California’s legislature was busy in 2025, enacting multiple laws impacting employers in the new year. In addition to a state minimum wage increase to $16.90 per hour, taking effect on January 1, 2026, new statutes address how employers must convey workers’ rights, what to do in cases of mass layoff, the use of AI in the workplace, and other policy changes California employers need to know.
Wage Judgment Enforcement (Senate Bill 261)
Employers will face increased penalties for failing to pay a final wage judgment imposed by the Department of Industrial Relations under Senate Bill 261. This new provision will subject employers who do not pay a wage judgment timely to a civil penalty of up to three times the amount of the outstanding judgment and any accrued post-judgment interest.
This legislation imposes joint and several liability on employer successors for unpaid judgments as well, holding them responsible for the debts left behind, for example, when there is a sale of the business or a reorganization. A worker who successfully brings an action against an employer who did not pay the final wage judgment may also be awarded their attorneys’ fees and costs incurred in seeking the civil penalty and in any judgment enforcement efforts.
Pay Transparency and Equity (Senate Bill 642)
Senate Bill 642 amends California Labor Code section 432.3 and Labor Code section 1197.5, which govern pay transparency in hiring and equal pay requirements. Labor Code section 432.3 already prohibits employers from seeking a job applicant’s salary history and requires disclosure of a pay scale upon request, while section 1197.5 prohibits paying employees less than coworkers of a different sex, race, or ethnicity for substantially similar work.
The changes now require that the employer give a “good faith estimate” of the salary or hourly range of the position. It also clarifies that “wage rates” used for equal pay comparisons encompass all forms of compensation, including bonuses, commissions, stock options, and other financial incentives, not just base pay.
Employers must keep records regarding the job title and wage rate history for three years, and the new legislation adds a rebuttable presumption in favor of an employee claiming pay disparity if the employer fails to keep the records for the required time. Senate Bill 642 also amends Labor Code section 1197.5 to use more inclusive language, replacing the word “opposite” sex with “another” sex.
Senate Bill 642 also revises California’s Equal Pay Act by extending the statute of limitations for pay discrimination claims to three years and allowing potential recovery of lost wages up to six years.
New AI Regulations Adopted
Related to the issue of fair hiring, new California Artificial Intelligence (AI) regulations were adopted by the Civil Rights Council in June 2025 and went into effect on October 1, 2025. The new regulations define terms like “automated-decision system,” “employment agency,” and “machine learning,” as they apply to employers using any sort of AI or algorithms in their search for new employees and screening candidates.
Under this new law, employers subject to California’s Fair Employment and Housing Act (FEHA) can be sued by a candidate if there is evidence that an algorithm or AI unfairly “screened them out” of the hiring process, based on any protected class under the FEHA.
Pay Data Reporting (Senate Bill 464)
Employers who have more than 100 employees must now submit an annual pay data report to the Civil Rights Department pursuant to Senate Bill 464 and provide information about their employees, including race, ethnicity, and sex, for 10 job categories. These categories are set to increase to 23 categories on January 1, 2027. The 10 current categories are composed of broad classifications of workers, such as executives, sales workers, laborers, and service workers. Beginning in 2027, these categories will be broken down into smaller, more detailed classifications, such as healthcare, food preparation, construction, and transportation. Civil penalties will apply to employers who do not submit the required information on time.
Updates to the California WARN Act (Senate Bill 617)
Employers who are contemplating a mass layoff should be aware of new updates to the California WARN Act, introduced by Senate Bill 617. This new legislation expands the information that must be given to employees facing a mass layoff. The new law requires such employers to provide information regarding whether the employer plans to coordinate with a local workforce development board.
The employer is also required to provide employees with a functioning email and phone number to allow employees to contact the employer following a mass layoff. Employees must also be provided with information regarding the statewide food assistance programs known as CalFresh.
In Vitro Coverage Required (Senate Bill 729)
California law will now mandate that employer-sponsored health insurance plans cover infertility diagnosis and treatment, including in vitro fertilization (IVF). Senate Bill 729 broadens the definition of infertility to include nonmedical reasons, such as same-sex relationships and single parents by choice, to make fertility care more inclusive. There is an exemption for religious employers.
Workers: Know Your Rights (Senate Bill 294)
Beginning February 1, 2026, Senate Bill 294 will require employers to provide current employees and new hires with a separate, standalone “Know Your Rights” notice annually. This notice is intended to explain workers’ compensation benefits, rights regarding unfair immigration practices and inspections, and an individual’s constitutional rights when interacting with law enforcement in the workplace. The California Department of Labor will provide a template (expected by January 1, 2026), and the notice must be given to employees in their language, if available. Otherwise, the notice must be given in English.
Additionally, if an employee requests, the employer must notify the employee’s designated emergency contact if the employee is detained at work or arrested. Employers must permit employees to designate an emergency contact for this purpose no later than March 30, 2026, for current employees, or the time of hire for employees hired after that date.
