2026 Wage and Hour Nationwide Update: Key Changes That Could Affect Your Business

Key Takeaways

• New laws in 2026 bring major changes to pay transparency, equal pay and compliance requirements.
• Employers face heightened penalties, expanded reporting obligations and stricter enforcement.
• Minimum wage and salary thresholds are increasing nationwide, requiring payroll audits.

2026 brings a wave of wage and hour developments that every employer needs to know. From sweeping revisions to pay transparency and equal pay laws in California to New York’s new restrictions on training reimbursement agreements and updated minimum wage rates nationwide, the landscape continues to shift. This update spotlights the most impactful changes, including heightened penalties, expanded reporting requirements and new wage thresholds that could affect your company’s compliance strategy and bottom line. While not intended to capture every change, this article highlights key developments from coast to coast to help your organization stay ahead of risk and regulatory scrutiny. Read on for practical insights and proactive steps to protect your business.

California: Compliance Just Got Tougher

California’s 2026 wage and hour shakeup will have a far‑reaching impact – employers must act now to navigate higher financial thresholds, stiffer penalties and sweeping notice obligations.

Revisions to Equal Pay and Pay Transparency Laws

SB 642 became effective Jan. 1. Among other changes, the law revises the definition of “pay scale” to include a good faith estimate of the salary or hourly wage range that an employer reasonably expects to pay for a position upon hire. The law also changes the definition of “wages” to include total compensation – salary, hourly wage, bonuses, stock options, profit sharing, life insurance, vacation, travel expenses and more. Aligning with other portions of the Fair Employment and Housing Act, the law now protects employees of all genders. Significantly, the law also extends the statute of limitations for pay discrimination claims to three years and allows an employee to obtain relief for up to six years. This means more claims, more exposure and a longer look-back period for potential violations.

Mandatory Penalties for Pay Data Reporting Failures

Under SB 464, annual pay data reports to the Civil Rights Department are now subject to mandatory penalties for noncompliance – $100 per employee for the first failure and $200 per employee for subsequent failures. The reporting requirements are also expanding starting Jan. 1, 2027: Employers must cover 23 job categories (up from 10), and EEO-1 categories are out. If you’re not already auditing your pay data processes, now is the time.

Broadened Enforcement for Gratuity Protection Laws

The labor commissioner is now empowered to investigate gratuity theft and issue citations or file civil actions. Employers can no longer rely on limited enforcement – any violation can trigger direct action and public penalties.

Reimbursement for Mileage

Employers must reimburse mileage at least at the IRS standard rate (72.5 cents per mile as of Jan. 1) or risk litigation. Paying less? Be prepared to justify it or face costly disputes.

Minimum Wage for Persons with Disabilities

Subminimum wage licenses are history. As of Jan. 1, 2025, all employees – including those with disabilities – must be paid at least the statewide minimum wage. Federal certificates permitting subminimum wage are no longer valid in California.

Minimum Wage Updates

Statewide, California’s minimum wage is increasing to $16.90 per hour. Minimum wage rates also continue to surge across California cities. For example, Los Angeles jumps to $17.87 per hour, San Francisco hits $19.18 per hour and San Diego reaches $17.75 per hour. In addition to the base minimum wage, many cities have special rates for hotel workers and employee classifications. If you operate in multiple jurisdictions, a one-size-fits-all approach won’t cut it – review and update pay rates for every location.

New York: New Rules, New Risks

New York’s 2026 wage and hour changes demand immediate attention – employers face new compliance hurdles, steeper penalties and shifting standards that can impact your company’s profitability.

Minimum Wage and Exempt Salary Thresholds

Minimum wage rates are climbing again. Starting Jan. 1, nonexempt employees in New York City, on Long Island and in Westchester County must be paid at least $17 per hour; the rest of the state rises to $16. Tipped minimum wages are split by worker type – $14.15 minimum ($2.85 tip credit) for tipped service employees and $11.35 minimum ($5.65 tip credit) for tipped food service employees. For exempt employees, the salary threshold jumps to $1,275 per week ($66,300 annually) in New York City, on Long Island and in Westchester and to $1,199.10 per week ($62,353.20 annually) elsewhere. If your payroll systems aren’t ready, you risk costly misclassification claims.

Ban on Employment Training Reimbursements

The new ‘Trapped at Work Act,’ which we previously wrote about here, prohibits most agreements requiring employees to repay training costs if they leave early. These “TRAP” provisions – once common for recouping specialized training or certification expenses – now expose employers to stiff fines and penalties unless you fit a narrow exception (such as bona fide loans unrelated to training or certain union-negotiated programs). Enforcement is real, and the law is evolving: A proposed amendment could add carve-outs, but for now, review all onboarding and training agreements for compliance.

