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California employers face a wide range of new compliance obligations beginning in 2026, along with several major regulatory shifts that already took effect in late 2025. As our holiday gift to you, we've wrapped up the 10 most significant developments you need to be aware of if you want to stay off the naughty list next year.
1. NEW REGULATIONS GOVERNING THE USE OF AI IN EMPLOYMENT DECISIONS
Already in effect as of October 1, 2025
The California Civil Rights Council approved sweeping regulations governing employers' use of automated decision-making systems ("ADMS"), including résumé screening tools, algorithmic ranking systems, and online assessments. Although framed as "clarifications" of existing FEHA obligations, they create substantial new compliance requirements.
Key Requirements
- Affirmative Notice: Employers must notify applicants and employees when an automated system is used in hiring, promotion, evaluation, or other employment decisions.
- Responsiveness: Upon request, employers must be able to clearly explain what data the system uses, how decisions are made, and how protected characteristics are handled.
- ADA/FEHA Compliance: Any automated assessment implicating medical or disability information must include an opt-out and alternative assessment method.
- Record Retention: Employers must retain records for four years documenting how automated systems function and how decisions that relied on automated systems were reached.
- Employer Liability for Vendors: Employers are responsible for discriminatory outcomes produced by third-party AI tools.
Action Required
Conduct an immediate audit of all automated tools, revise vendor agreements to ensure access to data, train staff on required disclosures, and implement regular audits to identify disparate impacts.
2. 2026 MINIMUM WAGE INCREASE AND IMPACT ON EXEMPT EMPLOYEES
Effective January 1, 2026
California's statewide minimum wage will rise to $16.90 per hour based on inflation calculations under existing law.
Exempt Salary Threshold
Because the minimum salary requirements for many of the exemptions are tied to the state minimum wage, the minimum salary for most exempt employees will increase to: $5,858.67 per month, or $70,304 annually.
Certain industries—including computer software professionals, physicians, and commission-based inside sales—have higher specialized thresholds.
Action Required
Review exempt classifications, adjust salary bands, and verify that job duties satisfy the applicable duties test. Check local minimum wage ordinances, many of which exceed the state rate.
3. AMENDMENTS TO PAY TRANSPARENCY AND PAY EQUITY LAWS (SB 642)
Effective January 1, 2026
California continues strengthening pay transparency and equal pay requirements.
Key Changes
- "Pay scale" will have to reflect the reasonably expected wage range that will apply upon hire, not the full range across all seniority levels of the position at issue.
- Employees will now be permitted to recover six years of wage disparities under the Equal Pay Act.
- The statute of limitations for bringing claims expands to three years.
- Adopting an unlawful compensation practice can itself trigger liability—even if the complaining employee is not personally underpaid.
- The law now prohibits an unlawful pay disparity between an employee of "another sex," rather than "opposite sex" in order to include non-binary genders.
- The definition of "wages" is expanded to include all forms of pay, such as bonuses, stock, stock options, cleaning or gasoline allowances, hotel accommodations, and reimbursement for travel expenses. Employers must now ensure these forms of compensation are paid equally across genders.
Action Required
Review all posted and internal pay ranges, update compensation structures, analyze pay equity risk, and ensure long-term retention of compensation records.
4. LIMITATIONS ON TRAINING REPAYMENT AND "STAY-OR-PAY" AGREEMENTS (AB 692)
Effective January 1, 2026
California now prohibits most forms of employee training repayment obligations, including agreements requiring employees to repay training, relocation costs, or education expenses if an employee leaves employment before a designated date.
Permitted Narrow Exceptions
Repayment is allowed for:
- Transferable credential tuition (subject to strict conditions), and
- Discretionary sign-on or retention bonuses that are paid upfront or at the outset of employment and not tied to specific job performance (subject to strict conditions, including a standalone agreement, five-day review period, prorated repayment, deferral option, and interest-free terms).
Enforcement
Employees may bring a private right of action under Labor Code §926, with damages of actual losses or $5,000 per employee, plus attorneys' fees.
