As California employers head into another year of compliance planning, the Golden State legislature has not slowed down. From higher wage thresholds and expanded pay-equity rules to sweeping changes affecting AI use, layoffs, and worker mobility, the coming year brings a slate of employment law updates that HR, legal, and business leaders may want to pay close attention to. Here’s a summary of notable changes coming in 2026 (and some that have already gone into effect).
Worker Mobility and Ban on Most Stay-or-Pay Agreements (AB 692)
One new law for employers is AB 692, which restricts so-called “stay-or-pay” arrangements. The law reinforces California’s long-standing public policy favoring employee mobility by voiding certain contractual provisions that require workers to repay money if their employment ends.
Covered agreements entered into on/after Jan. 1, 2026, may not:
- Require a worker to repay a debt upon termination of employment
- Allow resumption or initiation of debt collection upon separation
- Impose any penalty, fee, or cost if the work relationship ends
Prohibited “penalties” include items such as replacement hire or retraining fees, immigration or visa-related costs, liquidated damages, and lost profits or goodwill.
Certain arrangements may still be permissible – such as tuition reimbursement, relocation payments, or discretionary bonuses – but only if all statutory conditions are met. For example, for relocation stipends and discretionary sign-on bonuses presented at the outset of employment and that are not tied to job performance:
- The repayment terms must be set forth in a separate agreement from the primary employment contract
- Workers must be notified they have the right to consult with counsel and must be provided at least five business days to do so
- Any repayment obligation for early separation must not be subject to interest accrual, and it must be prorated based on the remaining term of any retention period (which is limited to a maximum two-year retention period)
- Workers must have the option to defer receipt of the payment until the retention period ends, without any repayment obligation
- Repayment may only apply if the employee leaves voluntarily or is terminated for statutorily defined misconduct
The law creates a private right of action, allowing workers to recover actual damages or $5,000 (whichever is greater), injunctive relief, and attorneys’ fees and costs.
Employers may want to audit and update sign-on bonuses, retention incentives, and repayment clauses before the new year.
Updates to Pay Scale and Expanded Pay Equity Enforcement (SB 642)
This law strengthens California’s equal pay framework in several ways.
First, “pay scale” is now defined as a good-faith estimate of the expected wage range at hire, not a generalized position range. In addition, “wages” for equal pay claims now include all forms of compensation, such as bonuses and incentive pay, stock and equity awards, profit-sharing, allowances and reimbursements, paid time off, and other benefits, like life insurance.
Second, statutory language replaces “opposite sex” with “another sex,” expanding protections for non-binary employees.
Finally, the statute of limitations expands to three years to file a civil action for Equal Pay Act violations, and it grants employees a six-year look-back period for wage recovery.
Changes to Employer Pay Data Reporting Requirements (SB 464)
Senate Bill 464 revises California’s pay data reporting requirements under Government Code Section 12999. The law applies to private employers with 100 or more U.S. employees, including those hired through labor contractors.
Key changes include new data-handling rules: demographic information such as race, ethnicity, and sex collected for pay data reporting must be stored separately from personnel records. Employers may need to review their systems and processes to help facilitate compliance.
Beginning Jan. 1, 2027, employers must classify employees using 23 Standard Occupational Classification (SOC) categories — replacing the 10 EEO-1 job categories previously used — starting with reports due in May 2027. This change may require employers to update job mapping and coordinate closely with labor contractors to help enable accurate reporting.
Penalties for noncompliance are now mandatory. When requested by the Civil Rights Department, courts must impose civil penalties of $100 per employee for an initial failure to file and $200 per employee for subsequent violations. These penalties also extend to labor contractors that fail to provide required data.
Paid Sick Leave for Judicial and Jury-Related Absences (AB 406)
AB 406 expands last year’s crime victim leave expansion and amends California’s paid sick leave law to allow use of paid sick leave for:
- Jury duty and witness service (effective Oct. 1, 2025)
- Judicial proceedings related to crime victim status, including delinquency proceedings, a post-arrest release decision, plea, sentencing, post-conviction release decision, or any proceeding where a right of that person is an issue (effective Jan. 1, 2026)
Employers should keep an eye out for updated notices from the CA Civil Rights Department and may wish to revise leave policies accordingly.
Paid Family Leave - Designated Person (SB 590)
In 2022, the state passed AB 1041, which allowed employees to take leave to care for a “designated person,” defined as any individual related by blood or whose association with the employee is equivalent to a family relationship. However, the state benefits did not change to cover these types of leaves. The new law specifically codifies and defines a “designated person” under Section 3302 of the Unemployment Insurance Code, and beginning July 1, 2028, employees may receive state-paid family leave benefits to care for a “designated person” – defined broadly to reflect non-traditional family relationships. When requesting family temporary disability insurance benefits to care for a designated person, the employee must both identify the individual and attest under penalty of perjury to the nature of the relationship, including either how the designated person is related by blood or how their association with the designated person is the equivalent of a family relationship.
