New Year, New Rules: Key California Employment Law Updates For 2026

California employers enter 2026 facing a broad set of statutory changes that materially affect wages, compensation practices, workplace policies, and compliance risk. These developments reflect the Legislature’s continued shift toward greater transparency, expanded employee protections, and closer scrutiny of employers. Employers should take immediate steps to confirm compliance, with particular attention to updating employee handbooks, internal policies, and employment agreements.

Minimum Wage and Exempt Salary Thresholds

Beginning January 1, 2026, California’s statewide minimum wage increases to $16.90 per hour under Labor Code section 1182.12. This increase directly raises the minimum salary required for employees classified as exempt under the executive, administrative, and professional exemptions to $70,304 annually. In addition, a number of local counties and cities have higher minimum wage rates that also increase in the new year, meaning employers in those areas must comply with the higher local rate where applicable.

Employers should promptly review exempt classifications and compensation levels and should also confirm compliance with any local ordinances that impose higher minimum wage requirements. 

New “Workplace Know Your Rights Act”

SB 294 requires employers to provide an annual written notice to each current employee that explains certain workers’ protections against unfair immigration-related practices and their constitutional rights when interacting with law enforcement in the workplace. The first notice must be provided on or before February 1, 2026.  In addition, employers must give employees an opportunity to designate an emergency contact in the event the employee is arrested or detained at work. The Labor Commissioner is expected to publish a template notice by January 1, 2026 at DLSE publications. 

Restrictions on “Stay-or-Pay” Provisions

AB 692 significantly restricts “stay-or-pay” provisions that require workers to repay certain costs (such as training expenses, visa-related costs, relocations costs, or sign-on bonuses) as a condition of employment or continued employment. Subject to a few narrow statutory exceptions, employers may no longer require employees to repay such costs upon separation. AB 692 authorizes a private right of action and allows recovery of actual damages or statutory damages of $5,000 per employee, as well as injunctive relief and attorneys’ fees.  You can read our Client Alert on AB 692 “Stay-or-Pay” No More: California’s New Limits on Training and Retention Agreement Payback – Fennemore. 

Updates to Job Posting Requirements and Equal Pay Act

SB 642 updates California’s pay transparency rules to be more precise and intentional about how pay ranges are set and communicated. When posting jobs or responding to employee requests, employers should provide a realistic, good-faith pay range that reflects what the company actually expects to pay for the position upon hire and not a broad or aspirational range. The law also extends the statute of limitations for pay discrimination claims to three years and allows potential recovery of up to six years.

California WARN Act

SB 617 expands California WARN Act (Cal-WARN) notice requirements by increasing the information employers must include when providing advance notice of a qualifying layoff, relocation, or termination. While SB 617 does not change when Cal-WARN is triggered or the 60-day notice period, it requires employers to include additional, employee-focused content in WARN notices, such as contact information for local workforce development boards, access points for unemployment insurance, CalFresh (California’s version of SNAP benefits), and other public benefit programs, and clearer guidance on available transition resources.

Artificial Intelligence and Automated Employment Decision-Making

California’s Transparency in Frontier Artificial Intelligence Act (SB 53) establishes new transparency and risk-management obligations for developers of “frontier” AI models – a term used to describe high-capacity, general-purpose artificial intelligence systems operating at the leading edge of current technology. Many employment-related tools, such as applicant screening, interview analysis, job matching, and performance analytics, are not standalone algorithms but instead are built on or powered by these underlying frontier models. Although SB 53 applies directly to AI developers rather than employers, it has practical implications for employers that use AI-enabled hiring, analytics, or decision-support tools supplied by third-party vendors. In particular, the law is likely to influence vendor diligence, contractual representations, and expectations around explainability, risk disclosure, and incident reporting. More broadly, SB 53 reflects a regulatory shift that is likely to shape future regulation and enforcement of automated decision-making in employment.

Expanded Wage Judgment Enforcement

SB 261 strengthens enforcement of final unpaid wage judgments, significantly increasing the consequences for employers who fail to satisfy them. Under the law, courts may impose penalties of up to three times the outstanding judgment amount if it remains unpaid 180 days after the appeal period ends, and prevailing claimants, including the Labor Commissioner or public prosecutors acting on behalf of employees, are entitled to attorneys’ fees and costs. The law also expands enforcement tools by allowing public prosecutors to step in as assignees, requires that half of any penalty go directly to affected employees with the remainder funding enforcement and education, and extends successor liability to successors of judgment-debtor employers. To prepare, employers are advised to identify and resolve outstanding judgments, prioritize timely payment or structured settlements, strengthen wage-hour compliance programs, and address wage judgment exposure during transactions.

What Employers Should Do Now

With the January 1, 2026 effective date now at hand, employers should focus on finalizing compliance efforts. This includes conducting a legal review of existing policies and agreements, coordinating updates across human resources, payroll, and information technology functions, and training managers on new requirements before they take effect.

If you would like assistance reviewing or updating employee handbooks or other employment documents, we are available to help.

June Monroe is a director in Fennemore’s Orange County office and a member of the firm’s Labor & Employment Law Practice Group. June advises employers on compliance, investigations, and litigation defense. She represents companies before the U.S. Department of Labor, the California Labor Commissioner, and state and federal court, and has successfully defended wage and hour, discrimination, and unemployment benefit claims. She can be reached at jmonroe@fennemorelaw.com.

Elise O’Brien is a director in our Orange County office who works in our Labor & Employment practice group. Elise has extensive experience representing employers in federal and state court litigation involving wrongful termination, discrimination, harassment, retaliation, and wage and hour claims. She can be reached at eobrien@fennemorelaw.com.

If you have any questions about this alert, please contact June Monroe, Elise O’Brien, or any of the attorneys in Fennemore’s Labor & Employment Practice.