’s wage comparison now covers all forms of compensation — not just base pay. Bonuses, equity awards, stock options, vacation pay, holiday pay, life insurance, and other incentive compensation are all included in the analysis.

•        Extended statute of limitations: employees now have three years (up from two) to file Equal Pay Act claims. Equally important, damages can reach back six years from the date of filing — meaning a claim filed today could capture six years of discriminatory underpayment.

•        Expanded definition of “sex”: the law now expressly includes gender identity and gender expression within the Equal Pay Act’s protections.

THE 6-YEAR LOOKBACK IS SIGNIFICANT

Under SB 642, a successful Equal Pay Act plaintiff can recover back pay reaching up to six years before the filing date. Combined with the expanded definition of ‘wages’ to include equity and bonuses, the potential damages in a pay equity case have grown substantially. Employers should conduct internal pay equity audits now — with counsel — before claims surface.

5. SB 261: Triple damages for unpaid wage judgments

This is one of the sharpest tools California has added to its wage enforcement arsenal in years. Under SB 261, employers with final, unsatisfied wage judgments face civil penalties of up to three times the outstanding judgment amount if the judgment remains unpaid 180 days after it is final.

There’s more. SB 261 also:

•        Explicitly authorizes public prosecutors — district attorneys and city attorneys — to pursue enforcement actions against employers with unpaid wage judgments, adding significant new enforcement capacity beyond the Labor Commissioner

•        Closes the successor liability loophole: any entity that is a “successor” to a judgment debtor is jointly and severally liable for the triple penalties — meaning employers can’t escape liability by reorganizing or selling the business

•        Requires courts to award reasonable attorney’s fees and costs to prevailing plaintiffs in actions to enforce wage judgments

•        Splits collected penalties 50/50 between affected employees and DLSE enforcement and education efforts

The only way to avoid the triple penalty is to enter into an installment payment agreement with the employee or judgment creditor before the 180-day deadline and remain in compliance with that plan.

FOR EMPLOYEES: DON’T LET A JUDGMENT SIT

If you have a final wage judgment against your employer and they’re not paying, you now have powerful new tools. The 180-day clock starts when the judgment becomes final. After that, you can seek triple the original judgment amount — plus attorney’s fees. Contact the Labor Commissioner or an employment attorney to start the collection process.

6. AB 406: More uses for your paid sick leave

California already had some of the broadest paid sick leave protections in the country. AB 406 expands them further by adding new qualifying reasons employees can use their accrued paid sick leave:

•        Jury duty and subpoenaed witness service (effective October 1, 2025)

•        Attending any judicial proceeding related to being a victim of a qualifying crime — including delinquency proceedings, post-arrest release decisions, plea hearings, sentencing, post-conviction proceedings, or any proceeding where a victim’s right is at issue (effective January 1, 2026)

•        Extended crime victim leave: coverage is expanded to 14 specific crimes enumerated in Government Code §12945.8, including violent felonies and serious felonies where the victim suffers physical, psychological, or financial harm

This means employees no longer need to use unpaid leave or burn through vacation to attend jury duty or crime-related court proceedings. Their accrued paid sick leave can now cover those absences — with all the anti-retaliation protections that come with protected leave use.

EMPLOYER HANDBOOK UPDATE REQUIRED

If your sick leave policy lists specific permitted uses, it needs to be updated to reflect AB 406’s new qualifying reasons. The California Civil Rights Department has also updated the model notice for crime victim leave protections — employers should ensure they are using the current version.

7. SB 464 and SB 513: Pay data and personnel records

Two laws work in tandem to expand the information employers must track and share. SB 464 amends California’s annual pay data reporting requirements in significant ways:

•        Civil penalties for non-filers are now mandatory — previously discretionary. The CRD must impose $100 per employee for a first failure and $200 per employee for subsequent failures

•        Demographic data collected for pay data reports must be stored separately from personnel files (effective January 1, 2026)

•        Starting with the 2027 pay data report (filed in spring 2027), employers must identify employees across 23 job categories — up from the current 10 — providing far more granular data for pay equity analysis

SB 513 adds a related expansion: employees’ existing rights to inspect and receive copies of their personnel records are now expressly extended to include education and training records. Employers who maintain these records must ensure they document the employee’s name, the training provider, the duration and dates of training, the core competencies covered, and the resulting certification or qualification.

