California’s Key Employment Law Changes for 2026: What Employers Need to Know

California employers will enter 2026 with one of the most wide-ranging sets of employment law changes in recent years. New legislation affects hiring and pay practices, independent contractor classification, personnel file requirements, pay data reporting, workplace notices, expense reimbursement, and more. In addition, several new appellate decisions clarify employer obligations in areas such as harassment prevention, investigations, and meal period waivers.

Below is Tyler Law’s deep-dive analysis of the most impactful updates—and, more importantly, what steps employers should take now to stay compliant heading into 2026.

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1. Minimum Wage & Exempt Salary Increases (SB 3)

California’s statewide minimum wage continues to rise automatically under SB 3, which ties annual increases to inflation using the Consumer Price Index. Beginning January 1, 2026, the state minimum wage will increase to:

• $16.90/hour for all employers
• $70,304/year minimum salary for exempt administrative, executive, and professional employees

Although SB 3 is not a “new” law, the 2026 adjustment reflects a 2.49% CPI increase, which translates to a $0.40 boost from 2025. Employers should continue to expect annual adjustments each January.

What This Means for Employers

• Budgets and payroll systems must be updated to reflect the new statewide wage floor.
• Any exempt employee earning below $70,304 in 2026 must either receive a raise or be reclassified as non-exempt.
• Minimum wage posters and Wage Theft Prevention Notices will be updated by state agencies—employers must ensure those updates are posted/distributed.

Action Steps

• Conduct an exempt-employee compensation audit before year-end.
• Update job descriptions if duty changes accompany reclassification.
• Update onboarding documents and wage notices.

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2. Expanded Pay Scale & Equal Pay Requirements (SB 642)

SB 642 makes significant updates to California’s Equal Pay Act and the state’s pay transparency rules.

Key Changes

• “Pay scale” is now defined as the expected wage range the employer reasonably and in good faith expects to pay upon hire.
• Employers do not need to disclose the full pay band for a position—only the expected hiring range.
• Pay scale disclosure is still required:
  
  • In job postings for employers with 15+ employees
  • Upon request by applicants or current employees
• “Wages” now include bonuses, overtime, stock options, employer-paid allowances, life insurance, profit-sharing plans, vacation/holiday pay, and travel reimbursements.
• The statute of limitations for equal pay claims is expanded to three years, and depending on the facts, employees may recover up to six years of damages.

What This Means for Employers

These expanded definitions significantly increase pay-equity exposure, particularly regarding bonuses, stipends, and non-traditional wage components.

Action Steps

• Update pay scale documentation to reflect the new definition.
• Review job postings for compliance.
• Conduct a privileged equal-pay audit focused on “substantially similar work.”

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3. Pay Data Reporting Expansion to 23 Job Categories (SB 464)

Beginning with the 2026 reporting year (due in 2027), pay data reports submitted to the California Civil Rights Department must use 23 different job categories—more than double the current 10 categories.

Other Key Requirements

• Employers must keep demographic data collected for pay reporting separate from personnel files.
• Updated CRD guidance will be released before the 2026 reporting cycle.

Action Steps

• Work with HR and payroll vendors to ensure systems track employees within the new 23 categories.
• Audit how demographic information is collected and stored.

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4. Independent Contractor Clarification & Vehicle Reimbursement (SB 809)

California’s “ABC Test” is often the dividing line between employee and contractor status. SB 809 clarifies that:

• Owning a vehicle used to perform work does not exempt a worker from the ABC Test.
• Employers must reimburse employees for the use of their personal vehicle when used for work duties.

This closes a commonly misunderstood area in contractor classification and reinforces that vehicle ownership alone does not create independent contractor status.

Action Steps

• Reevaluate contractor relationships, especially those involving drivers, delivery workers, or anyone using a personal vehicle.
• Review mileage reimbursement policies.

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5. Mandatory Worker Rights Notice + Emergency Contact Rule (SB 294)

This is one of the most unusual and far-reaching new requirements for 2026.

What the Law Requires

By February 1, 2026, employers must give all current employees a stand-alone “Know Your Rights” notice covering:

• Immigration-related rights
• Workers’ compensation rights
• Constitutional rights
• Protections related to retaliation and wage theft

The notice must be provided:

• At hire
• Annually
• In the employee’s primary language
• By physical delivery, email, or text (so long as receipt is reasonably assured within 1 business day)

Emergency Contact Requirement (March 30, 2026 Deadline)

Employers must offer employees the chance to designate an emergency contact in case the employee is arrested or detained.

If the employee is arrested/detained:

• On the worksite → employer must notify the contact
• Offsite but during working hours → employer must notify if the employer has actual knowledge

Penalties can reach $10,000 per employee for ongoing violations.

