New California Employment Laws for 2026: What Employers and Employees Need to Know

Overview

California continues to expand and strengthen its employment law protections in 2026, introducing significant new requirements for employers and expanded rights for workers. These changes span wage and hour regulations, worker rights education, contract restrictions, wage enforcement, pay transparency, and labor relations. Both employers and employees should understand these changes to ensure compliance and protect their rights.

This guide covers nine major legislative and regulatory changes taking effect in 2026, with implementation dates ranging from January through July. Whether you are an employer managing payroll and compliance, an employee understanding your rights, or a mediation professional helping parties navigate workplace disputes, understanding these changes is essential for handling California's rapidly evolving employment environment.

Minimum Wage Increases

General Minimum Wage Increase to $16.90 (Effective January 1, 2026)

California's statewide minimum wage increases to $16.90 per hour on January 1, 2026. This represents a continuation of the state's annual minimum wage adjustment formula established by previous legislation. The minimum wage applies to all covered employees in all industries, with limited exceptions for certain agricultural workers and trainees under specific programs.

For employers, this increase affects payroll calculations, budget planning, and compensation structures. Employees should verify that their hourly wage meets or exceeds the new minimum, even if they previously earned the prior year's minimum wage.

Exempt Salary Threshold

Coinciding with the minimum wage increase, California's exempt salary threshold, the minimum salary required to classify an employee as exempt from overtime requirements, increases to $70,304 per year. To maintain exempt status under California law, a salaried employee must earn at least this amount. This threshold is tied to the minimum wage and increases annually.

Employers should review exempt employee classifications and ensure all exempt workers meet the updated salary requirement. Employees earning below the exempt threshold may be reclassified as non-exempt and entitled to overtime compensation.

Healthcare Worker Minimum Wage Increases Under SB 525

Labor Code section 1182.14 sets a tiered healthcare minimum wage rather than a single rate, and most categories stepped up on July 1, 2026. Under subdivision (c)(1), the rate is $25 per hour for employers with 10,000 or more full time equivalent employees, integrated health care delivery systems at that size, dialysis clinics, and facilities owned or operated by counties with populations greater than 5 million, up from $24. Specified community clinics and rural health clinics moved from $21 to $22 under subdivision (c)(3). The residual category for all other covered health care facility employers moved from $21 to $23 under subdivision (c)(4). Safety net hospitals with a high government payor mix, rural independent facilities, and small county facilities are on the slowest track under subdivision (c)(2), which starts at $18 and rises 3.5 percent a year through June 30, 2033, putting the rate at $19.28.

The remaining categories reach $25 on dates the statute fixes: community clinics on July 1, 2027, the residual category on July 1, 2028, and the safety net category on July 1, 2033. Whether a facility meets the full-time-equivalent threshold turns on what it reports to the Department of Health Care Access and Information in its annual financial disclosure report, not on a headcount the employer selects.

Healthcare employers should confirm which facility category applies to them and verify that payroll systems reflect the rate the Labor Commissioner publishes for that category.

Key Point: These wage increases are independent. A healthcare worker covered by SB 525 must receive the higher of the general state minimum wage ($16.90 in 2026), the applicable local minimum wage, or the healthcare-specific minimum wage tier that applies to their employer.

Know Your Rights Act (SB 294)

Effective January 1, 2026; first notice due February 1, 2026

California's Workplace Know Your Rights Act (Senate Bill 294) added Part 5.6 to Division 2 of the Labor Code, Labor Code §§ 1550 through 1559. The Act took effect January 1, 2026. It imposes two obligations on two different dates, and running them together is the most common mistake made about this statute.

Notice Requirements

Labor Code § 1553. Employers had to provide a stand-alone written notice to every current employee on or before February 1, 2026, and annually after that, plus to each new employee at hiring and to an employee's authorized representative. The notice must cover five subjects:

• Workers' compensation rights and how to obtain benefits
• Rights when an immigration agency inspects the workplace, including the notice an employer owes on an inspection
• Protection against unfair immigration-related practices
• The right to organize, join a labor organization, and engage in protected concerted activity
• Constitutional rights when interacting with law enforcement at the workplace, including Fourth Amendment protection against unreasonable search and seizure and Fifth Amendment due process and self-incrimination rights

The notice must also identify new legal developments and list the enforcement agencies. Employers may use the Labor Commissioner's template, which section 1554 directs the Commissioner to publish, or draft their own notice meeting the statutory requirements.

A caution on scope. This notice is not a general summary of employment rights. Meal and rest breaks, personnel file access, and wage records are real rights, but they are not among the subjects section 1550 requires this notice to address. A notice built around them, and omitting the workers' compensation and immigration and law enforcement content, would not comply.

