Key Takeaways
- Review your policies and notices to be sure they are up to date.
- Make sure you are complying with all applicable minimum wage obligations, including local ordinances and industry-specific requirements.
- Review repayment agreements, such as for tuition assistance or signing bonuses, to ensure compliance with California’s new ban on “stay-or-pay” provisions.
- Avoid harsher penalties and expanded enforcement mechanisms by auditing and immediately paying any final wage judgments and timely reporting pay data.
The BakerHostetler Labor and Employment Practice Group keeps a close watch on new and upcoming employment and labor laws that can significantly impact our California-based clients. Below we highlight some of the recently implemented and noteworthy state laws that take effect in the new year. Unless otherwise noted, the new laws take effect on January 1, 2026.
California Minimum Wage
The California minimum wage is increasing from $16.50 per hour to $16.90 per hour. Correspondingly, the minimum salary threshold for exempt employees has increased to $70,304 annually, $5,859 monthly or $1,352 weekly. Keep in mind that local minimum wage requirements, which may impose higher minimum wages than $16.90 per hour, remain in effect. In addition, certain industries, including healthcare and fast food, are subject to separate minimum wage requirements.
Workplace Know Your Rights Act
Under California’s new Workplace Know Your Rights Act (SB 294), effective Feb. 1, 2026, employers must provide to each current employee an annual stand-alone written notice of their rights when interacting with law enforcement in the workplace. The model notice is now available here.
The act also requires employers to, upon an employee’s request, notify their designated emergency contact in the event the employee is arrested or detained at work. Employers must provide current employees the opportunity to designate this emergency contact no later than March 30, 2026.
Most Stay-or-Pay Provisions Banned
To strengthen California’s public policy encouraging employee mobility, AB 692 makes it unlawful for employers to include in employment contracts any terms that require the employee to repay a debt if their employment ends, subject to a few exceptions. Under the new Section 16608 of the Business and Professions Code, certain contracts entered into on or after Jan. 1, 2026, are prohibited from including a term that does any of the following: (1) requires the worker to pay an employer, training provider or debt collector for a debt if the worker’s employment or work relationship with a specific employer terminates; (2) authorizes the employer, training provider, or debt collector to resume or initiate collection of or end forbearance on a debt if the worker’s employment or work relationship with a specific employer terminates; or (3) imposes any penalty, fee or cost on a worker if the worker’s employment or work relationship with a specific employer terminates. The law sets forth certain exceptions for (i) a contract entered into under any loan repayment assistance program or loan forgiveness program provided by a federal, state or local government agency; (ii) a contract related to the repayment of the cost of tuition for a transferable credential that meets specific requirements listed under Section 16608; (iii) a contract related to enrollment in an apprenticeship program approved by the Division of Apprenticeship Standards; and (iv) a contract for the receipt of a discretionary or unearned monetary payment, including a financial bonus, at the outset of employment that is not tied to specific job performance, provided that specific conditions in Section 16608 are met.
Expanded Paid Family Leave Care Benefits for Designated Persons
Starting July 1, 2028, California will expand its Paid Family Leave to allow eligible individuals to receive paid family leave benefits to take time off work to care for a designated person who is seriously ill. Under Section 3302 of the Unemployment Insurance Code, a “designated person” is defined to mean any care recipient related by blood or whose association with the individual is the equivalent of a family relationship. The new law will require the employee seeking benefits to identify the designated person and, under penalty of perjury, attest to how the relationship is blood-related or the equivalent of a family relationship. In effect, eligible employees can now receive partial wage replacement when they take time off work to care for extended family or anyone who has a “family-like” relationship with the employee.
Revisions to Equal Pay and Pay Transparency Laws
Section 432.3 of the Labor Code currently requires employers to share or include in a job posting the “pay scale” for a position. SB 642 amends the definition of “pay scale” to “a good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.”
Section 1197.5 of the Labor Code currently prohibits employers from paying employees at wage rates less than the rates paid to employees of the “opposite” sex for substantially similar work, subject to certain exceptions. SB 642 aligns the definition of sex with other portions of the Fair Employment and Housing Act and changes “opposite” sex to “another” sex, now encompassing nonbinary genders. Moreover, the definition of “wages” and “wage rates” is revised under the bill to include “all forms of pay, including, but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.” Significantly, the law also extends the statute of limitations for pay discrimination claims to three years and allows the employee to obtain relief for up to six years.
