Welcome to 2026!
Each year the California legislature enacts new laws that impact California workplaces. Below is a quick summary of new laws and updates for 2026 that every employer should know.
AB 406
Employees can take crime victim’s leave for judicial proceedings. This includes violent or serious felonies and felonies involving theft or embezzlement. Previously, employees were allowed to take time off to attend judicial proceedings wherein the employee or the employee’s immediate family member was the victim of a crime. AB 406 allows leave if an employee or family member is the victim of certain crimes which cause the victim to suffer direct or threatened physical, financial, or psychological harm as a result of the commission or attempt of:
- Sexual assault
- Felony DUI causing injury
- Serious felony
- Solicitation for murder
- Hit and run causing death or injury
- Vehicular manslaughter while intoxicated
- Felony child abuse likely to produce great bodily harm or a death
- Assault resulting in the death of a child under eight years of age
- Felony domestic violence or stalking
- Felony physical abuse of an elder or dependent adult
The employee can use paid sick and safe time, personal leave, vacation, or PTO to account for Crime Victim’s Leave for Judicial Proceedings. They can use leave to attend proceedings related to the crime. Employers can require reasonable advance notice of intention to take time off, unless such notice is not feasible for the employee. If an unscheduled absence occurs, employers can require appropriate certification of the absence within a reasonable time after it (a police report, court order, documentation of employee’s presence at proceedings, etc).
This change will require employers to update their employee handbooks.
AB 692
Effective January 1st, 2025, AB 692 bans “stay or pay” requirements, with some exceptions. Stay or pay requirements are often included in sign-on bonuses, retention bonuses, educational assistance, relocation reimbursements, and Training Repayment Agreement Provisions (TRAPs – Oh, they love their acronyms, don’t they!). This bill prohibits employment contracts that include any of the following:
– Any requirement to pay an employer, training provider, or debt collector for a debt if the worker’s employment or work relationship terminates
– Any authorization of an employer, training provider, or debt collector to pursue collection or end forbearance on a debt if the worker’s employment or work relationship terminates
– Any imposition of a penalty, fee, or cost on a worker if their employment or work relationship terminates.
There are certain exceptions:
– If ALL of these conditions are met, there is a limited exception for discretionary or unearned monetary payment, including a bonus, at the outset of employment that is NOT tied to specific job performance, which must include:
- A separate agreement from the primary employment contract that covers repayment terms
- A notice of right to consult with an attorney and a reasonable period of at least 5 business days
- Pro-ration of repayment based upon remainder of retention period which cannot exceed 2 years after payment
- No interest accrual
- The option to defer payment until the end of fully served retention period without any repayment obligation
- Repayment triggered ONLY by voluntary resignation or misconduct before the end of the retention period
– Repayment of tuition for a transferable credential if ALL the following requirements are met:
- A contract that is separate from any employment contract
- Transferable credential which is not a condition of employment
- Contract specifies the repayment amount before the worker agrees to the contract
- Repayment amount does not exceed cost to the employer
- Prorated repayment amount during any required employment period is proportional to the total
- If worker separates, no accelerated payment schedule
- No repayment obligation for employment termination, except for misconduct
– Apprenticeship program approved by the Division of Apprenticeship Standards
– Loan repayment assistance program or loan forgiveness program provided by governmental agency
Employers should review offer letters, agreements, and policy to identify stay and pay provisions and consult with counsel to determine whether an exception may apply. Be prepared to draft new, compliant agreements and/or policies.
AB 858
Recall and reinstatement rights under Labor Code §2810.8 are extended through January 1, 2027. The law applies to covered employers (namely event centers and airport operations) that laid off employees on or after March 4, 2020 for pandemic or economic reasons. These employers must continue notifying laid-off employees of available positions, offer reemployment based on seniority and applicable qualifications, and not retaliate against employees exercising these recall and reinstatement rights. Violations can result in civil penalties, reinstatement, and back pay.
Employers in the designated industries who are rehiring after layoffs resulting from the COVID-19 pandemic must notify laid off employees of their right to reinstatement.