Language

The notice goes to the employee in the language the employer normally uses to communicate employment-related information to that employee and which the employee understands, provided the Labor Commissioner has posted a template in that language. If no template exists in that language, the notice may be given in English. The Labor Commissioner posts templates in English, Spanish, Chinese, Tagalog, Vietnamese, Korean, Hindi, Urdu, and Punjabi. There is no separate requirement to produce the notice in English and in every workplace language.

Recordkeeping

Section 1553(e) requires employers to keep records showing compliance, retained for three years. SB 294 imposes no supervisor or manager training requirement, and it has no employee-count threshold. It applies to employers of every size.

Stay-or-Pay Agreement Ban (AB 692)

Prohibition on Training Repayment Agreements and Quit-Fee Penalties

Assembly Bill 692, chaptered as Stats. 2025, ch. 703, adds Business and Professions Code § 16608, which carries the prohibition, and Labor Code § 926, which carries the remedy. Section 16608(b)(1) makes it unlawful to include in an employment contract, or to require a worker to sign as a condition of employment, a term that requires the worker to pay the employer, a training provider, or a debt collector for a debt if the work relationship ends. It also reaches terms that restart debt collection on separation, and terms imposing any penalty, fee, or cost contingent on employment ending.

Which Agreements It Reaches, and Which It Does Not

Section 16608 applies to contracts entered into on or after January 1, 2026. That date does real work and is the most misunderstood part of this statute. AB 692 is not retroactive. An agreement signed before January 1, 2026 is not made unenforceable by AB 692, and is governed by the law that applied when it was signed.

That does not mean an older stay-or-pay clause is necessarily good. Pre-2026 agreements were already vulnerable on other grounds, including the rules on unlawful wage deductions and unfair competition, and an employer deducting a claimed debt from a final paycheck has a separate problem under Labor Code §§ 201 through 203 regardless of the contract's date. But those are different arguments resting on different law. Anyone told they are simply relieved of a pre-2026 obligation because of AB 692 has been told something the statute does not say.

The Five Exceptions

Section 16608(b)(2) carves out five categories:

• (A) Contracts under federal, state, or local loan repayment or forgiveness programs
• (B) Tuition repayment for a transferable credential, where the agreement is separate from the employment contract, the credential is not required for the job, the amount does not exceed the employer's actual cost and is disclosed in advance, repayment is prorated over the retention period without acceleration, and no repayment is owed if the worker is terminated other than for misconduct
• (C) Apprenticeship contracts approved by the Division of Apprenticeship Standards
• (D) Discretionary upfront payments not tied to job performance, where the repayment agreement is separate, the worker gets not less than five business days to obtain advice of counsel, no interest accrues, repayment is prorated over a retention period of no more than two years, and the worker may elect to defer the payment instead
• (E) Contracts for the lease, financing, or purchase of residential property, including a mortgage

Remedies

Labor Code § 926(c) makes a violator liable for the worker's actual damages or $5,000 per worker, whichever is greater, plus injunctive relief and reasonable attorney's fees and costs. Worker representatives may bring claims on behalf of multiple workers.

Training and Development Are Not Banned

Nothing in AB 692 stops an employer from paying for training. What it stops is charging the worker for it on the way out, outside the five exceptions.

One correction worth stating plainly, because the opposite is often assumed. An employer may not require an employee to sign a non-compete as an alternative to a repayment clause. Business and Professions Code § 16600 makes non-competes void in California, and § 16600.5, added by SB 699 effective January 1, 2024, provides that a contract void under that chapter is unenforceable regardless of where and when it was signed, bars an employer from entering into or attempting to enforce one, and gives the employee a private action for injunctive relief or actual damages plus attorney's fees and costs. Confidentiality and trade secret agreements remain available; non-competes do not.

Gratuities: Labor Commissioner Enforcement and Credit Card Tips (SB 648)

What SB 648 Actually Did

Senate Bill 648 is a gratuities statute. It amends Labor Code § 351 and nothing else, and its changes were operative January 1, 2026. It is not a general wage-theft or wage-and-hour enforcement bill, it does not raise civil penalties across the Labor Code, and it does not change how ordinary unpaid-wage claims are investigated. Anyone reading it as a broad expansion of Labor Commissioner power has the wrong statute.

Section 351 has long provided that every gratuity is the sole property of the employee it was left for, and barred an employer from collecting or receiving any part of it, deducting it from wages, or crediting it against wages owed. What SB 648 added is enforcement and two credit card rules.

