California Employment Law Update: What Employers Should Expect in 2026

By McMahon Berger P.C.

December 24, 2025

As to be expected, California continues to lead the nation with robust employment protections and expanded employer obligations. A slate of new laws taking effect in 2026 will impact wages, pay transparency, notices, leave rights, enforcement penalties, and more. Employers should begin planning now to reduce compliance risk, avoid penalties, and maintain effective HR operations.

Here’s what employers should know as 2026 approaches.

Minimum Wage and Salary Threshold Adjustments

Effective January 1, 2026, California’s statewide minimum wage increases to $16.90 per hour for all employees, regardless of employer size. The minimum salary threshold for many exempt employees also rises specific amount dependent on industry. Reach out to a McMahon Berger Attorney for more information to determine your industry’s amount.

Action Steps:

   • Update payroll systems to reflect new minimum wage and salary thresholds.
   • Confirm exempt classifications align with updated compensation standards.

Expanded Pay Transparency and Pay Equity Requirements

California continues to strengthen pay transparency and equal pay enforcement in 2026. SB 642 expands employers’ obligations under the state’s equal pay and transparency laws by requiring that job postings include a good-faith estimate of the wage range the employer reasonably expects to pay at hire. SB 642 also broadens equal pay protections to include non-binary workers and extends the statute of limitations for pay discrimination claims.

Action Steps:

   • Include clear, realistic pay ranges in all external job postings.
   • Conduct internal reviews of pay practices to address potential disparities.

New “Know Your Rights” Employee Notices

Starting February 1, 2026, SB 294 requires employers to provide a stand-alone written notice to all employees at hire and annually thereafter summarizing specific workplace rights. These rights include wage protections, immigration-related workplace rights, labor organizing protections, and other employment entitlements.

Action Steps:

   • Adopt and distribute the required worker rights notice at hire and annually.
   • Maintain records of distribution and acknowledgment of receipt.

Increased Penalties for Unpaid Wage Judgments

New law clarifies that employers who fail to satisfy wage judgments within 180 days may face enhanced enforcement actions, including penalties up to three times the judgment amount plus attorneys’ fees. Unpaid awards may also be publicly posted by the Labor Commissioner.

Action Steps:

   • Establish protocols to track wage awards and satisfy judgments promptly.
   • Coordinate with outside counsel early in wage claim disputes.

Expanded Leave and Worker Protections

Several new laws taking effect in 2026 further expand employee leave rights and workplace protections, increasing compliance obligations for employers. Paid sick and safe leave protections have been broadened to cover additional qualifying uses and strengthen anti-retaliation provisions, making it riskier for employers to discipline or terminate employees for leave-related absences. Certain recall and reinstatement rights enacted during the COVID-19 era have also been extended or clarified for specific industries, requiring employers to offer reemployment opportunities to laid-off workers before hiring new employees. In addition, California has imposed new limits on so-called “stay-or-pay” arrangements, restricting an employer’s ability to require employees to repay training costs, onboarding expenses, or other employment-related debts upon separation, with only narrow exceptions.

Action Steps:

   • Review and update leave and attendance policies to ensure they reflect expanded protected leave rights and anti-retaliation standards.
   • Train managers and supervisors on handling leave requests and protected absences.
   • Audit existing training reimbursement, repayment, and employment-related debt agreements before attempting enforcement.

Emergency Contact and Arrest/Detention Notifications

As part of SB 294, employers must give employees the opportunity to designate an emergency contact and must notify that contact if the employer has actual knowledge the employee has been arrested or detained at the worksite. These provisions take effect in early 2026 and carry potential penalties for non-compliance.

Action Steps:

   • Modify personnel files to collect emergency contact information.
   • Train HR personnel on notification requirements.

Use of Artificial Intelligence in Employment Decisions

California lawmakers and regulators continue to scrutinize the use of artificial intelligence and automated decision-making tools in the workplace. While many AI-specific requirements initially focus on developers and large companies, employers that use AI-driven tools for recruiting, screening, hiring, promotion, or performance evaluation should proceed with caution in 2026. Employers remain legally responsible for employment decisions made with the assistance of AI, particularly where such tools may result in biased or discriminatory outcomes. As regulatory guidance evolves, employers should ensure human oversight of automated processes, evaluate vendors carefully, and regularly review hiring and employment practices for compliance with anti-discrimination laws.

Practical Tips for Employers in 2026

To prepare for these and other 2026 developments, employers should consider the following:

   • Audit compensation policies to ensure compliance with minimum wage and pay transparency rules.
   • Update onboarding and annual training materials to include new notice requirements.
   • Coordinate early with outside counsel before undertaking layoffs, wage disputes, or classification changes.
   • Review contracts and policies that could be impacted by new protections such as pay equity and repayment agreements.
   • Early planning and thoughtful implementation of these requirements can help employers reduce litigation risk, improve HR compliance, and adapt to California’s evolving employment landscape.

Conclusion

The 2026 California employment law changes continue a clear trend toward increased regulation, heightened enforcement, and expanded employee protections. Employers that take a reactive approach risk significant exposure in the form of penalties, wage claims, and costly litigation. By reviewing compensation practices, updating policies and notices, training management teams, and consulting counsel early, employers can position themselves to comply with evolving requirements while minimizing disruption to their operations. Proactive planning in 2025 will be critical to navigating California’s increasingly complex employment landscape in 2026 and beyond.

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