New Damages Limitations for Manual Workers’ Claims

Late wage payments to “manual workers” (those spending more than 25 percent of their time on physical labor) are now less punishing – liquidated damages for the first violation are limited to interest only, provided wages (which must be paid weekly) are paid within seven days of the work being performed. But beware: Repeat offenders can still face full liquidated damages. Tighten your payroll processes to avoid costly mistakes.

New York Healthy Terminals Act

Amendments to the Healthy Terminals Act now cover workers performing at least 50 percent of their duties at a covered airport, tie wages to the federal Service Contract Act, require paid leave and create a small employer exemption. If you operate at JFK or LaGuardia, these changes mean enhanced benefits and new compliance obligations – review your policies now.

Nationwide: Compliance Bar Keeps Rising

2026 is a turning point for wage and hour compliance across the country. Employers face a patchwork of new minimum wage rates, salary thresholds and enforcement priorities – missing a detail could mean costly penalties or litigation.

Increases to Minimum Wages and Salary Thresholds

Nineteen states are raising minimum wage rates for nonexempt hourly employees effective Jan. 1, with Alaska joining midyear. Many cities and counties having additional requirements – sometimes for specific industries or job types. Rates range from $10.85 in Montana to $19.18 in San Francisco. For remote workers, remember: The applicable minimum wage is determined by the employee’s location, not the employer’s office. Annual audits of your workforce’s hourly rates are no longer optional – they’re essential.

Exempt Employee Salary Thresholds

Six states – California, Colorado, New York, Washington, Alaska and Maine – have increased salary thresholds for exempt employees. For example, Colorado’s threshold jumps to $57,784 per year, Maine’s hits $45,300.32 and Washington’s soars to $80,168.40. These thresholds vary by jurisdiction and sometimes by job category (e.g., highly compensated or technical employees). If you miss the mark, you risk overtime claims and misclassification lawsuits.

WHD Opinion Letters – Fresh Guidance

Under the Biden administration, the Department of Labor’s Wage and Hour Division largely stopped issuing opinion letters, leaving employers with less clarity and more risk when interpreting complex wage and hour laws. But the Trump administration reversed course in January, publishing six new opinion letters that deliver fresh, actionable guidance on exemptions, bonus calculations and Family and Medical Leave Act (FMLA) leave. The key takeaways:

• The “learned professional” exemption applies to licensed clinical social workers based on licensure and job duties, not just degree. However, employers must still meet the salary requirement to take advantage of the exemption.
• Nondiscretionary bonuses (e.g., safety, attendance, performance) must be included in the regular rate for overtime.
• Mandatory pre-shift “roll call” time is compensable and must be included in overtime calculations, except where a collective bargaining agreement structures the time to qualify for a Section 7(b)(1) or Section 7(b)(2) exemption.
• Commissioned employees must meet federal minimum wage standards, even if state rates are higher, and tip credits must be factored into wage calculations for employees earning commissions who are classified as exempt under Section 7(i).
• When an employee is approved to take FMLA leave for less than a full workweek and the employer is closed for less than a week, the closure period cannot be deducted from the employee’s FMLA entitlement. However, when the employee uses FMLA for a full workweek, the employer’s closure for a portion of that week has no impact on the employee’s FMLA usage.
• FMLA leave covers travel time for medical appointments if the employee provides certification confirming the necessity of the appointment. The medical certification need not estimate the employee’s travel time.

DOL Penalties – Enforcement Is Up

The U.S. Department of Labor collected $318 million in back pay and penalties in fiscal year 2025 – an astounding 33 percent increase from 2024, despite fewer violations found. This marks the highest recovery of monetary penalties in a decade. The message is clear: Proactive audits, updated compliance policies and targeted training are critical to avoid costly penalties and reputational damage.

Conclusion

Wage and hour laws are constantly evolving, and 2026 is proof that the pace of change is accelerating. Staying compliant isn’t just about keeping up – it’s about staying ahead. As new rules and enforcement priorities emerge, even well-intentioned employers can find themselves exposed to costly penalties and litigation. To safeguard your business, consider conducting a comprehensive wage and hour audit to ensure your practices align with the latest requirements. For tailored guidance and proactive strategies, reach out to BakerHostetler’s Labor & Employment team – we’re here to help you navigate these changes and protect your organization.