Prepare for 2026: Key considerations for California employers

At a glance

• California’s employment law landscape continues to shift, with several new laws set to take effect soon.
• Minimum wage: Effective January 1, 2026, the state minimum wage will rise to USD16.90 per hour.
• Know Your Rights Notice: Employers must deliver a notice of key labor protections, immigration-related rights, and constitutional protections in the workplace to all employees upon hire and annually thereafter, starting February 1, 2026.
• Personnel records: Employees’ rights to inspect and receive copies of personnel records have been expanded to include education and training records, starting January 1, 2026.
• Equal Pay Act: Amendments clarify definitions, extend limitation periods, and align remedy structures with federal standards, starting January 1, 2026.
• Pay data reporting: A new law expands requirements for annual pay data reporting to the Civil Rights Department.
• Wage theft enforcement: The Labor Commissioner is enabled to pursue tip and gratuity violations, including by issuing citations or filing civil actions, starting January 1, 2026.
• Paid family leave (PFL) program: Effective July 1, 2028, eligibility for benefits under the state’s program will expand to cover time off to care for a seriously ill 'designated person.'
• California Worker Adjustment and Retraining Act (CalWARN): Existing notice requirements have been expanded to include additional information, starting January 1, 2026.
• 'Stay or Pay' contracts: A prohibition on contracts that require employees to repay debts to their employer upon termination, with limited exceptions, will become effective January 1, 2026.

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The California legislature enacted numerous workplace laws, most of which will take effect in 2026. Summarized below are key developments and actions for California employers to consider. 

Minimum wage

Starting on January 1, 2026, California’s minimum wage rate will increase to USD16.90 per hour from the current USD16.50 per hour, based on the released minimum wage adjustment calculated by the state’s Director of Finance. The increase will impact the salary thresholds for exempt employees, as well as other wage and hour obligations (eg premium pay calculations). Local ordinances may impose higher minimum wage rates, which likewise may be increased in the new year.

Workplace Know Your Rights Act  

Beginning February 1, 2026, SB-294 requires employers to deliver a standalone 'Know Your Rights' notice to current employees on an annual basis and to new employees upon hire. Employers must use the Labor Commissioner’s template, to be published by January 1, 2026. The notice must be distributed by February 1, 2026, and must cover, among other topics:

• Workers’ compensation benefits and contact information for the Division of Workers’ Compensation.
• Employee rights regarding immigration agency inspections and protections against unfair immigration‑related practices.
• Employee rights to organize or engage in concerted activity.
• A summary of constitutional rights when interacting with law enforcement at work. 
• Any other material developments and enforcement agencies identified by the Labor Commissioner.

Employers must deliver the notice in the language that is ordinarily used to communicate with employees if the template is available in that language. Employers may deliver the notice through the usual communication methods if it can reasonably be expected to reach the employee within one business day. Employers must keep records for a three-year period, beginning as of the date each notice was provided or sent. By July 1, 2026, the Labor Commissioner will also release explanatory videos that employers may share.

The new law also requires employers to give all current employees the opportunity to designate an emergency contact by March 30, 2026 and to collect this information at hire thereafter. If requested by an employee, employers must notify the designated emergency contact if the employee is arrested or detained at the worksite. The employer must also notify the contact if the arrest or detention occurs during work hours or while the employee is performing job duties offsite (if the employer has actual knowledge of it).

The Labor Commissioner is responsible for enforcement, with a penalty of USD500 per employee per violation (the penalty for a violation of the emergency contact provision would be an amount up to USD500 per employee for each day the violation occurs, up to a maximum of USD10,000 per employee).

Employers are encouraged to monitor the Labor Commissioner’s website for the template notice and prepare to develop notice, recordkeeping, and arrest/detention notification processes.

Personnel records  

Effective January 1, 2026, SB-513 provides employees with the right to inspect and receive copies of their education and training records. Training records must identify the employee’s name, the training provider, the duration and date of the training, core competencies (including equipment or software skills), and any resulting certification or qualification. 

Updates to Equal Pay Act - SB-642

The Pay Equity Enforcement Act updates California’s Equal Pay Act and related wage provisions to sharpen definitions, extend limitations periods, and align remedy structures with federal concepts. Effective January 1, 2026, key changes include:

• Pay scale definition: California employers are already required to provide employees with the pay scale for their position. California employers with 15 or more employees are also required to include the pay scale for a position in job postings. The new law defines 'pay scale' to mean the wage range the employer reasonably and in good faith expects to pay for the position upon hire, which may narrow posted ranges.
  
  
• Definition of 'wages': The definition of 'wages' for purposes of equal pay requirements is expanded to cover all forms of compensation, including cash compensation and non-cash benefits (eg bonuses, equity awards and / or stock options, vacation and holiday pay, life insurance, and other forms of incentive compensation). The expanded definition of 'wages,' which is consistent with federal Equal Pay Act standards, applies only to the requirement that employers not pay employees less than employees of a different sex, race, or ethnicity for substantially similar work performed under similar working conditions.
  