The Three Changes

• Labor Commissioner enforcement, § 351(b). The Commissioner may now investigate and issue a citation or file a civil action for gratuities taken or withheld in violation of the section, following the citation procedure in Labor Code § 1197.1. Before this, section 351 prohibited the conduct without specifying the Commissioner's mechanism for pursuing it.
• No deducting card processing fees from tips. Where a patron tips by credit card, the employer must pay the employee the full gratuity the patron wrote on the slip, without any deduction for credit card payment processing fees.
• A payment deadline for card tips. Gratuities paid by card must reach the employee no later than the next regular payday following the date the patron authorized the charge.

Who This Matters To

This is a restaurant, bar, salon, hotel, and delivery statute more than a general employment one. The two credit card rules are the practical core: a tipped worker can now check whether the amount on the slip is the amount that reached their pay, and whether it arrived by the next payday. Both are answerable from documents a worker already has.

Employers taking card payments should confirm that no processing fee is netted out of gratuities anywhere in the payment flow, including where a third-party processor or point-of-sale vendor applies the fee before the employer ever sees the amount. The obligation runs to the employer regardless of where in the chain the deduction happens.

Pay Transparency (Labor Code § 432.3, as amended by SB 642)

"Pay Scale" Got Narrower in 2026, Not Broader

This is the change most often described backwards. Labor Code § 432.3(m)(1) now defines pay scale as "a good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire." SB 642 added "good faith estimate" and "upon hire," and the effect is restrictive: an employer may no longer post a range spanning what the role might pay after several years of raises and promotions. The range has to describe the offer.

Pay scale means the salary or wage range. It does not mean total compensation. Benefits, bonuses, equity, and shift differentials are not part of the defined term, and there is no obligation to disclose them under this section. SB 642 did broaden the definition of "wages" to reach bonuses, stock, profit sharing, insurance, vacation pay, allowances, and similar items, but that broader definition lives in Labor Code § 1197.5, the Equal Pay Act, and applies only there. Reading the § 1197.5 wages definition into § 432.3 disclosure is the single most common mistake made about these two amendments, and they were amended by the same bill, which is why it happens.

What Must Be Disclosed, and to Whom

• Applicants, on request. Under § 432.3(c)(1), an employer must provide the pay scale for a position to an applicant upon reasonable request. The statute sets no deadline of its own.
• Job postings, if 15 or more employees. Under § 432.3(c)(3), an employer with 15 or more employees must include the pay scale in any job posting. Smaller employers have the on-request duty but not the posting duty.
• Current employees, for their own position. Under § 432.3(c)(2), an employer must, on request, provide an employee "the pay scale for the position in which the employee is currently employed." This is not a right to pay scales across the organization, and it applies to employers of every size.

Pay History Inquiries

Section 432.3(b) separately bars an employer from seeking an applicant's salary history information, including compensation and benefits. That is a distinct prohibition from the disclosure duties above, and the two are easy to run together: the pay-history ban is about what an employer may ask, and subdivision (c) is about what an employer must tell. Neither one makes disclosure of the pay scale a precondition to any conversation about compensation.

Enforcement and Remedies

A complaint may be filed with the Labor Commissioner within one year after the person learns of the violation, and a person may also bring a civil action for injunctive relief and other appropriate relief. Under § 432.3(d)(4) the Labor Commissioner may assess civil penalties of $100 to $10,000 per violation, scaled to the circumstances and any prior violations; for a first violation of the posting requirements no penalty applies if the employer shows all open postings have been updated to include the pay scale. Section 432.3(d)(5) creates a rebuttable presumption in the employee's favour where the employer failed to keep the required records.

Emergency Contact Requirements

Effective by March 30, 2026

Under the same statute, Labor Code § 1555, employers had to give employees the opportunity to name an emergency contact no later than March 30, 2026, and at the time of hiring for anyone hired after that date. The election includes whether that contact should be notified if the employee is arrested or detained, which is the point of the provision and the reason it sits in this Act rather than in a general recordkeeping law.

What Employers Must Do

The obligation is to offer, not to collect. Employers must:

• Offer every employee the chance to designate an emergency contact, and to say whether that contact should be notified on arrest or detention
• Let employees decline, and let them update the designation later
• Maintain any information given confidentially and securely
• Use it only for the purposes the statute contemplates

Designation is the employee's choice. An employer does not violate this section because an employee declines to name anyone, and the statute does not require an employer to obtain a contact from every worker. A compliance program that treats a completed designation as mandatory misreads the provision and collects personal data the law does not ask for.

