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The 2026 statutes enacted by the legislature that impact employment are fewer in number than in prior years. Still, California employers need to be aware that the new 2026 employment laws focus on strengthening existing laws to further expand employee rights and extend job protections. Amendments imposing stricter and more complicated requirements were enacted, and sanctions for employer non-compliance increased. The most notable among them are minimum wage increases, prohibitions on "Stay or Pay" employment contracts, and notice requirements.
This article summarizes the key employment laws to take effect in 2026 and beyond, along with the significant court decisions that will have the most impact on the workplace—but it does not cover everything. Please reach out to any of Dykema's Labor and Employment attorneys to discuss the impact of the new regulations on your business and to assess the best approach for complying with these new developments.
All the following laws are effective as of January 1, 2026, unless otherwise stated.
Wage Increases
Non-exempt Employees
California's minimum wage for non-exempt employees will increase from $16.50 to $16.90 per hour (Certain industries—fast food and healthcare—are already subject to higher hourly rates, as are employees in many local jurisdictions throughout the state).
Exempt Employees
Exempt salaried employees must earn at least twice the state minimum wage to maintain exempt status (employees must also satisfy the duties tests to qualify for those exemptions). This means that the minimum salary test to qualify for the primary exemptions (administrative, executive, and professional) will increase from $68,640 to $70,304 per year (or $1,352 per week) as of January 1, 2026, in accordance with the law.
Special Exemptions
Those employed in certain professions will also see adjustments to qualify as exempt:
Computer professionals. The California Department of Industrial Relations has set the 2026 threshold for computer professionals at $122,573.13 annually ($10,214.44 monthly or $58.85 per hour).
Licensed physicians and surgeons, including dentists. For these professions to qualify as exempt, the minimum hourly pay rate will increase to $107.17 from $103.75.
Commissioned salespeople. These employees must be paid at least $25.35, which is one and one-half times the minimum wage ($16.90 X 1.5) for each hour worked in a week to be considered exempt.
- Local jurisdictions are allowed to set the minimum wage higher
than the state minimum. Examples include:
- Berkeley: $19.18 per hour
- Los Angeles City: $17.87 per hour
- Pasadena: $18.04 per hour
- San Francisco: $19.18 per hour
- Santa Monica: $17.81 per hour. Many cities and local governments around the state are set to adjust their minimum wage rates on July 1, 2026.
Local minimum wage requirements, however, do not affect this salary threshold for exempt employees. As always, in order to be classified as exempt, employees must also satisfy the duties tests.
- Certain fast food workers must be paid $20 per hour based on the state law that took effect in 2025. The California Fast Food Council has the authority to raise the fast-food minimum wage, and can do so at any time.
- The minimum wage for healthcare employees is set to increase by another dollar per hour to $25 on July 1, 2026, depending on the type of healthcare workers involved.
Takeaway: Employers should periodically verify every minimum wage rate for non-exempt employees and annual salaries for exempt employees to ensure compliance with current federal, state, and local laws.
Beware of the California Multiplier Effect, in which a violation of a single regulation could lead to violations of several more:
- When minimum wages are increased, the amount of meal and rest period premiums, reporting time pay, split-shift premiums, and waiting time penalties will also increase at comparable rates. Wage-and-hour practices and applicable handbook policies should be reviewed periodically to ensure compliance with the increased minimum wage requirements.
- Payroll should be audited for compliance with all the new local and statewide minimum wage requirements for applicable industries and locations. In order to avoid liability, it is essential that exempt employees continue to qualify as exempt under the new salary basis minimum.
Expansion of Employee Rights
AB 692, entitled "Prohibition Against Workers Contracting to Repay Debts" and known as "Stay or Pay" Employment Contract Repayment Prohibition. It applies to all employers in California for all employment contracts entered into on or after January 1, 2026.
