California Labor Law Update: What Employers Need to Know Heading Into 2026
As the year comes to a close, many organizations are preparing for policy updates, budget planning, and new strategic goals. It’s also an essential moment to review upcoming labor law changes and ensure your workplace stays compliant, informed, and ready for the year ahead.
At People415, we believe compliance shouldn’t feel intimidating—it should feel manageable, proactive, and people-centered. Here’s a grounded, practical overview of key labor law updates taking effect in late 2025 and early 2026, plus actionable tips to help you prepare with confidence.
Updated Wage & Hour Requirements
Minimum Wage Increases
California’s minimum wage will rise to $16.90/hour for all employers on January 1, 2026, and the minimum salary for exempt employees will increase to $70,304/year. These adjustments follow Senate Bill 3, which mandates annual inflation-based increases using the national Consumer Price Index; this year’s 2.49% CPI increase accounts for a 40-cent wage hike.
What this means for employers:
Update wages for the new 2026 minimum wage ($16.90/hour) and exempt salary threshold ($70,304/year).
Refresh Wage Theft Notices for non-exempt employees if necessary.
Monitor for updates to required minimum wage workplace postings.
Expanded Pay Transparency Requirements
Senate Bill 642 updates California’s Equal Pay law by requiring employers with 15 or more employees to include a good-faith estimate of the expected wage range in job postings. The bill extends the statute of limitations for wage-recovery claims based on gender pay disparities from two to three years and allows recovery for the entire period of a violation, up to six years, clarifying when a cause of action arises. It also amends the act to prohibit paying an employee less than employees of “another sex” for substantially similar work, removing references to “opposite sex” (e.g., to include non-binary workers).
What this means for employers:
Ensure job postings include a pay range (employers with 15 or more employees) “Pay range” means an estimate of the expected wage range that an employer reasonably and in good faith expects to pay for the position upon hire.
Audit equal pay practices for employees engaged in substantially similar work.
Prohibited “Stay or Pay” Agreements
Assembly Bill 692 prohibits employers from requiring “stay or pay” agreements—contracts that force workers to repay training or related costs if they leave their job—except in limited circumstances such as government loan-repayment programs, tuition for transferable credentials, or signing bonuses. The law applies only to agreements entered into on or after January 1, 2026.
What this means for employers:
Update tuition-assistance and retention bonus practices for 2026 and forward.
Seek legal counsel for employment contracts and exceptions, as appropriate.
Expanded Crime Victim Leave and Uses of Paid Sick Leave
AB 406 expands California’s crime-victim leave law by protecting employees (and family members of victims) who take time off to attend judicial proceedings for certain specified crimes. It also updates handbook and notice requirements, and immediately changes jury-duty rules to require reasonable advance notice when feasible.
What this means for employers:
Ensure the Crime Victims Leave policy is updated to include the following judicial proceedings: delinquency proceeding, a post-arrest release decision, plea, sentencing, post-conviction release decision, or any proceeding where a right of that person is at issue.
Update California’s Paid Sick Leave policy to include the following uses of PSL: crime victims’ leave, and jury duty and witness leave.
Post the CRD’s Crime Victims Notice.
Updated Workplace Know Your Rights Notice
SB 294, the Workplace Know Your Rights Act, requires California employers to provide a written notice to employees about key workplace and constitutional rights, including workers’ compensation, immigration inspections, and concerted activity protections. The Labor Commissioner will create and update the notice annually, which must be distributed to current employees by February 1, 2026, to new hires, and to collective bargaining representatives. The law also mandates that employers notify an employee’s designated emergency contact if the employee is arrested or detained at work or during work duties, with employees given the opportunity to designate a contact by March 30, 2026, or upon hire thereafter.
What this means for employers:
Prepare to distribute the new Workplace Know Your Rights Notice by February 1, 2026.
Distribute voluntary emergency contact designation for current employees by March 30, 2026.
Include the above paperwork in your onboarding packet.
Expanded Rights for Personnel Record Access
SB 513 expands employees’ rights to access their personnel records by explicitly including education and training records. Employers must already provide employees and their representatives access to personnel records related to performance or grievances within 30 days, and this requirement now extends to education and training records. If employers maintain such records, they must include specific details such as the employee’s name, training provider, training dates and duration, core competencies, and any resulting certifications.
What this means for employers:
Make sure training records include the name of the employee, the name of the 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.
