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With the 2025 California legislative year closed, it is the time of year to become familiar with new legislation that will affect businesses operating within California.
Below, we summarize the key changes affecting labor, employment, and independent contractor topics, most of which go into effect on January 1, 2026, unless otherwise noted. California businesses with questions about these updates should contact experienced counsel.
Discrimination, Harassment, and Civil Rights
AB 406 — Crime Victim Provisions
AB 406 closes a loophole in the law and reinstates Labor Code Sections 230 and 230.1 to provide for job-protected paid sick and safe time and unpaid leave under the Healthy Workplaces Healthy Families Act and related law, including for victims of qualifying crimes and to attend judicial proceedings, serve on a jury, or comply with subpoenas for crimes that occurred on or before December 31, 2024. Notably, the Legislature passed AB 2499 last year (see our prior analysis here), which provided these protections for "qualifying acts of violence" that occurred on or after January 1, 2025.
Effective date: October 1, 2025
Action item: Update leave, accommodation, and antidiscrimination and harassment policies to incorporate the measure's provisions.
SB 303 — Bias Mitigation Training
SB 303 amends the Fair Employment and Housing Act (FEHA) to clarify that when employees, in good faith, complete evaluations regarding their own bias as part of an employer's bias-mitigation training, such participation alone does not constitute unlawful discrimination. The measure is intended to promote the use of bias-mitigation training by assuring employers that offering such programs and employees' good-faith engagement in them does not, by itself, create discrimination liability.
Effective date: January 1, 2026
Action item: Consult with experienced legal counsel to determine whether any changes to trainings are warranted.
CRD Regulations Regarding Automated Decision Systems
The regulations bring "automated decision systems" (ADS) and artificial intelligence within the scope of California's FEHA. An ADS refers to any computational process that makes or materially facilitates employment decisions, including tools for assessing skills, screening resumes, targeting job advertisements, analyzing interviews, or processing third‑party data. Employers are liable for discriminatory practices by their own systems and those used by agents, such as vendors or staffing firms. Under the regulations, it is unlawful to use an ADS or selection criteria that results in disparate treatment or impact across FEHA-protected categories (e.g., race, sex, age, disability, national origin, religion, pregnancy) unless the employer can establish job‑relatedness and business necessity.
The regulations require validation, accessibility, and accommodation, emphasizing that proactive anti‑bias testing and mitigation, while relevant, do not constitute a safe harbor. Employers must provide reasonable accommodations for automated tests and ensure technologies do not disadvantage protected groups. The regulations tighten limits on medical and disability-related inquiries via automated tools, reinforce Fair Chance (criminal history) procedures, and clarify that automated screening cannot bypass individualized assessment requirements. Employers must maintain ADS data and selection criteria for four years, preserve materials upon notice of a complaint, and retain statistical data consistent with FEHA. The regulations extend longstanding rules to online and automated contexts; prohibit aiding and abetting discrimination through automated tools; and maintain posting, notice, and enforcement obligations under FEHA.
Effective date: October 1, 2025
Action item: Employers should consult with experienced counsel to determine whether their employment processes require updated document retention protocols and/or bias audits.
Compensation and Benefits
SB 617 — California WARN Notice Requirements
SB 617 amends Labor Code Section 1401 to require California Worker Adjustment and Retraining Notification (WARN) notices to state whether the employer will coordinate rapid response services through the Local Workforce Development Board (LWDB), another entity, or not at all, and to include the LWDB's contact information and prescribed rapid response language. Notices must also describe the CalFresh program, provide the CalFresh helpline and website, and include an employer contact email and phone number.
Effective date: January 1, 2026
Action item: Employers considering mass layoffs should consult with experienced counsel regarding the impact of these changes to the Cal-WARN statute.
Statewide Minimum Wage Increase
Under existing law, the California director of finance must certify each year whether the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) necessitates an increase to the state minimum wage. This year, the director of finance has certified the minimum wage shall increase by 2.49% from $16.50 to $16.90 per hour effective January 1, 2026, for all employers. The change also affects exempt salary thresholds, which will rise from $1,320 to $1,352 per week, and $68,640 to $70,304 per year. As with prior minimum wage increases, local jurisdictions may impose higher minimum wage limits than what California mandates.
Effective date: January 1, 2026
Action item: Employers should prepare to increase the minimum wage for nonexempt hourly workers, as well as salaries for exempt employees.
AB 692 — Restrictions on Post-Employment Debt Obligations
California prohibits noncompete agreements and contracts restraining trade. AB 692 expands this policy by adding Section 16608 to the Business and Professions Code and Section 926 to the Labor Code. For contracts entered on or after January 1, 2026, it is unlawful to include or require any employment contract that (1) obligates a worker to repay an employer, training provider, or debt collector if employment ends; (2) allows resumption or initiation of debt collection if employment ends; or (3) imposes penalties, fees, or costs on a worker if employment ceases.