SB 294
Labor Code sections related to notices to employees and employee designated emergency contacts of rights have been added regarding interaction with law enforcement in the workplace. Beginning February 1st, 2026, upon hire, employers must provide employees a stand-alone written notice (Workplace Know Your Rights Act) with a description of workers’ rights in:
– Workers’ compensation benefits
– Contact information for the Division of Workers’ Compensation
– Notice of inspection of immigration forms by immigration agencies
– Protection against unfair immigration-related practices when exercising protected rights
– Right to union organization and engagement in concerted activity
– Constitutional rights while interacting with law enforcement at the workplace
Employers can download the form at: https://dir.ca.gov/dlse/Know-Your-Rights-Notice/Know-Your-Rights-Notice-English.pdf
Employers should provide this form to all employees, and create a system to ensure all employees receive the form every year.
Additionally, employers must notify the designated emergency contact (upon notice from the employee of their emergency contact) if the employee is arrested or detained at the worksite. If the arrest occurs during work hours or while performing work away from the worksite, the employer must notify the emergency contact only if it has actual notice of arrest or detainment. The form must include a description of new legal developments and a list of government agencies that may enforce underlying rights. The employer must also provide annual notice to an authorized union, if applicable, an anti-retaliation provision for exercise of rights, and monetary penalties for failure to provide the notice.
Employers should consult with counsel for training employees on rights and obligations when interacting with law enforcement and develop an HR policy regarding administrative to-do lists when law enforcement is on-site.
SB 303
SB 303 states that an employee’s good faith acknowledgment of personal bias in bias mitigation training does not constitute unlawful discrimination on its own. This clarification encourages employers to provide bias mitigation training, and employees to participate in it, without fear of discrimination claims resulting from it.
No changes to existing policies are necessary as a result of this new law.
SB 464
California law requires private employers of 100 or more employees and/or 100 or more workers hired through labor contractors to annually report pay, demographic, and other workforce data to the Civil Rights Department (CRD).
SB 464 makes changes to California’s Pay Data Reporting requirements. Civil Penalties are now required if requested by the Civil Rights Division for violations and demographic data for the Pay Data Report must be kept separate from personnel files.
Starting in 2027, there will be more specifications in job categories for reporting. The 2027 Pay Data Report will include 23 job categories instead of 10 for reporting, because the 10 previous categories were so broad that they did not provide enough meaningful data to find disparities or do analysis. Employers should train HR on the handling of demographic data, and after May 2026, begin updating how to record pay data.
Employers should consult with counsel to prepare a Pay Data Report, and should consider beginning to do an audit now for the necessary changes to make to the Pay Data Report for 2027.
SB 477
Starting January 1st, 2026, if a complainant appeals the Civil Rights Department’s closure of a complaint, the period for filing a FEHA civil action is tolled for one year. The tolling of deadlines is also required where there is a written agreement or petition to compel. A right-to-sue notice must be issued after the resolution of group or class complaints.
This provides employees more time to file discrimination and harassment lawsuits in some cases.
No additional action is required as a result of this law.
SB 513
SB 513 revises the employee’s right to inspect and receive personnel records to include “education and training records.” A personnel file includes an employee’s job status and history, compensation, any disciplinary action, and termination information. It also includes recruiting and screening documents, job descriptions, performance reviews, and documents an employee signs (notices, policy acknowledgments, payroll changes).
SB 513’s revision to include employee access to personnel files which should now include education and training records, because this documents an employee’s performance and abilities and ensures that compliance with training, such as harassment and workplace violence prevention, matters and is recognized. Employers must maintain education and training records related to an employee’s performance. The records should include the name of the employee, the name of the training provider, the duration and date of training,
the core competencies covered in the training, and the resulting certification or qualification.
Employers should update policies for maintenance of personnel files and train staff as to what is included in a personnel file. We recommend having a separate file with all work-related training records.
SB 590
Starting January 1st, 2028, the Paid Family Leave program is expended to allow wage replacement benefits to workers taking time off to care for an ill “designated person,” or a “person related by blood or whose association with the individual is the equivalent of a family relationship.”
This brings the PFL program in alignment with the California Family Rights Act and California’s Paid Sick Leave laws.