This law prohibits employers from requiring employees to enter into most types of repayment or "stay-or-pay" agreements as a condition of employment, which are often used by employers to ensure that when they pay for training, credentialing, or incur other expenses upon hiring new employees, they obtain a return on their investment. The goal is to prevent the employees from leaving just after they have received valuable training at the employer's expense and to exploit such benefits. The intent of this law, however, is to prevent employees from being trapped in a job due to the financial penalty incurred if they choose to leave.
Unless the agreement meets the specific requirements set forth below, this law invalidates agreements requiring the worker to repay an employer a debt if the worker's employment or work relationship terminates or if the employee leaves a job prior to a set date.
Agreements that fail to meet the exceptions are void, and the employer may be penalized up to $5,000 per worker. The law further provides recovery of actual damages, attorneys' fees, and costs.
Certain employee repayment contracts may nonetheless be enforceable if:
- The repayment terms are in a separate agreement from the employment contract,
- The employee is advised of the right to consult counsel and provided at least five business days to do so,
- The employee is given the option to defer receipt of the payment until the end of the retention period without a repayment obligation,
- Repayment of funds are prorated depending on the remaining retention period of up to two years, and the debt cannot accrue interest, and
- Repayment may only apply if the employee leaves voluntarily or is terminated for misconduct.
Notwithstanding the foregoing, the law allows for employee repayment contracts under limited circumstances, generally including the following:
- Contracts involving government loan repayment assistance or loan forgiveness programs, approved apprenticeship programs, and repayment of the cost of tuition.
- Contracts entered into upon employment for the receipt of a discretionary or unearned monetary payment, including a financial bonus.
- Contracts related to the lease, financing, or purchase of residential property.
Takeaway: If Employers enter into repayment or "stay-or-pay" agreements with employees as a condition of employment, any programs requiring the repayment of educational costs, relocation costs, signing bonuses, and retention incentives must strictly comply with the requirements of this new law. Preparation of a template that meets the specific requirements for exemption as set forth in this "stay-or-pay" legislation would save time and protect the employer from liability.
SB 294,effective on or before February 1, 2026. Entitled 'Workplace Know Your Rights Act,' requires employers to issue stand-alone written notices describing certain rights to each new employee upon hire and to all current employees upon the effective date, and annually thereafter.
By January 1, 2026, the Labor Commissioner is required to develop a template notice that may be used by all employers and should be available online.
Employers who fail to comply may be subjected to penalties of $500 per employee for each day the violation occurs, up to a maximum of $10,000 per employee.
The act further mandates employers to provide all employees the opportunity to designate emergency contacts by March 30, 2026, and requires employers to notify designated emergency contacts if the employee is arrested or detained on their worksite, or off-site if the arrest or detention occurs during work hours or during the performance of the employee's job duties, if the employer has actual knowledge of such off-site arrest or detention.
Similarly, employers who fail to make the mandatory notifications may be subject to a penalty of up to $500 per employee for each violation.
Takeaway: Clearly, the intent of this lawis to enable employers to protect their workers when immigration enforcers, lacking warrants or other authority, seek to occupy the workplace and arbitrarily round up workers for deportation. Although this law imposes additional requirements on employers, the legislature has placed the burden of preparing the notice on the Labor Commissioner. Employers need to keep up with the Labor Commissioner's directives to avoid non-compliance, which is often easier said than done. Using an electronic reminder system for this and similar directives might help ensure compliance.
Pay Equity and Data Reporting
SB 642, Payment of Wages and Pay Transparency Updates for 2026
This legislation expands upon the pay transparency law and the state's equal pay requirements enacted in 2022 (SB 1162). Employers with 15 or more employees were required to include an expected pay scale in job postings, as well as provide employees with pay scale information for their current role upon request.
The definition of "pay scale" has been revised under the new legislation. Under the prior statute, employers could include what the position was expected to pay 'after a few years'. The new definition of "pay scale" means an estimate of 'the expected wage range that an employer reasonably expects to pay for the position upon hire.'