When personnel records are requested, ensure they include the above.
New California WARN Act Requirements
SB 617 expands the California WARN Act by requiring covered employers to include additional information in notices for plant closings and mass layoffs. A “covered employer” is a business that has employed 75 or more full and part-time employees in the preceding 12 months. Newly required details include whether rapid-response services will be coordinated, information and resources for CalFresh, contact information for the local workforce development board and its services, and a working employer contact for affected employees.
What this means for employers:
Update Cal-WARN template notices to include:
Workforce board contact information
Rapid response activities offered (if any)
CalFresh contact information
The following statement: “Local Workforce Development Boards and their partners help laid-off workers find new jobs. Visit an America’s Job Center of California location near you. You can get help with your resume, practice interviewing, search for jobs, and more. You can also learn about training programs to help start a new career.”
Future Expansion of California Paid Family Leave Benefits
SB 590, effective July 1, 2028, expands eligibility for California Paid Family Leave benefits to employees caring for a seriously ill “designated person,” defined as someone related by blood or with a relationship equivalent to family. Employees must identify the designated person and attest under penalty of perjury to the nature of the relationship. This law aligns PFL with earlier expansions under AB 1041, which added designated persons to paid sick leave and CFRA.
What this means for employers:
No action required until July 1, 2028. Update the California Paid Family Leave policy in 2028.
Strengthened Protections Against Gratuity Theft
SB 648 strengthens protections against gratuity theft by allowing the Labor Commissioner, in addition to employees filing civil actions, to investigate and enforce violations. Employers who take employees’ tips face a $100 penalty per employee for a first offense and $250 per employee for subsequent offenses, in addition to returning the stolen gratuities.
What this means for employers:
Ensure tip policies are compliant, including tip-pooling agreements.
Updated Pay Data Reporting
SB 464 requires private employers with 100+ employees to submit annual pay data reports to the Civil Rights Department, and beginning January 1, 2027, the required job categories will expand from 10 to 23. Employers must also store demographic data used for reporting separately from employees’ personnel files.
What this means for employers:
Follow guidance from CRD on updated pay data reporting procedures.
Ensure demographic information collected for pay data reporting purposes is maintained in a confidential file, separate from personnel records.
Clarification of Bias-Mitigation Training
SB 303 clarifies that providing bias-mitigation training—such as activities that help employees recognize, assess, or address their conscious or unconscious biases—does not, on its own, constitute unlawful discrimination under the Fair Employment and Housing Act. The bill defines what qualifies as bias-mitigation training and encourages employers to offer or continue these programs without fear of violating discrimination laws.
What this means for employers:
No action required. Continue to provide bias-mitigation training.
One, Big, Beautiful Bill Act Tax Changes
The federal OBBBA introduces several tax changes for 2025–2028, including new deductions for qualified overtime pay and qualified tips. Employees may deduct the overtime “half-time” premium up to $12,500 annually ($25,000 for joint filers), with limits for high-income earners. Workers in IRS-designated tipped occupations may deduct up to $25,000 in qualified tips, with phaseouts at higher income levels. For tax year 2025, employers must continue withholding all applicable federal and California taxes on overtime and tips, with IRS withholding tables scheduled for updates in 2026. The law also includes changes to benefit programs like dependent care FSAs and HSAs and increases funding for immigration enforcement, likely leading to more ICE raids and Form I-9 audits. Effective: tax years 2025-2028.
What this means for employers:
Work with a tax advisor to take advantage of and comply with new rules.
CA employers: only FLSA-weekly overtime will qualify for the deduction. Work with the payroll provider to “code” or “tag” weekly overtime only for tax reporting purposes.
Consult your benefits partner about potential opportunities for your benefits plans.
Audit I-9 Forms to ensure compliance and proactively prepare for unannounced visits from ICE or other immigration agencies.
Vetoed Bills
The Governor vetoed three notable bills: AB 1136, which would have provided leave rights for employees affected by immigration enforcement; AB 1326, which would have codified the right to wear health masks in public; and SB 7, which would have regulated high-risk AI automated decision systems in employment.
Have a Compliant, People-Centered start to 2026
Labor law changes don’t have to feel overwhelming. With a little organization and a people-first mindset, they become an opportunity—to strengthen culture, improve clarity, and create a workplace where compliance and compassion go hand-in-hand.
As you prepare for 2026, we’re here to help you navigate the complexities with ease, confidence, and grounded support.