  
• Protected comparators: References to the 'opposite sex' are replaced with 'another sex,' reinforcing coverage across the spectrum of sex-based comparators.
  
  
• Limitations and accrual: Civil actions for violation of the Equal Pay Act may be filed within three years from the date of the last violation. An employee may recover back wages going back six years.

Employers are encouraged to ensure that posted pay scales reflect the good-faith expected range at hire and to consider the scope of wages when conducting pay audits.

Expanded pay data reporting

SB-464 expands employer obligations related to pay data reporting. Effective January 1, 2026, employers must store demographic information gathered for pay data reporting separately from personnel files. In addition, civil penalties for failure to file pay data reports will become mandatory at the request of the Civil Rights Department. Penalties are USD100 per employee for an initial failure and USD200 per employee for subsequent failures.

Effective January 1, 2027, the new law will expand job categories from 10 to 23, increasing visibility into pay patterns within more specific roles.

Wage theft claims for tips and gratuities

Effective January 1, 2026, under SB-648, the Labor Commissioner may investigate, issue citations, and bring civil actions when employers unlawfully take or withhold any money owed to employees, including gratuities. Until now, the Labor Commissioner could investigate wage theft, but its enforcement authority with respect to tips was limited. SB 648 closes that gap.

Employers in the hospitality, food service, and other tipped sectors are encouraged to review their tip‑pooling, distribution, and recordkeeping practices.

'Designated persons' under PFL

Effective July 1, 2028, SB-590 expands employee eligibility under California’s PFL programe to receive wage replacement benefits when caring for a seriously ill 'designated person,' which is defined as an individual related to the employee by blood or whose association with the employee is equivalent to a family relationship. Employees may identify the designated person by attesting to the relationship at the time of they make a claim for PFL benefits.

CalWARN updates

Starting January 1, 2026, under SB-617, 

notices required under CalWARN must indicate whether the employer plans to coordinate services through the local workforce development board or another entity. If so, the employer must arrange for those services within 30 days from the date of the written notice.

Employers must include the following information in the written notice:

• A 'functioning email and telephone number' of the local workforce development board.
  
  
• The following description of the rapid response activities offered by the local workforce development board:
  
  

  '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.'
  
  

• A description of CalFresh, the statewide food assistance program, the CalFresh benefits helpline, and a link to the CalFresh internet website.

Prohibition of 'stay or pay' contracts

Building on California’s longstanding public policy against noncompete and restraint‑of‑trade provisions, as of January 1, 2026, AB-692 prohibits employers from entering into 'employment contracts' that include training repayment agreement provisions (TRAPs), as well as other quit-fees or penalties tied to separation from employment, except under limited circumstances. Employers cannot include in an 'employment contract' – or require an employee to execute as a 'condition of employment' – a contract term that:

• requires the employee to repay a debt to the employer, a training provider, or a debt collector upon termination;
  
  
• authorizes debt collection to begin or resume upon termination; or
  
  
• imposes any penalty, fee, or cost for leaving a job.

AB 692’s restrictions will not apply to contracts related to repayment of tuition costs and repayment of 'discretionary or unearned monetary payments' that are made at the outset of employment and not tied to specific job performance (as long as detailed requirements, including that the repayment obligation be set forth in a separate agreement, are met).

Because AB 692 does not expressly define 'employment contract' or 'condition of employment,' its application to various compensation practices – under which employees may be required to repay advanced but unearned wages upon termination of employment – is uncertain.

Employers whose compensation-related agreements include provisions requiring employees to repay – or permitting the employer to 'claw back' – unearned advances upon an employee’s separation from employment should consult counsel about the potential need to modify template contracts and compensation practices going forward.

Key vetoes

In addition to laws that were enacted, a number of bills were vetoed, including two bills that would have significantly impacted employers in California:

No Robo Bosses Act: SB-7 would have thoroughly regulated employers’ use of automated systems in employment decision making, including by imposing transparency, bias assessment, and recordkeeping obligations. While the bill was vetoed, employers must still comply with recently approved Fair Employment and Housing Act regulations (described here) on the use of artificial intelligence in employment within California.

Immigration and work authorization: If enacted, AB-1136 would have required employers to allow employees to take up to five unpaid days off per year to attend to immigration or work authorization matters. The bill also would have required employers that are notified of an employee’s detainment or incarceration in connection with pending immigration or deportation proceedings to place the employee on an unpaid leave of absence for up to 12 months. In addition, employees terminated for lack of proper work authorization but who later produced proper evidence of authorization would have been given reinstatement rights.

If you have any questions regarding these developments, please contact the authors or your DLA Piper relationship attorney.