The law provides certain exceptions for contracts (1) under any loan repayment assistance program; (2) related to repayment of the cost of tuition; (3) related to enrollment in certain approved apprenticeship programs; and (4) for the receipt of a discretionary or unearned monetary payment, including a financial bonus, at the outset of employment that is not tied to specific job performance. For example, it allows for a discretionary or unearned bonus provided at the start of employment, as long as the bonus is not based on job performance and the contract clearly outlines specific terms. These terms must include, at a minimum and among other things, the worker's right to consult with a lawyer about the agreement and a period of at least five business days for the worker to seek legal advice before signing.
Any contract entered into on or after January 1, 2026, with terms prohibited by this law is void and unenforceable. Workers subject to such contracts may file a civil lawsuit and, if successful, recover actual damages or a $5,000 statutory penalty per affected worker, whichever is greater. Courts may also grant injunctive relief and require employers to pay reasonable attorneys' fees and costs.
Effective date: January 1, 2026
Action item: Employers should review their employment agreements and work with counsel on appropriate updates going forward.
Technology
SB 53 — Transparency in Frontier Artificial Intelligence Act
SB 53 establishes a statewide transparency and safety regime for advanced "frontier" AI models, targeting large developers with more than $500 million in prior-year gross revenue. The bill requires confidential and timely reporting of critical safety incidents to the Office of Emergency Services, with annual anonymized summaries published beginning in 2027 and authorizes civil penalties of up to $1 million per violation. It also adds whistleblower protections for employees, mandates internal anonymous reporting channels, and allows attorneys' fees for successful plaintiffs.
Effective date: January 1, 2026
Action item: Most direct obligations fall on frontier developers and not on ordinary enterprise users. However, employers should consult with counsel to discuss potential impacts.
Litigation and Civil Procedure
SB 85 — Service of Summons in Civil Actions
SB 85 amends Code of Civil Procedure Section 413.30 to allow courts, when standard service of summons is unavailable or unsuccessful despite reasonable diligence, on a motion from a plaintiff to authorize service by any method reasonably calculated to give actual notice, including electronic mail or other electronic means. Plaintiffs must provide specific facts, as required by statute, to show reasonable diligence.
Effective date: January 1, 2026
Action item: Employers (other than governmental entities), involved in litigation should be aware that if a summons cannot be served by standard procedure, service via electronic means is a possible option.
SB 261 — Division of Labor Standards Enforcement: Orders, Decisions, and Awards
SB 261 strengthens enforcement of and deters noncompliance with Division of Labor Standards Enforcement (DLSE) wage judgments by creating steeper penalties for nonpayment—including a civil penalty of up to three times the outstanding judgment amount if a final judgment remains unpaid after 180 days—and requiring courts to award reasonable attorneys' fees and court costs to the prevailing plaintiff, judgment creditor, labor commissioner, or public prosecutor in enforcement actions.
Effective date: January 1, 2026
Action item: Employers should reassess litigation and settlement strategies in DLSE matters.
AB 250 — Revival of Statute of Limitations for Sexual Assault
AB 250 extends the eligibility period for revival of certain adult sexual assault claims against entities or persons legally responsible for damages, including those who engaged in a cover-up. Claims may proceed if pending in court on the bill's effective date or may be filed between January 1, 2026, and December 31, 2027. Public entities are exempt from these provisions.
Effective date: January 1, 2026
Action item: Employers should remain aware of their possible record retention obligations for claims involving sexual assault. Employers defending or resolving sexual assault claims should work with experienced legal counsel.
New Employer Recordkeeping and Notice Requirements
SB 513 — Personnel Records
California law allows current and former employees to request copies of their personnel records from their employer. SB 513 amends Labor Code Section 1198.5 to require that personnel records related to an employee's performance include education or training records. Going forward, employers must maintain education or training records that specify the employee's name, the name of the training provider, the duration and date of the training, the core competencies covered (including skills in equipment or software), and any resulting certification or qualification.
Effective date: January 1, 2026
Action item: Employers should review and revise their internal processes that maintain personnel records.
SB 642 — Amendments to Pay Transparency and Pay Equity Statutes
SB 642 amends California's pay transparency and equal pay statutes by revising the definition of "pay scale" to mean a good-faith estimate of the salary or hourly wage range an employer expects to pay for the position upon hire. The bill also prohibits wage differentials between employees of "another sex" and broadens the definition of "wages" and "wage rates" to include all forms of pay and benefits for purposes of Labor Code Section 1197.5. Finally, the bill resets the limitations regime, allowing civil actions up to three years after the last violation and relief for up to six years.
Effective date: January 1, 2026
Action item: Employers should be mindful of the updated definition of "pay scale" when drafting salary ranges in job postings. They should also review and update their antidiscrimination, pay, and recordkeeping policies.
