2026 California Employment Law Update

2026 Laws Related to Compensation

AB 692: Ban on “Stay or Pay” Provisions

Beginning January 1, 2026, employers will be prohibited from requiring employees to repay a debt, penalty, or fee, if their employment ends, except in limited circumstances and subject to strict criteria.

Discretionary bonuses with repayment requirements (e.g., sign-on, relocation, retention) can be entered into as long as the following are satisfied:

• Bonus is not tied to job performance
• Terms are in a separate agreement
• Retention period is 2 years or less
• Repayment only required if employee resigns or is terminated for misconduct
• Repayment is prorated based on remaining term and without interest
• Employee can defer payment until end of retention period (rather than receive it as an advance with repayment obligations)
• Employee notified of right to consult an attorney and given at least 5 business days to do so

Repayment of tuition costs for “transferable credential” is permissible with similar requirements.

New law may impact penalty, fee, cost or repayment structures in equity documents, incentive plans and loan or tuition repayment agreements.

Noncompliant contracts entered after January 1, 2026, treated as unlawful noncompete. Employees or their representatives can bring civil action and seek actual damages or $5,000 per worker (whichever is greater), injunctive relief, and attorney’s fees and costs.

Update onboarding materials: Ensure any relocation, sign-on, or retention provision is in a separate agreement from offer letter and compliant with new requirements.

Reexamine contracts: Review bonus structures, incentive plans and other employment contracts entered into after January 1, 2026, for any prohibited “stay or pay” provisions.

Train your staff: Ensure HR, legal and recruiting teams are aware of new limitations.

SB 464: Expanded Pay Data Reporting and Penalties

Beginning January 1, 2026, demographic data collected must be stored separate from personnel files. Civil penalties for failure to comply with state’s pay data requirements will become mandatory (rather than permissive) upon Civil Rights Department request.

Beginning January 1, 2027, employers with 100+ employees must report pay data for 23 job categories (up from 10).

Data collection: Ensure data is stored separately from personnel file and prepare for collection of data for additional job categories.

Annual reporting: Ensure pay data is reported on or before annual May deadline.

Minimum Wage Increases

Starting January 1, 2026:

California’s minimum wage will increase to $16.90/hour statewide, with higher rates in many cities/counties, and higher rates for certain industries (e.g., healthcare, fast food).

California's minimum salary thresholds for most white-collar exempt employees will increase to $70,304/year. Salary requirement for computer professional exemption will increase to $122,573.13 annually and $58.85 per hour.

Review compensation: Update pay rates for hourly and exempt employees to meet new minimums. Check local ordinances for higher minimum wage requirements.

SB 261: Penalties for Unpaid Wage Judgments

Effective January 1, 2026, employers with unpaid wage judgments beyond 180 days can face penalties up to three times the outstanding judgment (with 50% going to the employee and 50% to the state), mandatory attorneys’ fees, and broader prosecutorial authority from Labor Commissioner.

Successors can be held jointly and severally liable for unpaid judgments.

Audit for outstanding judgments: Monitor and promptly satisfy wage judgments.

Assess transaction risk: Expand diligence in transaction to identify outstanding wage judgments.

2026 Laws Related to Equal Pay, Transparency and AI Use

SB 642: Updates to Equal Pay and Pay Transparency Laws

Effective January 1, 2026, California’s equal pay law and its pay transparency law are amended to require more accurate salary estimates in job postings, and ensure value of stock, bonuses, and other benefits are factored into equal pay determinations.

Posted salary or hourly wage range must be a good faith estimate of what employer reasonably expects to pay for the position upon hire.

Employers cannot pay employees of “another” sex—not just the “opposite” sex—less for “substantially similar work.” Law aligns definition of “sex” with definition in FEHA.

Statute of limitations extended to three years from last violation, with up to six years of back pay recoverable.

A more detailed insight can be found here.

Audit pay practices: Audit pay practices and compensation structures for equity across all forms of pay, and ensure audits include equity awards.

Update job postings: Be mindful of how pay scales are developed for postings to ensure reasonableness and accuracy in light of wage range and “upon hire” requirement.

