Staying Ahead: Key California Workplace Laws Taking Effect In 2026 And Beyond

California is well-known for highly regulating workplaces. Every year the California Legislature works to find new ways to regulate employers. This legislative year is no different–new laws have passed and more burdens will be placed on employers. California Governor Gavin Newsom signed, or declined to veto, 794 of 917 bills passed by the Legislature, including many affecting labor and employment matters. One vetoed bill would have limited how employers could use AI in the workplace, including its use in making employee discipline and termination decisions. Others would have granted employees unpaid leave to address their immigration status or work authorization issues, and another would have created a legal right to wear health masks at work. Still, a number of new employment-related bills did receive the Governor's signature and will become law in the coming year(s). The following briefly identifies some of the laws that may impact your California business operations.

Employment Contracts: Stay or Pay Contracts Outlawed-AB 692. Starting January 1, 2026, no new employment contract can require employees to pay a fee or cost, or accelerate and repay a loan or debt, when they leave their employment for another company. Such employment agreements are declared to be against public policy. This law is intended to eliminate the dilemma some employees face: whether to stay with their current employer and avoid paying a training or other cost, or postponing the repayment of a loan from the employer, or becoming obligated to repay the entire loan or cost immediately. For example, employers often will pay a prospective or current employee's educational costs, immigration or visa-related costs, and other employment-related expenses, but also require repayment of such loans and costs if they leave their employment within a relatively short period of time. Such employment agreements are deemed to be an unlawful restraint of the free movement of employees and against public policy. Several exceptions to this new law will exist. Most notably, tuition reimbursement contracts and signing bonuses that must be returned if employment ends before a specified period of time. Such contracts can be enforceable if statutory required disclosures are made and rights afforded to the employee that are memorialized in a separate written contract. Employees will have a right to file a lawsuit, recover actual damages or $5,000 per worker (whichever is greater), injunctive relief and their attorneys' fees and costs, if this new law is violated.

Key Takeaway: Make sure any new employment agreement requiring repayment of money complies with the specific requirements of this new statute.

Increased Penalties for Non-Payment of Wages-SB 261. California's Labor Commissioner plays a central role in enforcing wage and hour laws. Employees can file complaints for unpaid wages, and after a hearing, the Commissioner may issue a judgment awarding unpaid wages, interest, and penalties. The Labor Commissioner has various means to enforce its decisions, including filing an enforcement action in civil court. Starting January 1, 2026, if a final judgment arising from the non-payment of wages remains unpaid for 180 days after the time to appeal has expired, (and no appeal is pending), the employer "shall be subject to a civil penalty not to exceed three times the outstanding amount, including post-judgment interest." The Court will be required to award reasonable attorneys' fees and costs to a prevailing employee. This new law significantly increases the financial risk for employers who delay or avoid payment of a judgment for owed wages.

Key Takeaway: Pay judgments for wages owed timely to the Labor Commissioner's office to avoid tripling the amount owed.

Know Your Workplace Rights Act-SB 294. By February 1, 2026, all employers must provide employees a stand-alone written notice identifying certain workplace rights they have, including (1) the right to workers' compensation benefits, (2) the right to notice of inspection by immigration agencies, (3) protection against unfair immigration-related practices in the workplace, (4) the right to organize a union or engage in concerted activity in the workplace, and (5) their constitutional rights when interacting with law enforcement at the workplace. The Labor Commissioner will be required to prepare and make available a template notice for employers on or before January 1, 2026. Employers must provide this notice to current employees, as well as new hires upon their onboarding. Records of employer compliance must be kept for three years and include the date each written notice was provided. Further, no later than March 30, 2026, employers must provide existing employees, and new employees at the time of hiring, the opportunity to designate an emergency contact to whom the employer should notify if the employee is arrested or detained in the workplace. Failure to comply with these new employer obligations can result in issuance of injunctive relief, punitive damages to make an example of violators, and reasonable attorneys' fees and costs. Civil penalties may also be assessed of up to $500 per employee per violation of the notice requirements, and up to $10,000 per employee for failure to allow employees to designate an emergency contact as required by this new law.

Key Takeaway: Note the February 1 and March 1, 2026 compliance dates; begin distributing the Labor Commissioner's template notice to current employees and make it part of the on-boarding process for new hires; and establish or update emergency contacts for employees.

Inspection of Personnel Records-Expansion-SB 513. It has long been the law that current and former employees, and their representatives, are allowed to inspect and copy the employee's personnel records of the employee's performance and grievances concerning them. Generally, such records must be available for inspection and copying within 30 days of a request. Now, beginning January 1, 2026, such records must also include any "education or training records." If such records are maintained, they must include the name of the employee, name of the training provider, duration and date of the training, the core competencies of the training, and the resulting certification or qualification.