Policy updates will be required ahead of the 2028 implementation date.
AI, Automated Decision Systems, and Discrimination Risk (Amendments to FEHA Regulations)
For an in-depth discussion on California’s plan to regulate AI in the workplace, please see our team’s prior GT blog post.
Workplace Know Your Rights Act (SB 294)
By Feb. 1, 2026, and annually thereafter, employers must distribute a stand-alone notice outlining workers’ rights related to:
- The right to workers’ compensation benefits, including disability pay and medical care for work-related injuries or illness, as well as the contact information for the Division of Workers’ Compensation
- The right to notice of inspection by immigration agencies
- Protection against unfair immigration-related practices against a person exercising protected rights
- The right to organize a union or engage in concerted activity in the workplace
- Constitutional protections when interacting with law enforcement at the workplace
The notice must also contain a description of new legal developments pertaining to laws enforced by the Labor & Workforce Development Agency (LWDA) and a list, developed by the Labor Commissioner, of the enforcement agencies that may enforce the underlying rights in the notice.
A template notice will be developed and released by the Labor Commissioner by Jan. 1, 2026, and employers may also provide workers with a link or show a video the Labor Commissioner will develop.
Finally, by no later than March 30, 2026, employees must be provided the opportunity to name an emergency contact if they wish for that person to be contacted if the employee is detained or arrested at work.
Records of compliance must be retained for three years, and violations carry penalties of $500 per employee.
Expanded Personnel File Requirements (SB 513)
Personnel records must now expressly include education and training records maintained by the employer, with detailed content requirements, including: 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. Noncompliance may trigger civil penalties, injunctive relief, and attorneys’ fees.
Bias Mitigation Training Protections (SB 303)
Employers conducting bias-mitigation training received clarification 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 a bias mitigation training does not, by itself, constitute unlawful discrimination.” Bias-mitigation training refers to bias-mitigation or bias-elimination training, education, and activities provided by an employer for the purpose of educating employees on understanding, recognizing, or acknowledging the influence of conscious and unconscious thought processes and their associated impacts.
The law is intended to encourage employers to conduct bias-mitigation trainings and affirm that such training does not, by itself, constitute unlawful discrimination.
Amendments to Cal-WARN (SB 617)
Covered employers must include new information in their California Worker Adjustment and Retraining Notification Act (Cal-WARN) notices, including:
- Whether the employer will coordinate services with a local workforce development board (LWDB) or another entity to provide services, such as rapid response orientation for laid-off workers. (If an employer chooses to coordinate services with the LWDB, they must arrange these services within 30 days of the notice date.)
- A working email address and phone number for the LWDB, along with a specific description of the LWDB’s rapid response activities to assist laid-off workers with finding new jobs, resume assistance, and skills training.
- Details about CalFresh food assistance, including a link to its website and contact information.
Covered employers with any upcoming layoff plans may wish to review their notices to help facilitate compliance with the new requirements.
Extended 'Right to Recall' Protections for Hospitality and Service Workers (AB 858)
Assembly Bill 858 extends California’s COVID-19 “right to recall” protections for certain hospitality and service industry workers until Jan. 1, 2027. The state originally enacted these protections to help employees return to jobs lost during pandemic-related shutdowns.
The law applies to employees working in the following industries: hotels, private clubs, event centers, airport hospitality operations, airport service providers, and building services to office, retail, or other commercial buildings. To qualify, an employee must have worked for at least six months and have been separated from employment on or after March 4, 2020, for a COVID-related reason, such as a public health directive, lack of business, or a reduction in force. The law creates a presumption that economic, non-disciplinary separations during the pandemic were COVID-related unless the employer can prove otherwise.
Covered employers must follow specific rehiring procedures. When a position becomes available, the employer must offer the job in writing to qualified, laid-off employees, prioritizing those with the longest seniority. Employees have at least five business days to accept or decline the offer. Employers must maintain records of laid-off employees for three years.
Violations may result in reinstatement, back pay, benefits, and civil penalties of up to $600 per employee per day. Importantly, the law preserves the Division of Labor Standards Enforcement’s (DLSE) ability to enforce violations occurring before Dec. 31, 2026, even after the law sunsets—closing a potential loophole and reinforcing California’s commitment to worker protections.
Collective Bargaining for App-Based Drivers (AB 1340)
Effective July 1, 2026, a new law known as the Transportation Network Company Drivers Labor Relations Act establishes a novel framework allowing app-based drivers to unionize and bargain collectively – while remaining classified as independent contractors. The Public Employment Relations Board (PERB) will oversee certification, elections, and enforcement.
