California’s Employment Law Updates for 2026 and Beyond: What Every Employer Needs to Know & Why It Matters

As 2025 rolls out, a new wave of laws impacting employers will roll in with significantly more workplace restrictions and requirements starting in 2026. Below is a breakdown of some the important changes in the law.

Pay Transparency & Equity Expands

Senate Bill (SB) 642 amends Sections 432.3 and 1197.5 of the Labor Code effective January 1, 2026, as follows:  

• Employers with 15 or more employees will be required to include, in every job posting, a “good faith estimate” of the salary or wages showing what the employer expects to pay a new hire at the time of hire, rather than merely a pay range that the employer expected to pay for the position generally.
• The law also expands the terminology for equal pay protections by removing the “opposite sex” language and replacing it with “another sex,” thus prohibiting employers from paying employees at wage rates less than the rates paid to employees of “another sex.”
• The statute of limitations for equal pay claims will be expanded from two years to three years and employees may recover for pay violations going back up to six years. The existing law had a statute of limitations for two years, and three years for “willful violations.” Now, all violations will have a statute of limitations period of three years.
• A cause of action accrues when an alleged unlawful compensation decision or practice is adopted, when an individual becomes subject to the decision or practice, or when an individual is affected by the application of the decision or practice.

Why it matters: These changes in the law force greater transparency and accountability around employee compensation. Employers will need to audit their job postings, pay scales and their internal compensation policies in order to be compliant with the new requirements.

Goodbye to “Stay or Pay” Contracts

Assembly Bill 692, effective January 1, 2026, will prohibit employers from including provisions in their employment contracts, or require a worker to execute as a condition of employment or a work relationship, a contract that includes an obligation to repay debts or fees to the employer, training provider, or debt collector when the employment ends.

Employers may still be able to recoup legitimate costs, such as government loan forgiveness programs, tuition for transferable credentials, approved apprenticeships, or discretionary bonuses or unearned monetary payment at the onset of employment, but only under strict standards.

This law will be added to Section 16608 to the Business and Professions Code and will add Section 926 to the Labor Code.

Why it matters: This ensures that workers are free to leave employment when they wish, without the threat of debt hanging over them. This will enhance labor mobility and give employees more control over their career path, especially if circumstances or opportunities change.

Paid-Family Leave Expansion for “Designated Persons”

Senate Bill 590, effective July 1, 2028, expands employees’ eligibility to receive state Paid Family Leave (PFL) benefits to those who are taking time off work to care for a seriously ill “designated person.” A “designated person” includes any individual related by blood or whose association with the employee is the equivalent of a family relationship.

An employee will identify the designated person the first time they file a claim for PFL to care for that designated person, and will be required to state, under penalty of perjury, how they are associated with that person by blood or the equivalent of a family relationship.

Why it matters: This provides broader leave eligibility as employees will no longer be limited to the “traditional” family relationship (spouse, parent, child, etc.) and will be allowed to care for extended family, close friends and chosen family as well. This change in the law recognizes diverse family structures beyond legal or biological definitions.

Worker Notice & Rights Amplified

Senate Bill 294, effective February 1, 2026, establishes the “Workplace Know Your Rights Act.” This law requires employers to provide a stand-alone written notice to all employees (new and existing) of key labor protections, including rights to workers’ compensation and interactions with law enforcement. The Labor Commissioner is tasked with developing a template notice to be available on or before January 1, 2026, which includes information on many areas of workers’ rights under state and federal law and related educational materials for California employees and employers. Employers will be required to provide this written notice annually to employees.

The bill also sets a deadline of March 30, 2026 for employers to allow employees to designate an emergency contact to be notified if the employee is arrested or detained at work or during work hours, if the employer has knowledge of the arrest or detention.

This law will be added to Division 2 of the Labor Code, commencing with Section 1550.

Why it matters: This will ensure that employees know their rights and legal protections. It is aimed at protecting vulnerable employees and promoting fairness.