Key takeaway: Ensure your HR professionals are aware of the additional records to include in personnel record requests.

Pay Disparity—Lengthen Period of Recovery-SB 642. Currently,California employers must share the pay scale of a position in a job posting or upon request. The "pay scale" is the salary or hourly wage range the employer expects to pay for the position. This definition has been clarified to mean a good-faith estimate of the wage range reasonably expected to be paid for the position upon hire, and include all forms of compensation such as stock options and bonuses. Further, current law provides that an employer may not pay one sex, race or ethnicity less than those of a different sex, race or ethnicity who are doing the same job. "Sex" is expanded to include gender identify and gender expression. Currently, a civil action to recover disparate or underpaid wages must be filed no later than 2 years after the last date the cause of action occurred, or 3 years if the cause of action arises out of a willful violation. Beginning January 1, 2026, the time to file a civil action is a more straightforward within 3 years, but significantly, the period of recovering damages has been extended to include the entire period of time in which a violation of the law up to 6 years.

Key Takeaways: Be prepared for a longer look-back window at pay decisions as they could come under new scrutiny years later. Prepare and maintain records that support those pay rate decisions.

Right to Investigate Tip Sharing-SB 648. Many employees depend on tips or gratuities to supplement their hourly wages. California law provides that tips belong to the employee it was left for, although employers often have tip-sharing policies that provide for a sharing of gratuities with those in the line of service, for example, bussers or others in "the front of a restaurant" who also provide service to the restaurant patron. Additionally, tips are often given via credit card charges which can result in credit card processing fees—charges that are not to be borne by employees. In practice, disputes over tips and deducting tips from wages can occur. Starting January 1, 2026, the Labor Commissioner will be authorized to investigate and issue citations or file a civil lawsuit arising from gratuities taken or withheld improperly, which may leave an employer liable for civil penalties.

Key Takeaway: Review your company policy on tip or gratuity sharing and withholding to ensure it is not in violation of these (and other) requirements.

FEHA: Tolling of Time to Sue-SB 477. The California Fair Employment and Housing Act (FEHA) establishes the Civil Rights Department (Department) to enforce civil rights laws with respect to housing and employment, and authorizes a person who claims to be aggrieved to file complaint with the Department. Such complaints are a prerequisite to filing a civil complaint in court. Current law allows an employee to file a civil action until one year after the Department closes its investigation (commonly referred to as a Right to Sue letter), or the Department files its own civil complaint. A new law will now allow the complaining employee and the Department to toll, or extend, the time of filing such a civil action when there is a pending appeal regarding the Department's decision to close the complaint, or if the Department and employee enter into a written agreement to extend the deadline.

Key Takeaway: Anticipate longer timelines for potential FEHA claims and ensure records keeping for longer periods than previously expected.

New Penalties for Expanded Pay Data Reporting Requirements-SB 464. Not next year, but starting January 1, 2027, the current California law requiring employers of 100 or more employees to report pay data for ten specific categories of jobs to the Civil Rights Department (Department) will be expanded to 23 different of job categories. Many employers who did not have previous reporting responsibilities will have to report pay data, including building and ground cleaning and maintenance occupations and food preparation occupations. Failure to comply with reporting requirements may subject employers to civil penalties. These penalties may be assessed up to $100 per employee for failure to report and up to $200 per employer for subsequent failure to file the required report.

Key Takeaway: Prepare and become familiar with whether your business will become subject to new pay data reporting requirements in 2027.

Expanded Paid Family Leave-SB 590. California's Paid Family Leave law currently allows employees to take paid leave to care for "a seriously ill child, spouse, parent, grandparent, grandchild, sibling, or domestic partner." Beginning July 1, 2028, the law will expand to include care for a "designated person," that is defined as someone related to the employee by blood or whose relationship is equivalent to a family member. This change recognizes non-traditional family structures, allowing individuals, particularly those in the LGBTQ+ community, to access paid family leave when caring for someone who is equivalent to a family member. The extension will also require employees to identify the "designated person" and state the relationship under penalty of perjury when requesting leave.

Key takeaway: Be prepared for more extended leave requests from employees. Make sure HR personnel are trained on the impending change in the law.

What Does It All Mean? Employers must continue to be vigilant and become informed of changing employment laws affecting businesses in California. What used to be a safe or acceptable practice or policy may no longer be compliant with the law. Additional recordkeeping obligations have been created. Businesses should conduct annual reviews to determine how their employment-related practices and policies may have been impacted by changing employment laws, and practices and policies should be updated, when appropriate.

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.