California Employment Law Updates for 2026

It’s that time of year when California employers brace themselves for news on the new laws that will go into effect come the first of the year. Sadly, we don’t often see many new laws that balance the interests of employers. This year, once again, we have not such good news for employers whose compliance requirements seem to continually expand – additional Victims Leave rights and protections, more reasons for the use of Paid Sick Leave (PSL), restrictions Stay or Pay Contacts, new complexities in Pay Transparency and Equal Pay practices, more complex Pay Data Reporting rules, multiple developments in the classification of Independent Contractors, expanded Unionizing Rights, several new laws in the area of Artificial Intelligence, a new required Workplace Rights Notice, amongst others.

California Employment Law Updates for 2026

– The following is a description of most of the more impactful (but not all) new employment laws that unless otherwise stated, will go into effect on 1/1/26:

AB 288 – State Authority in Private Labor Disputes

This bill creates state authority over certain private sector workers by giving the California Public Employee Relations Board (PERB) expanded authority. It allows the PERB to enforce provision of the National Labor Relations Act (NLRA) in the private sector when the National Labor Relations Board (NLRB) has declined or failed to act. A similar law recently passed in New York was met with legal action by the NLRB who has similarly now filed a suit to block AB 288’s enforcement.

Regardless of the outcome, employers should pay heightened attention to actions that could be construed as interfering with their employees’ rights to unionize or bargain collectively.

AB 406 – Victims’ Rights

California has long provided protection to employees who are victims of certain crimes. On 1/1/25, these rights and protections were significantly expanded, and jurisdiction for related claims was transferred from the Division of Labor Standards Enforcement (aka “the Labor Commissioner”) to the California Civil Rights Department (CRD).

The changes included establishing that employees who were victims or had family members who were victims of any crime could take protected time off to appear in court. Additionally, victims of a “qualifying act of violence” (a newly defined term) could take protected time off to obtain relief to help ensure the health, safety, and welfare of the victim and their child. Additionally, for employers with 25 or more employees, the law spelled out an additional 10 specific reasons for employees to be able to take protected time off related to being a victim of a qualifying act of violence.

AB 406 created a new reason for which employees at companies of all sizes who are victims or who have family members who are victims can take protected time off – to attend judicial proceedings related to 14 specific crimes. This new protected time off provision goes into effect on 1/1/26.

Existing law provided that employees could use Paid Sick Leave (PSL) for certain reasons covered by crime victim leave and protection law. AB 406 stipulates that PSL may be used for the new time off reasons it creates. Additionally, while existing law required employees to provide their employers with reasonable advance notice of the need for jury duty, AB 406 clarifies that reasonable advance notice is only required unless the “advance notice is not feasible.”

Employers will need to update handbook policies on this topic and should be on the lookout for a new required notice that we expect will be issued by the CRD. Most importantly, given the myriad of definitions and circumstances surrounding when an employee is entitled to victim leave and protection, employers should always exercise caution when faced with an employee experiencing anything that may trigger these protections and seek professional advice and guidance. The law is extraordinarily complex on this subject at the current time.

SB 590 – Paid Family Leave for Designated Persons

The existing California Paid Family Leave (PFL) program provides wage replacement benefits for employees who take otherwise unpaid time for a number of specific reasons which include, but are not limited to, in order to care for a family member who is seriously ill. The current definition of family member includes a child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner.

Effective 7/1/28, benefits will be available if the employee takes time off to care for a designated person, defined as someone who is either related to you by blood or whose association with you is the equivalent of a family relationship. An employee requesting benefits for this reason will be required to attest, under penalty of perjury, to how the individual is related by blood to the designated person or how the individual’s associate with the designated person is the equivalent of a family relationship.

Previous legislation added designated persons to the list of individuals for whom California employees could use Paid Sick Leave or take a leave of absence under the California Family Rights Act.

AB 692 – Stay or Pay Contracts

California has long held the position that contracts that restrict a worker from engaging in a lawful profession, trade, or business are illegal restraints of trade. As such, most non-compete, non-solicitation, and even no-poach agreements have been found to be unenforceable and illegal.

AB 692 goes a step further and makes contracts entered into after 1/1/26 illegal if they require a worker to pay an employer, training provider, or debt collector for a debt if the employment or work relationship ends. Equally illegal will be any contract that authorizes the employer, training provider, or debt collector to resume or initiate collection or end forbearance on a debt if the work relationship terminates.

Finally, any contract that imposes a penalty, fee, or other cost on the worker if the relationship ends will also be prohibited. Debts will include any money or personal property that is due such as costs related to employment, education, or consumer financial products or services – even if incurred voluntarily. Penalties, fees, or costs will include replacement hire fees, retraining fees, replacement fees, quit fees, reimbursement for immigration or visa-related costs, liquidated damages, lost goodwill, and lost profit.

The law does provide for some exceptions including certain loan repayment assistance programs; tuition reimbursement contracts; signing bonus contracts with retention requirements; and contracts related to the lease – as long as very specific conditions are met.