Employers: Keep Your Records (Senate Bill 513)
Employers now must keep education and training records as part of their employees’ personnel files under Senate Bill 513. These records include provider dates, certifications, and competencies, and must be made available for inspection to the same extent employees are entitled to review their pay and personnel records.
Don’t Touch the Tips (Senate Bill 648)
Harsher penalties against employers who improperly take server or waitstaff tips are now imposed by Senate Bill 648. Existing law already prohibits an employer or manager from taking any part of a gratuity left for a server or deducting tips from their wages. Now, the Labor Commissioner can investigate and issue a citation or file a civil action for tips taken or withheld from a paycheck.
Keep On Trucking (Senate Bill 809)
For workers in the construction industry, ownership of a truck will not be sufficient to allow the company to classify those drivers as “independent contractors” under Senate Bill 809. The bill makes clear that truck ownership alone does not satisfy the requirements for contractor status. This bill also establishes the Construction Trucking Employer Amnesty Program, which is intended to facilitate settlements between employers who had previously misclassified truckers as independent contractors and those impacted employees.
Bias Mitigation (Senate Bill 303)
Employers are encouraged to confront bias and provide training to employees to eliminate bias in the workplace. As part of this effort, Senate Bill 303 amends the Fair Employment and Housing Act at Government Code section 12940.2. Under the new law, “an employee’s assessment, testing, admission or acknowledgement of their own personal bias, when made in good faith and solicited or required as part of a bias mitigation training does not, by itself, constitute unlawful discrimination.” The goal of the new legislation is to continue providing meaningful trainings where individuals can confront their own presuppositions without fear that it will be used against them as “proof” of discriminatory conduct or intent.
Paid Sick Leave Expansion (Assembly Bill 406)
Employees may now use paid sick leave to attend certain judicial proceedings if they, or a loved one, were the victim of “a qualifying act of violence,” under Assembly Bill 406. This new law expands employee protections when the employee or a family member is recovering from the aftermath of violence. It also expands and defines what a “qualifying act of violence” includes. The new law amends Labor Code section 12945.8, which already outlines ways in which an employer must accommodate an employee who is seeking relief, medical care, or other assistance after they or a loved one was a victim of violence.
Restaurant Pest Control Training (Assembly Bill 592)
Restaurant employees must now be trained on pest prevention and pest control procedures under Assembly Bill 592, and the restaurant must have a written policy and a record-keeping system regarding monitoring vermin activity. This new legislation updates Health and Safety Code section 114266 to help ensure that management includes both preventative and responsive measures to keep pests from contaminating the restaurant.
Pay-to-Stay (Assembly Bill 692)
Employers will now be generally prohibited from including any term in an employment contract that would require an employee or prospective employee to repay a debt to the employer at the end of employment under Assembly Bill 692. There are exceptions for repaying tuition or apprenticeship-related costs, so long as certain criteria are met, including that the repayment is addressed in a separate agreement, and not the employment contract. Retention bonus arrangements are still permitted under certain circumstances, when the conditions outlined in Assembly Bill 692 have been met.
Bring Them Back: Rehiring After COVID (Assembly Bill 858)
Workers laid off due to COVID reasons are to be provided offers of rehire or reinstatement in certain industries most impacted by the pandemic. Assembly Bill 858 extends this obligation to January 1, 2027.
Minimum Wage and Exempt Salary Increases
The new state minimum wage bumps to $16.90 on January 1, 2026 for all employers, regardless of size, pursuant to Labor Code section 1182.12(c), which enacted the formula by which the new minimum wage gets set each year.
As a result of this increase, the minimum salary that must be paid to exempt employees will increase to $70,304 per year, which reflects two times the state minimum wage for full-time employment.
NOTE: This increased minimum wage and related exempt salary threshold do not apply to covered health care employees who may be subject to a separate, higher wage schedule and a distinct exempt salary test. Additionally, higher wage rates may apply to certain employers under California’s fast food employee minimum wage law.
The minimum wage rate for licensed physicians and surgeons increases to $107.17/hour, and the minimum annual salary exemption for computer professionals increases to $122,573.13 per year.
Quite a few local minimum wage rates increase in 2026 as well, including Belmont, Burlingame, Cupertino, Daly City, East Palo Alto, El Cerrito, Foster City, Half Moon Bay, Hayward, Los Altos, Menlo Park, Mountain View, Novato, Oakland, Palo Alto, Petaluma, Redwood City, Richmond, San Carlos, the City of San Diego, San Jose, the City of San Mateo, Santa Clara, Santa Rosa, the City of Sonoma, South San Francisco, Sunnyvale and West Hollywood.
Paid Family Leave (Senate Bill 590)
Although not effective until July 1, 2028, California employers should be aware that Senate Bill 590 broadens the definition of “family member” under the Paid Family Leave (PFL) program. Employees will soon be eligible to receive PFL benefits to care for a “designated person” (someone related by blood or whose relationship is equivalent to a family relationship), as long as they identify that individual at the time of their first claim and attest under penalty of perjury to the nature of the relationship.
Now is a good time for California employers to review their employee handbooks, policies, and pay practices to ensure that they reflect the new legislation described above.
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