SB 53: AI Transparency Law for Frontier Models; CRD Regulations on ADS

Effective January 1, 2026, the Transparency in Frontier Artificial Intelligence Act:

• Imposes new transparency and reporting obligations on large “frontier” AI developers
• Protects covered employees who raise catastrophic-risk or compliance concerns from retaliation, and
• Requires employers to provide notices of these rights by posting and providing annual written distribution.

A more detailed insight can be found here

Separately, California Civil Rights Division (CRD) regulations effective October 1, 2025, clarify that anti-discrimination laws apply to Automated-Decision Systems (ADS) used in employment (including vendor tools), and employers can be liable if ADS results in unlawful disparate treatment/impact or fails to accommodate disabilities.

Create AI safety and reporting procedures: Frontier model developers should create AI safety reporting and escalation procedures; enable anonymous internal reporting channels; integrate with whistleblower/anti-retaliation policies; distribute or post the required TFAIA employee notices and track annual distribution/versions.

Review ADS use: Employers should review ADS used in hiring and employment (including third-party tools), obtain vendor documentation and contractual assurances of non-discrimination, and remediate or discontinue tools that pose discrimination risk.

2026 Laws Related to Workplace Notices and Policies

SB 294: Workplace Know Your Rights Act Notice

Beginning February 1, 2026, all employers must provide a standalone written notice of key workplace rights to all employees upon hire and annually, covering union organizing rights, immigration, and other workplace protections.

Labor Commissioner will provide model notice by January 1, 2026, and will provide templates in different languages.

Employers must allow employees to designate an emergency contact by March 30, 2026, and notify contact if employee is arrested or detained at work.

Prepare and distribute notice: Watch for Labor Commissioner’s template and plan to distribute notice using your standard communication method, ensure notices are provided in languages understood by employees.

Update onboarding procedures: Include notice for new hires as of Feb. 1.

Designate emergency contacts: Have process for new and existing employees to designate and update emergency contacts by March 30, 2026.

SB 617: WARN Act Notice Expansion

Beginning January 1, 2026, existing Cal-WARN Act notice requirements for layoffs, closures and relocation have been expanded to include information on whether employer plans to coordinate reemployment services through the local workforce board or another entity, the board’s contact information and description of services, and a description of CalFresh, the state’s food assistance program.

Update WARN notices: Update templates to comply with new notice requirements and coordinate with local workforce boards as needed.

SB 590: Paid Family Leave for Designated Person

Effective July 1, 2028, benefits under California’s Paid Family Leave Program (which are maintained by the state, not the employer) are expanded to cover employees who take time off to care for a “designated person” – meaning any person related by blood or who is equivalent to family.

Note that this law does not create an additional leave requirement for employers, employers already must provide unpaid leave for designated persons under CFRA (this law adds paid state benefits).

Update handbook: Revise employee handbook and leave policies, as applicable, to incorporate the broader availability of paid state benefits for designated persons.

AB 406: Expanded Uses of Paid Sick Leave

Effective October 1, 2025, employees may use paid sick leave if they or a covered family member are crime victims who must attend specified court proceedings, such as sentencing hearings and delinquency hearings.

Update handbook: Revise employee handbook, sick leave policies and FAQs, as applicable, to include expanded sick leave use.

2026 Laws Related to Training and Personnel Files

SB 513: Personnel Records – Training/Education

Beginning January 1, 2026, personnel records will include education and training records. Such documents must specify required details (employee name, training provider, date and duration of training, core competencies of training, certification), and must be available for employee inspection within 30 days of request.

Applies to all employers who maintain such records.

Update records: For employers who maintain training and education records, ensure such records include required details, and are kept in personnel file.

Train HR and management: Train HR and management to ensure all education and training records include employee name, training provider, date and duration of training, core competencies of training, certification.

SB 303: Bias Mitigation Training

Effective October 1, 2025, law clarifies that acknowledging personal bias during employer-provided bias mitigation training does not constitute unlawful discrimination. Law is intended to encourage bias mitigation training, including self-reflection exercises, without fear of retaliation or discrimination claims arising from such activities.