Employee Privacy Considerations

Employees have the right to consent to sharing their emergency contact information with others. Employers should not disclose emergency contact information to third parties without employee consent, except in genuine emergencies or as required by law.

Compliance Timeline

The deadline to offer the designation was March 30, 2026, and the offer must be repeated at hiring for anyone hired after that date. There is no deadline by which every employee must have named someone, because naming someone is voluntary.

Where an employee has designated a contact and elected notification, section 1555 also puts an affirmative duty on the employer: if the employee is arrested or detained at the worksite or while performing work duties, and the employer has actual knowledge of it, the employer notifies that contact. Section 1557 bars retaliation against an employee for exercising any right under this Part, and section 1556 allows a collective bargaining agreement to supersede these requirements only where it says so expressly.

Rideshare Driver Collective Bargaining (AB 1340)

Scope: Rideshare Drivers Only

Assembly Bill 1340, the Transportation Network Company Drivers Labor Relations Act, was approved October 3, 2025 and adds Chapter 10.7 to Division 3 of the Business and Professions Code, beginning at § 7470, plus Government Code § 7927.710.

It applies only to transportation network company drivers, meaning people who use their own vehicles through a TNC platform to carry passengers. It does not extend to gig workers generally, to app-based delivery couriers, or to other independent contractors, and it does not change anyone's classification. A driver covered by this Act remains an independent contractor; the Act gives that particular group a bargaining framework rather than employee status.

How the Framework Works

• Certification. Driver organizations may seek certification as a bargaining representative beginning May 1, 2026, through the Public Employment Relations Board.
• Data to PERB. TNCs must submit quarterly rideshare volume data and driver lists to PERB, with driver list submissions commencing March 31, 2026. A certified organization may obtain driver contact information for representation purposes.
• Mandatory subjects. A TNC must bargain in good faith over earnings, benefits, deactivation appeals, paid leave, grievance procedures, and safety requirements.
• Sectoral agreements. An agreement approved by PERB and covering TNCs representing 95 percent of statewide rideshare volume binds all covered TNCs, not just the signatories.
• Impasse. Mediation and then binding arbitration apply where the parties have not reached agreement after 210 days of bargaining.

Unfair Practices

Section 7470.18(a)(7) makes it an unfair practice for a TNC to discharge, deactivate, or otherwise discriminate against a driver for exercising rights under the chapter, participating in a driver organization, or filing a complaint.

One clarification, because it is widely assumed otherwise. The Act does not contain a provision about algorithmic penalties, and adverse changes to how a platform's algorithm treats a driver are not named as retaliation anywhere in it. What the Act does is put deactivations on the list of mandatory bargaining subjects, which is a route to negotiating protections around algorithmic decisions that end in removal from the platform. That is a meaningful difference: a driver claiming the algorithm was turned against them is not describing a listed unfair practice, while a driver who was deactivated is.

PERB Expansion (AB 288)

What AB 288 Does

Assembly Bill 288 was signed on September 30, 2025 and took effect on January 1, 2026. The California Public Employment Relations Board has historically handled public sector labor relations. AB 288 reaches in the other direction: it authorizes PERB to enforce rights under the federal National Labor Relations Act for private sector workers, in situations where the National Labor Relations Board declines to act or is unable to act. That is the whole point of the law, and it is why it drew a federal challenge.

Most of It Is Currently Blocked

Do not treat AB 288 as fully operative. The National Labor Relations Board sued the State of California, arguing the law is preempted by the National Labor Relations Act and violates the Supremacy Clause. On December 26, 2025, the United States District Court for the Eastern District of California granted a partial preliminary injunction, finding the NLRB likely to succeed on its preemption claim.

The injunction blocks the central mechanism, meaning California may not let PERB step in on the basis that the NLRB is backlogged, lacks a quorum, or has allegedly lost its independence. California may still enforce the law in the narrower situation where the NLRB is genuinely out of the picture, such as where a court has enjoined the NLRB from acting in a particular case. The case is National Labor Relations Board v. State of California, No. 2:25-cv-02979-TLN-CKD, and it remains pending on the merits, so this position can change.

What This Means in Practice

A private sector worker should not assume PERB is currently an available forum for an NLRA claim. A private sector employer should not assume the opposite either. Because the injunction is preliminary and the merits are undecided, anyone whose situation turns on AB 288 should check the current posture of the case rather than rely on a general guide.