SB 294 — The Workplace Know Your Rights Act
SB 294 directs the labor commissioner to issue model notices and digital resources that employers must distribute or post annually. The notice shall contain a description of (1) the right to workers' compensation benefits; (2) the right to notice of inspection by immigration agencies; (3) protection against unfair immigration-related practices against a person exercising protected rights; (4) the right to organize a union or engage in concerted activity in the workplace; and (5) constitutional rights when interacting with law enforcement at the workplace.
Separately, the new law allows employees to authorize their employer to notify a designated person if the employee is arrested or detained during work hours or while performing job duties. Violations of the bill may be subject to penalties.
The labor commissioner must publish the new model notice by January 1, 2026. Employers are required to distribute the notice to employees by February 1, 2026, and at the time of hire and annually thereafter. Additionally, by March 30, 2026, employers must implement a system that allows employees to authorize notification to a designated person in the event of arrest or detention during work hours or while performing job duties.
Effective Date: January 1, 2026
Action item: Employers should promptly obtain and distribute the labor commissioner's template. Employers should also inform employees of their right to designate an emergency contact person in the event of arrest or detention, give current employees the opportunity to name a contact on or before March 30, 2026, and regularly monitor for updates to the notice or related requirements.
SB 464 — Employer Pay Data
California requires private employers with 100 or more employees to submit a pay data report to the Civil Rights Department (CRD) covering the prior calendar year, as detailed here. California also requires private employers with 100 or more employees hired through labor contractors within the prior calendar year to submit a separate pay data report. SB 464 clarifies that any demographic information gathered by an employer or labor contractor shall be collected and stored separately from an employee's personnel records. SB 464 also mandates that upon request of the CRD, courts must impose civil penalties upon employers who fail to file the required report. Beginning January 1, 2027, SB 464 increases the number of job categories employers must report on from 10 to 23.
Effective date: January 1, 2026, for the storage of demographic information and penalties; January 1, 2027, for the increased job categories
Action item: Employers with 100 or more employees should review and audit their processes for submitting the required pay data to the CRD and ensure they properly segregate the pay reporting data from personnel files.
Miscellaneous
SB 590 — Paid Family Leave for Designated Persons
SB 590 expands Paid Family Leave (PFL) eligibility to include care for a "designated person," defined as someone related by blood or with a family-like relationship. The bill aligns PFL with recent California paid sick leave and California Family Rights Act expansions, increasing flexibility for workers with diverse caregiving needs.
Employers may see more claims and scheduling requests for nontraditional family members. Employees must identify the designated person at first claim and attest to the relationship under penalty of perjury; employers may limit selection to one person per 12 months.
Effective date: July 1, 2028
Action item: Employers should update leave policies, forms, and manager training to recognize employees can recover benefits to care for designated persons.
SB 809 — Independent Contractors and Employee Expenses
SB 809 creates the Construction Trucking Employer Amnesty Program, administered by the labor commissioner and Employment Development Department. Eligible contractors who sign a settlement agreement approved by the labor commissioner to properly classify construction drivers as employees will not be liable for penalties for prior misclassification.
Separately, SB 809 also establishes that it is declarative of existing law that ownership of a vehicle, including a personal or commercial vehicle, used by a person providing labor or services for remuneration does not render the individual an independent contractor. Finally, SB 809 establishes that it is declarative of existing law that Labor Code Section 2802 (which requires employers to reimburse employees for necessary business-related expenses) applies to an employee's use of a vehicle, including a personal or commercial vehicle, which the employee owns and uses to perform their duties.
Effective date: January 1, 2026
Action items: Businesses and employers should evaluate their processes for classifying workers as independent contractors and should ensure their expense reimbursement processes for employees comply with SB 809.
AB 288 — Employment: Labor Organization and Unfair Practices
AB 288 authorizes the Public Employment Relations Board (PERB) to enforce private sector organizing and bargaining rights when federal National Labor Relations Act protections are limited or unavailable on procedural grounds, such as National Labor Relations Board (NLRB) delays, loss of quorum, or injunctions. In these cases, workers may petition PERB to process labor-related matters, including but not limited to certifying election results and bargaining representatives, adjudicating unfair labor practices, and ordering relief. PERB decisions are reviewable by state appellate courts.
AB 288 also confirms the Agricultural Labor Relations Board's exclusive jurisdiction over agricultural labor relations and clarifies that it may follow but is not bound by federal precedent. These reforms increase employer obligations by expediting state enforcement, first-contract arbitration, and monetary penalties, while expanding workers' access to remedies and representation.
Effective date: January 1, 2026
Action item: Employers should not assume that current NLRB status will be the final determinative factor regarding worker rights in California, as this legislation authorizes a quasi-state NLRB. Employers should consult experienced traditional labor counsel to advise on these issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