Given the risk of non-compliance damages of $5,000 or more per worker as well as attorney’s fees and costs, employers are advised to seek legal counsel when drafting any agreements that might fall under the restrictions of this new law.

AB 858 – COVID Recall Rights

Existing law provides for recall and reinstatement rights for certain employees in the hotel, private club, event center, airport, and building service (janitorial, maintenance, security) industries who were laid off due to the COVID-19 pandemic.

Employers must provide the laid-off workers with specific information about jobs that become available for which the laid-off workers are qualified and offer positions to those laid-off employees based on a preference system based on specific timelines and procedures.

These rights were due to sunset on 12/31/25, but AB 858 extends them through 1/1/27.

AB 1340 – Gig Drivers Rights to Unionize

Existing law establishes that certain drivers who use their own vehicles to connect with customers through Transportation Network Companies (TNC) are independent contractors.

AB 1340 grants these drivers the right to form, join, and participate in the activities of TNC driver organizations; to bargain through their own representatives; to engage in concerted activities for the purpose of bargaining or other mutual aid or protection, or to refrain from such activities.

The bill establishes that the Public Employment Relations Board (PERB) is tasked with administering the Act, overseeing the union certification process, and determining unfair labor practices. It also addresses the appeals of driver terminations, paid leave and safety standards, and general grievance procedures.

SB 642 – Pay Transparency & Equal Pay

Existing law requires employers, upon request, to provide the pay scale for a position with an employee who is currently employed in that position. Employers must also, upon request, share the pay scale for a position with an applicant who is applying for that job. Further, employers with 15 or more employees must list the pay scale in a job posting.

“Pay scale” is currently defined as the salary or hourly wage that the employer reasonably expects to pay for the position, which might be a very broad or wide range. SB 642 revises the definition of “pay scale” to mean a good faith estimate of the expected wage range that an employer reasonably expects to pay for the position upon hire.

Existing law further prohibits an employer from paying its employees at a wage rate that is less than the rate paid to employees of the “opposite” sex or another race or ethnicity for substantially similar work, except under specified circumstances. SB 642 would instead prohibit an employer from paying its employees at a wage rate that is less than the rate paid to employees of “another” sex vs the “opposite” sex.

It also expands the definition of wages and wage rates to include all forms of pay including salary, overtime, bonuses, and a number of other types of pay and benefits. Additionally, it would increase the statute of limitations to recover wages for payments that were inappropriately paid at a lower rate.

AB 1514 – Manicurists and Commercial Fishers – Independent Contractor Status

Existing law establishes a test known as the ABC test to determine if someone is an employer or an independent contractor.

A. The worker needs to be free from the control of the employer;
B. The work being performed needs to be outside of the usual course of the employer’s business; and
C. The worker needs to be engaged in their own independent business.

Existing law also provides for an ever-increasing number of specific occupations and types of business relationships that are exempt from the ABC test but are instead subject to a multifactor test referred to as the “Borello” test.

There was an exemption for certain manicurists that became inoperative on 1/1/25. AB 1514 allows the exemption to reapply through 1/1/29.

Similarly, there is an existing exemption for a commercial fisher working on an American vessel who is also ineligible for unemployment benefits. This exemption becomes inoperative on 1/1/26. AB 1541 extends the inoperative date to 1/1/31.

SB 261 – Wage Judgements

The law significantly increases penalties for employers who fail to pay judgements for unpaid wages. If a final non-appealable judgement remains unpaid for 180 days, the employer may be subject to a civil penalty of up to 3 times the outstanding amount, plus interest.

Additionally, it requires the court to award attorneys’ fees and costs to the workers or their representatives who take action to enforce the judgement.

SB 291 – Contractors Workers’ Comp Insurance

Existing law requires that to obtain or maintain their license, contractors must have on file a current and valid certificate of workers’ compensation coverage unless they are able to claim an exemption due to having no employees.

SB 291 significantly strengthens the enforcement of these requirements and establishes minimum civil penalties for non-compliance that range from $10,000 to $20,000 per violation. It further prohibits the licensing board from renewing or reinstating a license until the contractor complies with the requirements.

SB 294 – The Workplace Know Your Rights Act

SB 294 will require employers to provide a new, stand-alone notice of workplace rights with information on topics that include workers’ compensation, rights to organize, inspections by immigration agencies, employees’ constitutional rights when interacting with law enforcement at the workplace, etc.

It must be provided to all current employees by 2/1/26 and annually thereafter as well as to all new hires. The Labor Commissioner is tasked with developing the new notice by 1/1/26, which it must update annually.

The notice may be provided to employees in a manner that the employer normally uses to communicate employment-related information including but not limited to personal service, email, or text message, as long as it can be reasonably expected to be received by the employee within one day of when it is sent.

The notice must be provided to the employees in the language that the employer normally uses to communicate employment-related information and which the employee understands if the notice is available in that language on the Labor Commissioner’s website. If the notice is not available in that language, the employer may provide it in English.