Employer Compliance Checklist for 2026

To ensure compliance with California's 2026 employment law changes, employers should take the following actions:

Immediate Actions (January - March 2026)

• Update Payroll Systems: Ensure minimum wage calculations reflect the January 1, 2026 increase to $16.90 and verify exempt employee salaries meet the $70,304 threshold.
• Audit Employment Agreements: Review all offer letters, employment agreements, training program agreements, and bonus plans, and remove training repayment or quit-fee terms from anything signed on or after January 1, 2026, unless it fits one of the five § 16608(b)(2) exceptions. For agreements predating that date, take advice rather than assuming either way: AB 692 does not reach them, but other law may.
• Implement Know Your Rights Notice: Distribute the stand-alone written notice to all current employees by February 1, 2026, and annually after that. For new hires, provide it at hiring. Give it in the language the employer normally uses with that employee, where the Labor Commissioner has posted a template in that language; otherwise English is permitted. Confirm the notice covers all five statutory subjects, including the workers' compensation and immigration and law-enforcement content (Lab. Code § 1553).
• Establish Record-Keeping System: Track and document when Know Your Rights notices are provided to each employee, and retain those records for three years (Lab. Code § 1553(e)).
• Offer the Emergency Contact Designation: By March 30, 2026, give every employee the opportunity to name an emergency contact and to elect whether that contact is notified on arrest or detention, and repeat the offer at hiring after that date. Naming someone is voluntary, so there is no completion target; the obligation is to offer, and to notify the contact where the employee elected it and the employer has actual knowledge of an arrest or detention (Lab. Code § 1555).

By Mid-Year (April - June 2026)

• Review Pay Transparency Practices: Ensure all job postings and recruitment materials include pay scale information for open positions. Train HR and hiring managers on pay transparency disclosure requirements.
• Prepare Healthcare Wage Increase Implementation: If applicable, begin budget and operational planning for the July 1, 2026 SB 525 healthcare worker minimum wage step ups, including the $25/hour rate that applies to the largest covered facilities and the $22 to $23 increases that apply to other covered facility categories. Review job classifications and payroll systems.
• Check Gratuity Handling: If the business takes card payments, confirm that no processing fee is netted out of gratuities anywhere in the payment flow, and that card tips reach employees by the next regular payday (Lab. Code § 351, as amended by SB 648). A general payroll audit is good practice on its own, but SB 648 reaches gratuities only and creates no new exposure elsewhere.
• Review Labor Relations Policies: For public employers, review policies affected by PERB expansion to ensure anti-retaliation protections and labor relations compliance.

Ongoing Throughout 2026

• Let employees update or withdraw an emergency contact designation, and keep what they give confidential.
• Reissue the Know Your Rights notice annually, which is the recurring SB 294 obligation. SB 294 requires no supervisor or manager training, at any employer size.
• Monitor changes in pay scale definitions and ensure compensation packages remain competitive and compliant.
• For gig economy employers, review platform practices to ensure no retaliation against drivers engaged in union organizing or concerted activity.
• Stay informed about regulatory guidance from the California Labor Commissioner and other enforcement agencies regarding implementation and interpretation of these new laws.

Two 2026 Changes Covered Elsewhere

Two further changes effective in 2026 are not treated above because each has its own dedicated treatment. SB 513 expanded Labor Code Section 1198.5. Subdivision (a)(1) now covers personnel records relating to the employee's performance, expressly including education or training records, and subdivision (a)(2) requires an employer that maintains training records to document the employee's name, the training provider, the duration and date, the core competencies covered including equipment or software skills, and any resulting certification or qualification. Under subdivision (b)(1) the employer has 30 calendar days from a written request to make the records available, extendable to 35 by written agreement. SB 261 added Labor Code § 238.05, which lets an unpaid wage judgment carry a penalty of up to three times the amount owed once it has gone unpaid for 180 days, with successor liability. Both are covered in New California Workplace Laws 2026, and SB 261 has its own post at Unpaid Wage Judgments Now Carry a Treble Penalty.

Conclusion

California's 2026 employment law changes reflect the state's continued commitment to worker protections, wage fairness, labor rights, and transparency in employment relationships. These changes affect employers across all industries and sizes, requiring updates to payroll systems, employment agreements, notice procedures, training programs, and labor relations practices.

Employees should be aware of their expanded rights, including the right to receive notice of their labor protections, the prohibition on training repayment agreements and quit-fee penalties, expanded access to pay scale information, and protection for union organizing activities (where applicable).

Both employers and employees benefit from understanding these changes early and implementing compliance measures proactively. Doing so reduces the risk of violations, disputes, and enforcement actions while promoting fair, transparent, and legally compliant workplaces.

For specific legal advice regarding how these changes apply to your particular situation, consult with a qualified employment law attorney licensed to practice in California.