Employers do not have to adjust their policies, but the brochures for Paid Family Leave which must be provided to eligible employees will likely be updated. You can download the most recent forms from www.edd.ca.gov.
SB 617
Cal-WARN can require 60 days’ notice prior to a mass layoff, operation-wide relocation, or shutdown. Regardless of if an employer plans to coordinate services for laid-off employees, a Cal-WARN Notice must include the functioning email and telephone number of the local workforce development board and the following description:
“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.”
If an employer is coordinating services, it must do so within 30 days of the notice. The notice must also specify whether the employer is coordinating services or not, and if so, with whom (the workforce development board or a different entity), a description of CalFresh, the CalFresh benefits helpline, a link to the CalFresh website, and a functioning email and phone number of the employer for contact.
Employers who have employed 75 or more employees for at least 6 of the 12 months preceding a layoff should consult with counsel about Cal-WARN requirements.
SB 642
SB 642 revises California’s Equal Pay Act to remove binary references to Equal Pay Act requirements, increase the statute of limitations for Equal Pay Act claims, and apply the “wage rate” in Equal Pay Act claims to all forms of pay. This revision attempts to make the pay scale in job posting an accurate estimate of the expected wage range an employer would pay.
Previously, the only specification was that an employer must include what it could “reasonably expect” to pay, leaving room for inaccuracies.
Employers should review job advertisements, bases, and explanations for discrepancies in pay, and should consider a wage and hour audit.
AI Regulations
Since October 1st, 2025, employers cannot use Automated-Decision Systems (i.e., AI) in a way that discriminates against, restricts, classifies, or prefers based on FEHA’s definition of protected characteristics. “Computational processes that make decisions or facilitate human decision-making regarding an employment benefit,” cannot be used by employers in scenarios such as reviewing applicants’ resumes or in hiring processes, where the system analyzes an applicant’s gender, disability, race, ethnicity, physical characteristics, tone of voice, or other characteristics, because the System may discriminate against the applicant due to these characteristics.
Employers using AI for their hiring processes have an affirmative obligation to ensure protected characteristics are not part of the hiring process.
Minimum Wage Increases
Effective January 1st, 2026, the non-exempt minimum wage will increase to $16.90 per hour. The “white collar” exemption increases to $70,304 per year, and computer software professionals increase to $122,573.13 per year, or $58.85 per hour.
Local minimum wage rates:
– Alameda: $17.46
– Berkeley: $19.18
– Hayward: $17.79
– Milpitas: $18.20
– Oakland: $17.34
– San Francisco: $19.18
– Santa Clara: $18.70
– Mountain View: $19.70
– Palo Alto: $18.70
– Fremont: $17.75
Employers should ensure employees receive at least the applicable minimum wage for all hours worked.
Federal Pay Changes
The “No Tax on Overtime” requires substantial procedural changes for overtime classifications for employers. There is up to a $12,500 deduction for individuals for qualified overtime pay under the FLSA, and a $25,000 deduction for joint filers. In 2026, this is being phased out, starting at $150,000 total for individual pay and $300,000 total for joint filers. Under the new law, employers must separately report qualified overtime compensation on the W-2 form and update payroll systems to reflect different types of overtime compensation. However, the IRS will not impose penalties for the 2025 tax year for noncompliance.
Beginning in 2026, the IRS will provide W-2 forms to account for updated overtime reporting.
Employers should update payroll systems to reflect these changes and consult with tax professionals regarding these requirements.
The IRS issued proposed regulations on September 15th, 2025 for “no tax on tips.” The definition of “qualified tips” for deduction are those that are paid in cash or an equivalent medium. They must come from customer or through a tip-sharing arrangement and must be paid voluntarily. The IRS also identifies almost 70 occupations that can use tip deduction. The employer reporting requirements are also delayed until 2026 for this.
Beginning in 2026, employers must submit information returns with a separate accounting of cash tips, must provide occupation codes on W-2 forms, and report tips separately on 1099’s for contractors.
Employers should consult with counsel and work with tax professionals on providing reasonable methods to estimate and report tips for 2025.
The Nuddleman Law Firm helps employers understand and comply with the law. We also advise employees about their rights and responsibilities. If you have questions about California employment laws, contact the Nuddleman Law Firm.