As 2026 approaches, California employers face one of the most sweeping waves of employment-law changes in recent years. New legislation effective in 2026 touches nearly every aspect of the workplace, including pay transparency, layoffs, training reimbursement restrictions, employee notice requirements, protected leave, minimum wage increases, and the rapidly expanding regulation of artificial intelligence in employment decisions.
Former prosecutor, mediator, and leading Southern California trial attorney Paul P. Cheng, Esq. cautions that the California Legislature has sent a clear message: employee protections will continue to tighten, not loosen, and 2026 is merely the beginning. Employers should proactively build a forward-looking and sustainable compliance structure to avoid penalties and litigation risk.
1. Restrictions on Training Repayment and “Stay-or-Pay” Provisions (AB 692)
AB 692 introduces one of the most consequential changes for 2026 by prohibiting most recruitment-related “stay-or-pay” terms. Employers may no longer require employees to:
- Repay training expenses,
- Return signing bonuses due to early resignation, or
- Pay “exit fees,”
unless the obligation falls within narrow statutory exceptions such as legally mandated training, government-funded education, or approved apprenticeship programs.
Agreements containing prohibited repayment terms are void and may expose employers to statutory damages and attorney’s fees.
Employer Action Items:
Review and revise offer letters, bonus agreements, relocation repayment terms, and any training reimbursement policies to ensure no repayment obligations are tied to resignation.
2. New Mandatory “Know Your Rights” Notices (SB 294)
Effective February 1, 2026, employers must annually distribute a revised “Know Your Rights” notice to all employees, and provide the notice to every new hire upon onboarding. The notice must include information regarding:
- Workers’ compensation rights,
- Immigration-related protections,
- Labor organizing rights,
- Rights during interactions with law enforcement.
Employers must retain proof of distribution for at least three years.
SB 294 also requires employers, by March 30, 2026, to collect and maintain each employee’s emergency contact information and notify that contact under specific circumstances (e.g., if an employee is arrested or detained at the workplace).
Employer Action Items:
Update and distribute the new required notices and implement a compliant record-retention system.
3. Expanded CalWARN Notice Requirements (SB 617)
Beginning January 1, 2026, employers conducting mass layoffs or facility closures must include additional information in CalWARN notices, including:
- A statement describing the availability of “Rapid Response” services;
- Whether the employer is coordinating with the local workforce development board;
- Information about CalFresh eligibility;
- Updated employer and workforce board contact information.
Employer Action Items:
Revise CalWARN templates and integrate these requirements when planning any reductions in force.
4. Pay Transparency and Equal Pay Amendments (SB 642)
Effective January 1, 2026, SB 642 further refines California’s equal-pay framework by:
- Narrowing the definition of “pay scale” to the actual range the employer reasonably expects to pay;
- Expanding “wages” to include bonuses, commissions, equity awards, and other non-base compensation;
- Updating statutory language to protect nonbinary employees (changing “opposite sex” to “another sex”);
- Extending the statute of limitations to three years, with the ability to recover up to six years of back wages.
Employer Action Items:
Ensure posted pay ranges accurately reflect real compensation practices and conduct renewed pay equity audits using the expanded definition of wages.
5. Strengthened Pay Data Reporting Obligations (SB 464)
Beginning in 2026, pay data reporting obligations increase substantially:
- Civil penalties will apply for noncompliance;
- Employers must maintain demographic data separately from personnel files;
- Job categories increase from 10 to 23 (mandatory beginning 2027).
Employer Action Items:
Coordinate HR systems, compensation frameworks, and reporting teams to accommodate expanded reporting fields and data structures.
6. Expanded Personnel File Access (SB 513)
SB 513 enlarges employee rights to inspect personnel files, now including detailed training and education records such as:
- Training providers,
- Dates and duration of courses,
- Covered competencies,
- Certifications earned.
Failure to comply may result in misdemeanor liability, underscoring the need for structured training record management.
Employer Action Items:
Update policies and systems governing personnel file access and training record retention.
7. Minimum Wage Increases for 2026
Beginning January 1, 2026, the statewide minimum wage increases to $16.90 per hour. The minimum salary threshold for exempt (white-collar) employees increases to $70,304 annually. Certain industries or local jurisdictions may impose even higher requirements.
Employer Action Items:
Review exemption classifications, adjust salary bands, and plan for payroll and overtime impacts.
8. New Tip and Gratuity Enforcement Rules (SB 648)
Effective January 1, 2026, employers must:
- Distribute credit-card tips no later than the next regular payday;
- Maintain detailed tip records;
- Refrain from deducting any fees—including processing fees—from tips.
The Labor Commissioner may now investigate and bring civil actions for unlawful tip withholding.
Employer Action Items:
Service-industry employers should immediately update payroll processes and tip-distribution procedures.
9. Expanded Protections for Crime Victims and Jury Service (AB 406)
AB 406 broadens protected leave rights for crime victims and certain family members, strengthens anti-retaliation provisions, and clarifies reasonable advance-notice expectations for jury duty.
Employer Action Items:
Update leave-of-absence and anti-retaliation policies to reflect expanded protections.
10. Artificial Intelligence and Automated Decision Systems (FEHA Regulations Effective Oct. 1, 2025)
Although effective in late 2025, compliance obligations continue through 2026 and beyond. Employers using AI or automated tools in recruitment, promotion, assessment, or performance evaluation must:
- Provide required notices to applicants and employees;
- Evaluate whether the tool has discriminatory impact;
- Retain decision-making data and vendor documentation for at least four years;
- Ensure third-party vendors comply with FEHA standards—employers may be liable for discriminatory outcomes.
Employer Action Items:
Audit all automated hiring, screening, or evaluation systems and implement FEHA-compliant processes.
What California Employers Should Do Now
To prepare for these major shifts, employers should:
- Update policies and agreements to meet new requirements around pay, leave, conduct standards, and technology use.
- Revise required notices and templates, including onboarding materials and layoff notices.
- Align HR and compensation systems with updated wage thresholds and reporting obligations.
- Train HR teams and management on new rights, responsibilities, and compliance expectations.
- Strengthen documentation and recordkeeping to reduce litigation exposure and ensure consistent policy enforcement.
Acting early helps employers avoid penalties and puts them in the strongest position as these 2026 laws take effect.
Law Offices of Paul P. Cheng, APC
Our firm is dedicated to helping employers navigate California’s rapidly evolving employment landscape. We provide comprehensive compliance counseling, risk assessments, and strategic planning tailored to each client’s operational needs.
For guidance on the 2026 legislative updates or to schedule a compliance review, please contact our office.
Legal Disclaimer:
This publication is for informational purposes only and does not constitute legal advice. No attorney–client relationship is formed by reading this update. Because laws evolve, employers should consult legal counsel regarding their specific circumstances.