START PREPARING FOR 23-CATEGORY REPORTING NOW

The expanded 23-category pay data report requirement doesn’t kick in until the 2027 reporting cycle — but employers should start tracking data in the new categories now. The categories are substantially more detailed than the current 10, and recategorizing an entire workforce after the fact is significantly harder than building the right taxonomy from the start.

8. FEHA AI Regulations: The algorithm isn’t exempt from discrimination law

Effective October 1, 2025, the California Civil Rights Department (CRD) finalized amended FEHA regulations governing the use of AI and automated decision systems (ADS) in employment decisions. These regulations confirm — and now explicitly codify — that FEHA’s anti-discrimination requirements apply fully to AI-powered hiring and employment tools.

Key elements of the new regulations:

•        Employers using AI tools in hiring, promotion, or other employment decisions must assess those tools for adverse impact on protected classes under FEHA

•        The fact that an algorithm — rather than a human — made a decision does not insulate the employer from liability for discriminatory outcomes

•        Employers bear responsibility for the tools they deploy, including third-party AI products purchased from vendors

•        Disparate impact — discriminatory outcomes regardless of intent — remains actionable under FEHA when produced by automated tools

•        Employers should be able to demonstrate that any automated selection tool is job-related and consistent with business necessity

These regulations dovetail with the broader AI-in-hiring compliance landscape. California employers using resume screening tools, video interview AI, personality assessments, or any other automated decision-making system in employment should be conducting adverse impact analyses and documenting their validation processes.

THE VENDOR DOESN’T ABSORB THE LIABILITY

Under FEHA and the new AI regulations, the employer is responsible for the discriminatory effects of any AI tool used in employment decisions — even one purchased from a third party. Audit your vendors, negotiate for bias testing data and indemnification in contracts, and build monitoring into your ongoing compliance program.

9. SB 617: Better notice when layoffs happen

California’s Worker Adjustment and Retraining Notification (Cal-WARN) Act already required employers to provide 60 days’ notice before covered mass layoffs, relocations, or terminations. SB 617 expands what that notice must include, effective January 1, 2026.

Going forward, Cal-WARN notices must contain:

•        Whether the employer plans to coordinate workforce transition services through the local workforce development board or another entity (and if so, must arrange those services within 30 days of issuing the notice)

•        A description of rapid-response activities available from the local workforce development board and their contact information

•        Information about CalFresh — California’s food assistance program — including a description of the program, the CalFresh benefits helpline, and a link to the website

•        A functioning email address and phone number for the employer for affected workers to use

The practical intent of these requirements is to ensure that workers receiving layoff notices are immediately connected with unemployment resources, retraining opportunities, and safety-net programs — not just handed a date and left to figure it out.

10. AB 288: California steps in where the NLRB steps back

This is the most politically charged law on this year’s list — and also the most legally uncertain. AB 288 expands the jurisdiction of California’s Public Employment Relations Board (PERB) to hear unfair labor practice charges and collective bargaining disputes that would normally be handled by the federal National Labor Relations Board (NLRB).

The law allows California workers covered by the National Labor Relations Act to petition PERB for relief when the NLRB has been inactive — specifically when the NLRB has experienced unreasonable delay (defined as more than 6 months for a regional director to issue a complaint, or 12 months for a final NLRB decision).

This law was passed explicitly in the context of concerns about federal labor enforcement rollbacks. The NLRB responded by suing California on October 15, 2025, arguing that AB 288 violates federal preemption principles — and the outcome of that litigation is still unresolved. Employers should monitor this closely.

AB 288 IS IN ACTIVE LITIGATION — WATCH THIS SPACE

The NLRB’s lawsuit against California challenging AB 288 means the law’s ultimate fate is uncertain. Employers should comply with the law as written while it remains in effect, but consult with labor counsel about how to navigate any PERB proceedings that arise. This is an evolving situation.