Mandatory Penalties for Pay Data Reporting Failures
California currently requires private employers with 100 or more employees to submit annual pay data reports to the Civil Rights Department (CRD) for a “snapshot” period. These reports include the number of employees by race, ethnicity and sex across 10 job categories (aligned with EEO-1 reporting); within each job category the mean and median hourly rate for employees by race, ethnicity and sex; and the total number of hours worked by each employee counted in each pay band. Reports are due annually on the second Wednesday in May (i.e., by May 13 in 2026).
Under SB 464, civil penalties for failures to comply with the state’s pay data reporting requirements will become mandatory upon CRD request. Previously, courts had discretion in imposing civil penalties. Noncompliance risks civil penalties of $100 per employee for the first failure and $200 per employee for a subsequent failure. Effective January 1, 2027, SB 464 also increases the number of “job categories” that must be covered in pay data reports from 10 to 23, and EEO-1 categories will no longer be used.
Pandemic-Related Recall Rights Extended Again
Certain hospitality and service industry workers have been covered by California’s rehire protections if they were laid off for a COVID-19-related reason. AB 858 extends the sunset date of these recall and reinstatement rights, which were set to expire at the end of this year, until January 1, 2027. This applies to hotels, private clubs, event centers, airport hospitality operations, airport service providers, and building services to office, retail or other commercial buildings.
Expanded Cal-WARN Notice Requirements
SB 617 expands the information employers are required to include under the California Worker Adjustment and Retraining Notification Act (Cal-WARN). Under the new law, the written notice provided for a mass layoff, relocation or termination pursuant to Cal-WARN must include information on whether the employer plans to coordinate services through the local workforce development board or another entity, as specified, and information regarding the statewide food assistance program known as CalFresh, as specified.
Harsher Penalties for Unsatisfied Wage Judgments
According to the California Legislature, only around 12 percent of final wage judgments are fully collected by employees. Accordingly, SB 261 significantly increases the risks for employers with unpaid wage judgments by introducing triple penalties for delay, successor liability, mandatory attorneys’ fees, and expanded enforcement power for the Labor Commissioner’s office. SB 261 adds Section 230.05 to the Labor Code, which imposes a penalty of up to three times the outstanding judgment, including interest, if a final wage judgment remains unpaid 180 days after the time to appeal ends. SB 261 further requires that a court “shall” assess the entire amount of the penalty, “except to the extent that the court finds that the judgment debtor has demonstrated by clear and convincing evidence good cause to reduce the amount of the penalty.” The new law extends joint and several liability for penalties to successors of judgment-debtor employers. In addition, SB 261 adds Section 238.10 to the Labor Code, which awards a prevailing plaintiff “all reasonable attorney’s fees and costs in any action brought by a judgment creditor, the Labor Commissioner, or a public prosecutor” to enforce a final wage judgment.
Personnel Records To Include Education or Training Records
SB 513 expands Section 1198.5 of the Labor Code, which allows current and former employees to inspect and receive a copy of personnel records the employer maintains relating to the employee’s performance or to any grievance concerning the employee. Under the expanded law, employers who maintain education or training records must also make them available to employees. Such records must include the following: (1) the name of the employee, (2) the name of the training provider, (3) the duration and date of the training, (4) the core competencies of the training, including skills in equipment or software, and (5) the resulting certification or qualification.
FEHA Amendments
SB 477 amends the California Fair Employment and Housing Act (FEHA) and expands the circumstances for tolling the statute of limitations. Specifically, tolling will apply when the individual appeals a decision from, or enters into an agreement with, the California Civil Rights Department (CRD), or during the pendency of any petition to compel CRD action. The law adds a definition of “group or class complaint” to the FEHA as “any complaint alleging a pattern or practice” and requires the CRD to fully resolve all related proceedings before issuing a right-to-sue notice for group or class matters.
Bias Mitigation Training
To encourage employers to conduct bias mitigation training and to affirm that conducting such training does not, by itself, constitute unlawful discrimination, SB 303 added Section 12940.2 to the Government Code. This new law clarifies that an employee’s assessment, testing, admission or acknowledgment of their own personal bias, when made in good faith and solicited or required as part of a bias mitigation training, does not, by itself, constitute unlawful discrimination.
Broadened Enforcement for Gratuity Protection Laws
Under existing law, employers are prohibited from collecting, taking or receiving any gratuity that is paid, given to or left for an employee by a patron, or deducting any amount from wages due to an employee on account of a gratuity, or requiring an employee to credit the amount or any part of a gratuity against and as a part of the wages due the employee from the employer. The law also requires the Department of Industrial Relations to enforce these provisions. SB 648 provides an additional option for recovery for gratuity theft by authorizing the Labor Commissioner to investigate gratuity theft and issue citations or file civil actions.