Transportation Network Companies (organizations operating in California that provide prearranged transportation services for compensation using an online-enabled application or platform to connect passengers with drivers using a personal vehicle) will be required to submit quarterly driver data to PERB, and driver organizations may seek union certification by demonstrating sufficient support among active drivers. Once certified, these organizations may negotiate agreements addressing issues such as deactivation appeals, paid leave, safety standards, and grievance procedures. Importantly, these agreements cannot reduce minimum earnings guarantees or alter drivers’ independent contractor status.
Although legal challenges based on National Labor Relations Act (NLRA) preemption are expected, the law may signal broader changes for platform-based work nationwide and may help establish a national model for sectoral bargaining among independent contractors. Employers in the rideshare sector should prepare for compliance obligations, including reporting requirements and engagement in collective bargaining processes.
Independent Contractors and Employee Expenses (SB 809)
Senate Bill 809 addresses two key issues: vehicle ownership and expense reimbursement, and misclassification in the construction trucking industry.
First, the law reaffirms that owning a personal or commercial vehicle used for paid labor does not automatically make a worker an independent contractor. Workers remain subject to California’s ABC Test for determining employment status. Employers must reimburse employees for all necessary expenses incurred when using their own vehicles for work—including upkeep and depreciation. For commercial drivers who own the trucks they operate, reimbursement must equal at least the actual costs or the IRS mileage rate, whichever is greater. The law allows for the amount to be negotiated as a flat rate or per-mile rate, but does not allow for an amount below those minimums.
Second, the law introduces an amnesty program for construction contractors who misclassified drivers as independent contractors. Contractors may avoid civil and statutory penalties by entering a settlement agreement with the Labor Commissioner before Jan. 1, 2029. The agreement must include provisions reclassifying drivers as employees, paying all wages, benefits, and taxes owed, obtaining workers’ compensation coverage, and agreeing that future drivers performing the same work will be treated as employees.
Even if a driver declines the settlement, they would still need to be reclassified as an employee, and they would not be able to pursue Private Attorneys General Act (PAGA) penalties for claims during the covered period. Declining the settlement would not necessarily restrict the driver’s ability to pursue claims not covered by the penalty provisions of the agreement.
Two-Year Revival Window for Sexual Assault Claims (AB 250)
Assembly Bill 250, which the governor signed into law in October, becomes effective Jan. 1, 2026. It revives civil claims for sexual assault that were previously time-barred under California’s statute of limitations. Eligible claims may be filed during a specific two-year window—from Jan. 1, 2026, through Dec. 31, 2027—regardless of when the alleged misconduct occurred.
To qualify for revival, plaintiffs must show that one or more non-public entities legally responsible for damages engaged in a “cover-up,” defined as a concerted effort to hide evidence of sexual assault that incentivized individuals to remain silent. Related claims, such as wrongful termination or sexual harassment, may also be revived if tied to the alleged cover-up.
Unlike prior revival statutes, AB 250 applies only to private actors; public entities remain exempt. For employers, this law may signal heightened litigation risk. Businesses may wish to review past settlement agreements for confidentiality provisions, update policies to preserve reporting rights, train managers to avoid conduct that could be construed as concealment, and implement long-term document retention practices. Proactive compliance now may help mitigate exposure when the revival window opens.
Rest Break Exemption for Safety-Sensitive Petroleum Facility Employees (AB 751)
Assembly Bill 751, which the governor signed into law earlier this year, removes the Jan. 1, 2026, sunset on California’s rest period exemption for employees in safety-sensitive positions at petroleum facilities, making the exemption permanent. Under existing law, most non-exempt employees must receive a paid, uninterrupted 10-minute rest break for every four hours worked. However, employees in safety-sensitive roles at petroleum facilities have been allowed to remain on duty during rest periods if they must carry a communication device or stay on-site to respond to emergencies.
The law clarifies and expands this exemption. It now applies indefinitely to employees in safety-sensitive positions at refineries, including those that produce fuel by processing alternative feedstock. If an emergency interrupts an employee’s rest period, employers must provide another break when possible or pay one hour of premium wages if they cannot give a make-up break.
The exemption only applies when employees are covered by a valid collective bargaining agreement that addresses wages, hours, rest periods (including arbitration for disputes), premium overtime rates, and guarantees a regular hourly rate at least 30% above the state minimum wage.
Expanded Meal Period Exemption (SB 693)
Under current law, employees of an electrical corporation, gas corporation, or local publicly owned electric utility who are covered by a valid collective bargaining agreement (CBA) that meets specified conditions are exempt from California’s meal period requirements. Senate Bill 693, approved by the governor earlier this year, now extends this exemption to employees of water corporations who are covered by a qualifying CBA.