Action Steps

• Update onboarding packets to include the new rights notice & emergency contact designation.
• Maintain proof of delivery for three years.
• Watch for the Labor Commissioner’s model notice.

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6. Expanded Personnel File Requirements (SB 513)

Current and former employees already have a right to inspect personnel records. SB 513 expands that right to include all training and education records the employer maintains, including details such as:

• Training provider
• Dates and duration
• Competencies gained
• Certifications earned

Employers who maintain training records must track these data points proactively.

Action Steps

• Audit HR files to confirm required details are being captured.
• Update record-keeping practices and training logs.

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7. Restrictions on Retention Bonuses & Tuition Assistance (AB 692)

Effective January 1, 2026, employers can no longer require repayment of:

• Hiring bonuses
• Retention bonuses
• Tuition assistance
• Training costs

…when an employee leaves before the end of a specified period.

Exceptions exist, but they are narrow and often require attorney review.

Action Steps

• Remove claw-back provisions from offer letters.
• Review all tuition reimbursement and bonus agreements.
• Consult counsel for industry-specific exceptions.

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8. Crime Victim Leave Updates & Paid Sick Leave Clarifications (AB 406)

This bill updates the 2025 changes to crime-victim leave laws and clarifies that Paid Sick Leave (PSL) may be used for all purposes authorized under crime-victim leave, jury duty, or witness duty.

Action Steps

• Update handbooks to reflect expanded PSL use.
• Distribute updated CRD Crime Victims Leave Notice.

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9. Automated Decision-Making & AI in Employment (CRD Regulations)

California’s Civil Rights Department has issued new rules governing employer use of AI and automated decision-making systems (ADS).

What Employers Cannot Do

• Use AI tools that disproportionately screen out protected categories
• Rely solely on AI results when evaluating criminal history
• Fail to maintain AI-related records for four years

Action Steps

• Implement human review for all decisions involving AI tools.
• Adopt internal ADS/AI policies for all managers and HR personnel.
• Evaluate vendors for compliance with the new regulations.

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10. Hospitality & Airport Recall Rights Extended (AB 858)

California extended pandemic-era recall rights for certain industries—hotels, airport service providers, event centers, private clubs—through January 1, 2027.

Most employers outside these industries are unaffected.

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11. Key 2025–2026 Case Law Affecting Employers

Iloff v. LaPaille — Liquidated Damages & Good Faith Defense

The California Supreme Court held employers must show they took reasonable steps to understand their legal obligations to avoid liquidated damages in minimum wage violations.

“I didn’t know” is not a defense.

Bradsbury v. Vicar Operating — Meal Waiver Clarification

Advance meal waivers for 5–6 hour shifts are enforceable if:

• In writing
• Clearly explained
• Revocable at any time
• Free of pressure or retaliation

Carranza v. City of Los Angeles — Gossip as Harassment

Coworkers circulated a doctored nude photo; even though the conduct was not face-to-face, the court upheld a $4 million verdict because gossip and rumors can create a hostile work environment.

Liu v. DeJoy — Biased Investigations

A biased or incomplete investigation can itself support liability—even if the underlying misconduct is disputed.

Investigations must be independent, thorough, and well-documented.

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12. Other Notable Updates (Brief Summary)

• SB 648: Labor Commissioner now has explicit authority to pursue tip-related violations.
• Cal/WARN Updates (SB 617): Notices must include rapid response services information and CalFresh benefits information.
• AB 288: If the NLRB cannot act, workers may turn to California’s PERB—significant in union environments.
• PFL Expansion (SB 590): Beginning 2028, PFL will extend to “designated persons.”
• Construction Trucking Amnesty (SB 809): Provides misclassification amnesty under specific conditions.
• Transportation Network Company Collective Bargaining (AB 1340): TNC drivers have expanded rights to organize.

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What Employers Should Do Now: A 2026 Compliance Checklist

✔ Update minimum wage & exempt salary levels

✔ Conduct a pay equity audit under updated SB 642 standards

✔ Prepare for expanded pay data reporting

✔ Update onboarding packets with new rights notice & emergency contact form

✔ Adjust bonus/tuition agreements to remove repayment obligations

✔ Audit personnel/training records

✔ Update leave policies and PSL language

✔ Train HR managers on AI rule compliance

✔ Review independent contractor classifications

✔ Update Cal/WARN templates

✔ Re-train supervisors on harassment and investigations

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Conclusion

California employers face a complex mix of new obligations in 2026. The good news is that early preparation—updated handbooks, revised onboarding procedures, pay equity audits, and HR system reviews—can significantly reduce legal exposure.

Tyler Law assists employers with policy updates, compliance reviews, AI policy development, pay equity analysis, and training for HR, supervisors, and managers. If you need help preparing for these 2026 changes, our team is ready to assist.

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