Definition of “Personnel Records” Expanded

Senate Bill 513, effective January 1, 2026, amended the definition of “Personnel Records” to include “education or training records” under Labor Code section 1198.5. Education or training records must include the employee’s name, name of the training provider, duration and dates of the training, the core competencies of the training course, and the resulting certification or qualification.

The existing rules for inspection and copying still apply; current and former employees or their authorized agents have the right to inspect and obtain a copy of their personnel records, which includes this expanded category of education and training records within 30 days of the request.

Why it Matters: Many workers, especially skilled-labor workers, earn job-specific training and certifications on the job versus formal education. This will help ensure these training credentials are documented, preserved and accessible to the worker. This can be critical for workers who change jobs, are laid off or apply for a new position to prove their qualifications and skills.

Pay Data Reporting Tightens

Starting January 1, 2026, Senate Bill 464 will require employers who already report pay data (private employers with more than 100 employees) to store demographic data separately from personnel files. This bill also amends the law to require a court to impose a mandatory civil penalty, which was previously permissive, against an employer who fails to file a pay data report requested by the Civil Rights Department.

Beginning January 1, 2027, employers will also be required to identify the numbers of employees by race, ethnicity and sex in 23 categories, which was increased from 10 categories.  

Why it Matters: Requiring the pay data to be kept separate from personnel files will ensure a more secure, compartmentalized record-keeping and expanding the number of job categories requiring demographic information will give a more granular picture of pay equity.

CalWARN Notices Now Require Additional Information

CalWARN (California Worker Adjustment and Retraining Act, Labor Code section 1401) applies to employers with 75 or more employees, including part-time employees, and requires 60 days advance notice for plant closures, layoffs of 50 or more employees, and relocations of at least 100 miles affecting any number of employees.

Senate Bill 617, effective January 1, 2026, employers will now be required to include in the notice whether the employer plans to coordinate services through the local workforce development board or another entity, as specified, and information regarding the statewide food assistance program known as CalFresh.

Why it Matters: This change in the law signals California’s increasing focus on worker welfare. Layoff notices will now include information on public assistance and retaining resources to assist workers.

Wage Judgment Enforcement Gets Stricter

Senate Bill 261, effective January 1, 2026, impose stricter penalties on an employer who fails to pay a wage judgment within 180 days, including:

• Payment of mandatory court costs and attorney fees
• Penalties up to three times (3x) the judgment amount

This bill will amend Section 98.2 of the Labor Code and will add Sections 238.05 and 238.10 to the Labor Code.

Why it Matters: This is a strong incentive to resolve back-pay issues quickly. There is now serious financial risk for an employer who fails to pay a wage judgment.

Protections for Workplace Training

Senate Bill 303 provides protection for bias training and amends California Fair Employment and Housing Act (FEHA), which requires employers to prevent workplace discrimination, including providing specified harassment prevention training. Under the new law, effective January 1, 2026, if an employee, in good faith, assesses, tests, admits or acknowledges their own personal bias during bias training or bias mitigating training, that acknowledgment does not, by itself, constitute unlawful discrimination.

This will add Section 12940.2 to the Government Code.

Why it Matters: The amendment ensures that bias mitigation efforts do not automatically become a liability, i.e., that participation in such training will not be used on its face as evidence of discriminatory intent.

Key Take Away

If you run a business with operations in California, the 2026 changes in law require immediate attention to your existing policies, practices and procedures. These laws collectively demonstrate a recognition of labor standards, transparency, and accountability. Employers should audit their compensation practices (job postings, pay scales, benefits), revamp their data reporting systems, train managers and HR teams on the new notice and contract rules and prepare for increased wage costs and enforcement risks.

In addition to these new laws, several laws also passed focusing on specific industries, including licensed manicurists, commercial fishermen, employees at Petroleum facilities, ride-share drivers and workers in eligible hospitality and service industries.  

For more information or specific guidance, please contact Jeanne Tollison.