EMPLOYER GROUP
By: Lynn Hounsley, president, Integrity HR Inc.
2026 Employment Law Update for California Employers Effective Dates: January 1, 2026, unless otherwise noted
California continues to lead the nation in employment legislation, and 2025 marked the first year of a two-year legislative session. During this period, lawmakers introduced 2,397 bills, of which 917 were sent to Governor Newsom’s desk. He signed 794 bills (86.6%) and vetoed 123 (13.4%), slightly below the 10-year average veto rate of 15%. Many of the new laws enacted during this active legislative year take effect in 2026, creating important compliance obligations for employers across the state. To remain compliant and reduce risk, employers should review updated wage requirements, notice obligations, pay reporting changes, leave laws, and more.
1. Minimum Wage Increases
On January 1, 2026, California’s minimum wage increases to $16.90 per hour. As a result, the minimum salary requirement for full-time exempt employees rises to $70,304 annually.
Fast-food employees covered under Labor Code Sections 1474–1476 remain subject to a separate minimum wage of $20 per hour, and exempt classification requires a salary of at least twice that hourly rate.
Various California cities and counties also maintain their own local minimum wage ordinances, many of which will increase on January 1, 2026. While these local rates do not change the statewide exempt salary threshold, employers must still comply with whichever hourly rate—state or local—is higher.
2. Equal Pay Act Amendments (SB 642)
SB 642 revises compensation transparency rules and strengthens Equal Pay Act enforcement. Employers must now provide a good-faith salary or hourly wage range representing what they reasonably expect to pay upon hire. Employers with 15 or more employees must continue including this range in job postings.
The bill also expands Equal Pay Act liability by:
- Increasing the statute of limitations from two to three years
- Allowing wage recovery reaching back up to six years
- Clarifying when a cause of action accrues
In addition, the law impacts pay data reporting requirements. SB 464 (discussed below) will expand job categories from 10 to 23 beginning in 2027.
3. Pay Data Reporting Penalties (SB 464)
SB 464 strengthens pay data reporting enforcement by eliminating judicial discretion for penalties. Courts must now impose civil penalties for non-compliance when the California Civil Rights Department (CRD) seeks enforcement.
4. OBBBA Federal Changes:
Overtime & Tips Deductions
The federal OBBBA introduces new tax deductions for the 2025–2028 tax years affecting overtime and tipped workers:
Deduction for Qualified Overtime Pay
Employees may deduct the “half” portion of “time-and-a-half” overtime pay that exceeds the regular rate.
Annual caps include:
- $12,500 for individuals
- $25,000 for joint filers
Deduction for Qualified Tips
Employees in IRS-recognized tipped occupations may deduct up to $25,000 in qualified tips, with income-based phase-outs.
For Tax Year 2025, employers must continue withholding all federal and California payroll taxes. IRS withholding tables will be updated beginning Tax Year 2026.
OBBBA also adjusts dependent care FSA and HSA provisions and increases immigration enforcement funding, likely resulting in additional ICE audits and I-9 inspections.
5. Employee Notices & Emergency Contacts (SB 294)
The Workplace Know Your Rights Act requires employers to distribute a new annual notice covering:
- Workers’ compensation
- Immigration protections
- Rights to engage in concerted activity
- Constitutional rights when interacting with law enforcement
The Labor Commissioner will publish a template by January 1, 2026. Employers must distribute the notice by February 1, 2026, at hire and annually thereafter, and keep compliance records for three years.
Additionally, employers must notify an employee’s designated emergency contact if the employee is arrested or detained at the worksite, provided the employee has opted in for this specific notification. The bill requires employers to provide existing employees with the opportunity to choose an emergency contact by March 30, 2026, and at the time of hire, for new employees hired after that date.
6. Cal-WARN Expansion (SB 617)
SB 617 requires employers covered by Cal-WARN (covers establishments with as few as 75 employees — including part-time employees) to include new information in layoff and closure notices. Updated notices must disclose whether the employer will coordinate services through the local workforce development board and must include information about that board and the CalFresh food assistance program.