Action Required
Review and revise offer letters, bonus programs, tuition reimbursement structures, and any agreements containing repayment obligations. Consult with legal counsel regarding the very specific and narrow exceptions when repayment may be allowed.
5. EXPANDED CFRA AND PAID FAMILY LEAVE DEFINITIONS (SB 590)
Note that this expansion is not effective until: July 1, 2028
Paid Family Leave ("PFL") eligibility will expand to include care for a designated person—a term already incorporated into CFRA and paid sick leave.
Employees may designate one person per 12-month period and must attest under penalty of perjury to the qualifying relationship.
Action Required
Update PFL materials, ensure internal HR teams understand coordination among leave laws, and prepare handbook revisions ahead of the 2028 effective date.
6. EXPANSION OF PROTECTED LEAVE FOR VICTIMS AND FAMILY MEMBERS OF VICTIMS (AB 406)
Effective January 1, 2026
Existing leave protections for victims of certain crimes now extend to:
- Victims and family members attending a broad range of judicial proceedings
- Victims of an expanded list of qualifying criminal acts
- Use of accrued paid sick leave for these absences
Action Required
Update handbooks and leave request procedures and provide manager training to avoid inadvertent interference or retaliation.
7. NEW PERSONNEL FILE REQUIREMENTS (SB 513)
Effective January 1, 2026
Personnel files must now include education and training records, such as workplace safety, harassment prevention, and equipment training.
The records must include:
- Employee name
- Provider name
- Date and duration of training
- Core competencies addressed
- Resulting certifications
Action Required
Review onboarding files, HRIS systems, and training documentation practices to ensure compliance.
8. "KNOW YOUR RIGHTS" WORKPLACE NOTICE REQUIREMENTS
Employer compliance deadlines in 2026
By January 1, 2026, the Labor Commissioner is required to issue a new statewide notice summarizing key employee rights, including workers' compensation benefits, rights to immigration inspection notices and protection against unfair immigration-related practices, union organizing and concerted activities, and constitutional rights during interactions with law enforcement at the workplace. This Labor Commissioner will update it yearly and will publish educational videos by July 1, 2026.
Employers must:
- Post and distribute the new notice by February 1, 2026.
- Permit designation of a specific emergency contact for arrests or detentions at work or while on duty by March 30, 2026.
Enforcement
Violations may incur penalties for up to $500 per employee, or up to $10,000 per employee for ongoing emergency contact violations.
Action Required
Monitor for publication of the new notice on January 1, 2026, and update onboarding and personnel file practices accordingly to ensure it is provided to employees and new hires. Implement a process for notifying an employee's designated contact if an employee is arrested or detained at work, offsite during work hours, or while performing job duties (if known to the employer).
9. CHANGES TO CALIFORNIA WARN ACT NOTICES (SB 617)
Effective January 1, 2026
California employers conducting mass layoffs, relocations, or closures must now include additional content in WARN notices, including:
- Whether "rapid response" services will be offered
- Local Workforce Development Board (LWDB) contact information
- A mandatory statement describing available LWDB workforce services
- Information regarding CalFresh (the statewide food assistance program), the CalFresh benefits helpline, and a link to the CalFresh internet website
- A functioning employer email and phone number for inquiries
Action Required
Update WARN templates now and consult with counsel before engaging in a mass reduction in force. Failure to provide compliant notices may trigger penalties and back-pay liability.
10. PAY DATA REPORTING EXPANSIONS (SB 464)
Effective January 1, 2026
Private employers with 100 or more employees on their payroll or who utilize 100 or more workers hired through labor contractors, who are required to submit pay data reporting to the California Civil Rights Department annually, must begin storing demographic pay data separately from employee personnel records. Starting with the 2026 reporting due May 2027, an employer must report employee demographic information in 23 Standard Occupational Classification ("SOC") categories (increased from ten current EEO-1 categories by race, ethnicity, and sex).
Action Required
Revise data storage practices to segregate pay reporting data from general personnel files. Ensure systems and processes are ready to collect and report the expanded demographic data by mapping job titles to the new SOC categories. If applicable, confirm with labor contractors that they can provide the necessary demographic and pay data.
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.