Employers must keep records of compliance with these notice requirements for 3 years.

Further, if an employee has provided an emergency contact for this purpose, this bill requires the employer to notify the emergency contact if the employee is arrested or detained at the workplace or if the employer has knowledge of the employee’s arrest or detention off-site but during work hours and while performing the employee’s job duties.

Employers have until 3/30/26 to provide employees with the opportunity to name an emergency contact or upon hire for anyone hired after that date.

SB 303 – Bias Training

Existing law prohibits various forms of employment discrimination. SB 303 provides that an employee’s assessment, testing, admission, or acknowledgement of their own personal bias that was made in good faith and solicited or required as part of a bias mitigation training does not constitute unlawful discrimination.

The law makes it clear, that while not required, employers are encouraged to conduct such bias mitigation training and that conducting such training does not, by itself, constitute discrimination.

SB 464 – Pay Data Reporting

Existing law requires private employers in California with 100 or more employees to submit an annual pay data report to the Civil Rights Department that includes, amongst other things, the number of employees by race, ethnicity, and sex across 10 specified job categories.

Beginning 1/1/27, employers will be required to report this data across 23 specified job categories.

SB 464 further requires employers to collect and store any demographic information gathered as part of collecting the required pay data separately from employees’ personnel records.

The bill further requires a court to impose a civil penalty against an employer who fails to file the required reporting.

SB 477 – FEHA Enforcement

The law strengthens the power of the California Civil Rights Department (CRD) to enforce the state’s laws on discrimination in the Fair Employment and Housing Act (FEHA).

SB 477 allows additional flexibility by permitting the CRD to pause investigations (toll the statute of limitations) in certain complex discrimination cases.

Existing law provides that a complainant’s statute of limitations is tolled while the CRD investigates and decides if it will bring its own suit or instead issue a right to sue letter. Once that happens, the complainant has 1 year from receiving a right to sue letter to file their own civil action.

SB 477 provides that if a complainant appeals the CRD’s decision to close a complaint and the CRD affirms the closure, the statute of limitations is tolled for an additional year from the date of the appeal decision.

SB 513 – Personnel Records

Existing law requires that an employer grant a current or former employee the right to inspect and receive a copy of their personnel records related to the employee’s performance or any grievance concerning the employee. Such records must be made available within 30 days of the request.

SB 513 will require employers to include employee education and training records as part of these personnel records. The training and education records must include the name of the employee, the name of the training provider, the duration and date of the training, the core competencies of the training including skills in equipment and software, and the resulting certification or qualification.

These records must be maintained by the employer for no less than 3 years following the termination of the employee’s employment.

SB 617 – California WARN Act

Existing law, the California Adjustment and Training Act (WARN), governs mass layoffs, relocations, and terminations.

SB 617 would not require employers to include in that notice whether the employer plans to coordinate services through the local workforce development (LWD) or another entity and to include a functioning email and phone number for the LWD board and a description of the services offered.

The notice must also include information about the state food assistance program “Cal Fresh.”

SB 648 – Tip Theft

Existing law prohibits an employer (or its agent) from collecting, taking, or receiving any gratuity or part of that gratuity left for an employee by a patron.

SB 648 authorizes the Labor Commissioner to investigate and issue a citation or file a civil action for gratuities taken in violation of these provisions.

SB 809 – Independent Contractor Vehicles

AB 809 establishes that the mere fact that an employee owns a personal or commercial vehicle used to provide services does not make that person an independent contractor.

SB 809 clarifies that the requirement to indemnify employees for necessary expenditures applies to the use of personal or commercial vehicles owned by the employee.

SB 53 – Artificial Intelligence Whistleblower Protections

SB 53, referred to as the “Transparency in Frontier Artificial Intelligence Act,” adds new protections to the California Labor Code for specific employees working at large “frontier” companies developing advanced AI technology.

The law prohibits retaliation against employees who raise concerns related to critical AI safety incidents and requires covered employers to implement anonymous internal reporting mechanisms.

New Regulations About Artificial Intelligence

Effective 10/1/25, the California Civil Rights Commission published new regulations dealing with AI in the workplace, clarifying that existing anti-discrimination laws apply to AI tools used in all employment decisions.

Employers are prohibited from using Automated Decision Systems (ADS) that discriminate based on protected characteristics and must ensure ADS does not interfere with reasonable accommodations.

Employers are encouraged to conduct bias audits of AI tools and must preserve ADS-related records for 4 years.

What Should Employers Do?

• Update your employee handbooks and leave documentation
• Review and revise any existing Stay or Pay contracts
• Audit independent contractor classifications
• Audit job postings for compliant pay scales
• Audit pay practices for equal pay compliance
• Prepare to issue the new Workplace Rights Notice by 2/1/26
• Coordinate pay data reporting preparation
• Update personnel file retention practices
• Review WARN notice procedures
• Audit AI and ADS usage
• Train staff on lawful AI use
• Maintain AI-related records