7. Personnel Records Requirements (SB 513)
SB 513 updates requirements for documenting employee education and training by mandating the inclusion of:
- Employee name
- Training provider
- Training duration and dates
- Core competencies, including equipment or software skills
- Certifications or qualifications earned
Penalties for noncompliance include $750 plus attorney fees. Employers should review their training record practices to ensure compliance.
8. Bias Mitigation Training (SB 303)
An employee’s acknowledgment or assessment of personal bias—when made in good faith as part of required bias mitigation training—cannot be used as proof of unlawful discrimination under FEHA. This clarification supports employers implementing bias training without creating legal risk for participants.
9. Crime Victim Leave & Paid Sick Leave Updates (AB 406)
AB 406 expands enforcement of California’s crime-victim leave laws by transferring authority to the Civil Rights Department. The bill clarifies that employees may use Paid Sick Leave for all purposes aligned with crime-victim leave, jury duty, and witness leave statutes.
Updated state model notices are expected and should be monitored by employers.
10. Restrictions on Retention Bonuses & Tuition Assistance (AB 692)
For employment contracts entered into on or after January 1, 2026, employers cannot require employees to repay hiring bonuses, retention bonuses, or tuition-assistance payments when employment ends—except in limited situations such as approved apprenticeship programs, transferable-credential tuition programs, government loan repayment assistance, or certain discretionary payments not tied to job performance.
Employers offering such benefits should seek legal guidance to ensure agreements remain compliant.
11. Paid Family Leave Expansion (SB 590)
Beginning July 1, 2028, the Paid Family Leave Program (EDD) will cover time off to care for a seriously ill designated person, defined as anyone whose association with the employee is equivalent to a family relationship.
“Integrity HR, Inc. is here to help—from handbook updates to employee relations guidance and compliance strategy.”
12. Expanded Enforcement of NLRA Rights (AB 288)
In circumstances where the NLRB is unable to act, AB 288 authorizes workers and unions to petition California’s PERB to enforce NLRA rights, including union elections and unfair labor practice charges.
13. Transportation Network Company Drivers (AB 1340)
AB 1340 enhances the rights of app-based drivers—such as those working for Uber, Lyft, and DoorDash—to organize and engage in collective bargaining. TNCs must provide driver information to PERB and follow established bargaining procedures.
Other Notable Legislation
Additional laws affecting employers include:
- Hospitality & Airports Return to Work (AB 858)
- Construction Trucking Classification (SB 809)
- Contractors’ State License Law (AB 1002)
- Direct Contractors Labor Liability (SB 597)
- Final Wage Judgment Enforcement (SB 261)
- California Tips & Gratuities (SB 648)
PAGA: A Continuing Compliance Priority
The Private Attorneys General Act (PAGA) continues to drive significant litigation risk. In 2024 alone, over 9,464 PAGA notices were filed—an 85,936% increase since 2006. The best protection is strict, ongoing compliance with the Labor Code and Wage Orders.
Employers should regularly review policies, handbooks, payroll practices, and timekeeping systems with legal counsel.
Conclusion
Not every new law applies to every employer, but all employers should review their policies, notices, wage practices, and agreements for compliance. Integrity HR, Inc. is here to help—from handbook updates to employee relations guidance and compliance strategy.
This article is for informational purposes only and not legal advice. Consult employment counsel before implementing any changes.
Lynn Hounsley – is the President and Founder of Integrity HR Inc. ,established in 2008 to support the people-management needs of growing businesses. She partners with small to mid-sized companies to ensure HR compliance, resolve employee issues ,foster positive work environments, and reduce legal risk. With over 30 years of human resources experience, Lynn’s background includes employee relations, recruitment and retention, benefits, compensation, and training. She has served as HR Manager for a Southern California aerospace corporation and held consulting and leadership roles within a large life insurance company. Lynn holds a bachelor’s degree from Biola University and a Human Resources Management certificate from the University of California, Irvine. She has volunteered as an HR counselor with the Inland Empire Women’s Business Center and is an active leader in the HR and business community, currently serving as President of the La Sierra Business Council. Her professional service also includes leadership roles with PIHRA and SHRM.
Featured in our January Special Issue 2026 page 30 – Click here to download!
Source Credits:
- Ogletree Deakins and California Chamber of Commerce