To qualify, employees must be covered by a valid CBA that addresses wages, hours, and working conditions; provides for meal periods; includes final and binding arbitration for meal period disputes; guarantees premium pay for overtime; and ensures a regular hourly rate at least 30% above the state minimum wage.
The law defines a “water corporation” as any entity that owns, controls, operates, or manages a water system for compensation within California. This expansion gives water utilities and their unionized employees flexibility to replace statutory meal period rules with negotiated terms, provided all required safeguards are met.
Enforcing Tip Theft (SB 648)
Existing law prohibits an employer or agent from collecting, taking, or receiving any gratuity that is paid, given to, or left for an employee by a patron; from deducting any amount from wages due an employee on account of a gratuity; and from taking a credit against a gratuity received by the employee. This new law allows the Labor Commissioner to investigate and issue a citation or file a civil action for gratuities taken or withheld in violation of the law.
Unpaid Wage Judgments (SB 261)
Senate Bill 261, signed into law this year, introduces major changes to California’s enforcement of unpaid wage judgments. If an employer fails to satisfy a final wage judgment within 180 days after the appeal period ends, courts must impose a civil penalty of up to three times the unpaid judgment amount, including interest. This penalty is mandatory unless the employer proves “good cause” for a reduction by clear and convincing evidence.
The law also requires courts to award reasonable attorneys’ fees and costs to prevailing plaintiffs in any action to enforce a wage judgment—whether brought by the employee, the Labor Commissioner, or a public prosecutor. SB 261 expands enforcement authority by explicitly allowing public prosecutors to pursue actions against employers with unsatisfied wage judgments, adding significant enforcement capacity.
Employers may avoid the triple penalty by entering into an installment payment agreement with the employee or judgment creditor before the 180-day deadline and remaining in compliance with that plan. Any penalties collected are split evenly: 50% to affected employees and 50% to fund DLSE enforcement and education efforts.
Finally, SB 261 closes a loophole by imposing successor liability, making any successor entity to a judgment debtor jointly and severally liable for these penalties. This is intended to prevent employers from evading responsibility through corporate restructuring or asset transfers.
Civil Discovery—Initial Disclosure (SB 66)
Senate Bill 66, which is now law and took effect this year, removes the sunset provision for California’s mandatory initial disclosure rules under Code of Civil Procedure § 2016.090, making them permanent. These requirements apply to most civil actions filed on or after Jan. 1, 2024, and represent a noteworthy shift in California’s discovery practice.
Under SB 66, any party may demand initial disclosures, which must be provided within 60 days unless otherwise stipulated. Disclosures must include:
- Names and contact information for witnesses
- Relevant documents and tangible things
- Insurance and indemnity agreements
The rule excludes small claims, family law, probate, preference cases, and self-represented matters. Unlike federal Rule 26, California’s framework imposes no meet-and-confer requirement and offers no clear objection process, requiring disclosure of both favorable and unfavorable information. This raises practical questions about what qualifies as “reasonably available” and the timing of investigation.
We may see courts clarify compliance standards as litigators adapt to this enduring disclosure regime.
FEHA Enforcement Procedures (SB 477)
Senate Bill 477 makes notable changes to California’s Fair Employment and Housing Act (FEHA) procedures, expanding tolling rules, and clarifying complaint definitions.
Expanded Tolling: The statute of limitations for filing a civil action will now pause not only during the original tolling period (from complaint filing until California’s Civil Rights Department (CRD) closure plus one year) but also during:
- Appeals of CRD closure decisions
- Written tolling agreements between the complainant and CRD
- Petitions to compel CRD action
- The pendency of any appeal of a CRD closure decision.
SB 477 codifies that a “group or class complaint” means any complaint alleging a pattern or practice of unlawful conduct—declaratory of existing law—strengthening CRD’s authority to pursue systemic discrimination cases.
Right-to-Sue Adjustments: CRD must issue right-to-sue notices only after completion or resolution of a director-led complaint or group/class complaint and closure of any related petition or appeal. The one-year filing period begins after these proceedings conclude, preventing premature lawsuits.
Minimum Wage Increases
California’s statewide minimum wage continues its upward climb: effective Jan. 1, 2026, the state minimum wage increases to $16.90 per hour for all employers. This also means that the new state salary basis threshold for some California exemptions will increase to $70,304 per year ($5,858.67/month). Employers may wish to confirm that all exempt employees continue to meet both the duties and salary basis tests under California law.
This article originally appeared on Greenberg Traurig. www.gtlaw.com
About the Authors:
Vanessa C. Krumbein is of counsel at Greenberg Traurig. krumbeinv@gtlaw.com
Kevin T. May is an associate at Greenberg Traurig. kevin.may@gtlaw.com