On the horizon: what’s coming in 2027 and 2028

A few of 2025’s new laws have delayed effective dates that employers and employees should already be preparing for:

28 SB 464

Expanded pay data categories effective for 2027 reporting cycle The annual pay data report due in spring 2027 will require employers to categorize employees across 23 job categories — up from 10 — providing far more granular data for CRD analysis. Employers should start building the new taxonomy now.

28 SB 590

Paid Family Leave for designated persons effective July 1, 2028 Beginning July 1, 2028, employees will be eligible for state PFL wage replacement benefits when caring for a seriously ill “designated person” — anyone related by blood or whose association with the employee is equivalent to a family relationship. This aligns PFL with existing CFRA and paid sick leave definitions.

What employees should do right now

•        Check your pay stub. If you’re earning close to the old minimum wage, verify your rate has been updated. If you’re salaried and earning less than $70,304 annually, you should now be reclassified as non-exempt and entitled to overtime.

•        Look for the Know Your Rights notice. Your employer was required to distribute SB 294’s notice by February 1, 2026. If you haven’t received it, ask HR. If they refuse or are unaware of the requirement, that’s a flag.

•        Review any contract you signed in 2026 for stay-or-pay clauses. If you signed an offer letter, training agreement, or bonus clawback provision on or after January 1, 2026 that requires repayment if you leave, it may be void under AB 692. Have an attorney review it.

•        Understand your expanded sick leave rights. Jury duty, witness service, and crime victim court proceedings are now covered uses of your paid sick leave. You cannot be penalized for using sick leave for these purposes.

•        Know your pay transparency rights. Employers with 15+ employees must post salary ranges in job postings. If you’re curious about the range for your own role, you can ask — and your employer must provide it.

•        If you have an unpaid wage judgment, act quickly. The 180-day clock to avoid triple damages starts when the judgment is final. Contact the Labor Commissioner or an attorney to pursue collection.

What employers should do right now

•        Update all wage rates and verify exempt employee salaries clear the new $70,304 floor.

•        Distribute the SB 294 Know Your Rights notice to all current employees immediately and implement an annual distribution process. Collect emergency contact designations from employees.

•        Audit all offer letters, bonus agreements, training reimbursement contracts, and relocation agreements for stay-or-pay provisions that are now void under AB 692.

•        Update the pay scale definition in all job postings to reflect a good-faith estimate of actual intended pay upon hire under SB 642.

•        Update employee handbooks to reflect expanded sick leave uses under AB 406, expanded crime victim leave, and the new jury duty paid leave rights.

•        Update Cal-WARN notice templates to include all required SB 617 content.

•        Conduct an adverse impact analysis on any AI or automated decision tools used in hiring or employment decisions under the new FEHA AI regulations.

•        Begin preparing for 23-category pay data reporting (effective for the 2027 reporting cycle) and ensure demographic data is stored separately from personnel files.

ANNUAL COMPLIANCE REVIEW IS NO LONGER OPTIONAL

California passes significant new employment legislation almost every year. Employers who update their policies and handbooks only when something goes wrong are perpetually behind. Build an annual employment law compliance review into your calendar — ideally in Q4, before new laws take effect on January 1. The cost of proactive compliance is a fraction of the cost of litigation.

The bottom line

California’s 2026 employment law changes are extensive, and the list above isn’t even exhaustive. From the wage floor to the workplace rights notice to the AI hiring regulations to the wage judgment triple-penalty — this is a significant body of new law that affects virtually every employer and employee in the state.

The common thread running through all of it: California continues to move decisively in the direction of stronger worker protections, higher accountability for employers, and broader enforcement tools for both employees and government agencies.

Whether you’re an employee trying to understand what you’re newly entitled to, or an employer trying to stay compliant, the answer is the same: read the law, update your documents, and consult counsel when you’re not sure. The cost of getting it right is almost always less than the cost of getting it wrong.

Disclaimer: This blog post is for general informational purposes only and does not constitute legal advice. Employment laws are complex and subject to change. Some provisions described here are subject to ongoing litigation or regulatory development. Consult a licensed California employment attorney for advice specific to your situation.