Employers are prohibited from seeking salary history or relying on it when determining whether to hire an applicant or what salary to offer. And the employer is not prohibited from inquiring about salary expectations. Also, the employer may consider salary history information voluntarily disclosed by the applicant.
Updates also include:
- Employers must maintain records of job title and wage rate history for each employee for both the duration of their employment, as well as for at least three years after the end of their employment.
- Violations of the pay transparency requirements, such as failure to post a pay scale, may result in a civil penalty between $100-$10,000 per violation.
- Protections against wage disparities now apply to nonbinary employees, with the objective of promoting greater inclusivity.
- Employers may not pay employees of "another" sex, rather than "opposite" sex, lower wage rates for substantially similar work. There are exceptions, such as living in different cost-of-living locales.
- Unlike other Labor Code violations that go back three or four years, the statute of limitations for pay equity violations is extended. Employees may recover wages dating back six years for claims arising within the last three years.
Takeaway: The expansion of this law places a greater burden on employers with respect to auditing and record keeping. However, the real challenge is that any differences in position, salary, promotions, privileges, job assignments, etc., based on merit can be easily attributed by disgruntled employees to sexual orientation, age, ethnicity, etc. Employers need to be extremely vigilant to avoid accusations of bias and disparity, the defense of which can be extremely time-consuming and expensive, notwithstanding the lack of merit.
SB 464, Employee Pay Data Reporting Expanded
Current law requires private employers with 100 or more employees to submit an annual pay data report to the Civil Rights Department (CRD), which includes various disclosures, including the number of employees by race, ethnicity, and sex in specific job categories. SB 464 expands these existing requirements as follows:
- Demographic information collected pursuant to the Government Code must be "collected and stored separately from employees' personnel records,"
- Under prior law, a court "may" impose a civil penalty of up to $100 per employee upon any employer who fails to file the required report and $200 per employee for a subsequent failure to file. The word "may" has been revised to "shall," rendering the penalty mandatory.
Leaves of Absence
SB 59, Expanded PFL Benefits to Include Care for Designated Person
Starting on July 1, 2028, Paid Family Leave (PFL) will be expanded to include eligibility for benefits for individuals who take time off work to care for a seriously ill "designated person," in addition to a family member. A "designated person" is defined as "any care recipient related by blood or whose association with the individual is the equivalent of a family relationship." Employees must identify the designated person at the time of their first claim and, under penalty of perjury, attest to how the relationship is blood-related or the equivalent of a family relationship.
Takeaway: This is one law that may turn out well for both employees and employers, as it does not impose any additional expense on the employer nor increase the amount of leave available to the employee. At the same time, it allows the employee the option to use the benefit of PFL to care for someone who is in need but does not fit into the traditional family relationship category.
New Laws Affecting the Restaurant and Hospitality Industries
SB 858, Expansion of Rehire Protections
Rehire protections for hospitality workers who were laid off due to the COVID-19 pandemic were codified in 2021, requiring employers to give qualified employees an opportunity for reinstatement before hiring new workers. Labor Code Section 2810.8 was initially codified to remain in effect until December 31, 2025. SB 858 extends these protections to remain in effect until January 1, 2027.
SB 648, Enforcing Tip Theft, previously signed into law on July 30, 2025
Section 351 of the Labor Code prohibits employers from, "...collecting, taking or receiving,... any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, or deduct(ing) any amount from wages due an employee on account of a gratuity, or require(ing) an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer."
This law amends Section 351 of the Labor Code by expanding the authority of the Labor Commissioner to Enforce Gratuity Law Violations, thereby putting more pressure on employers to comply with the law and assisting employees in enforcing their rights under the statute.
AB 592 and AB 671. The restaurant industry is believed to be struggling. These two bills are intended to reduce regulatory burdens on small businesses.
The first measure, AB 592, allows restaurants with open kitchens to use windows, folding doors, or non-fixed storefronts for outdoor dining. This goal is to benefit from the state's mild climate.
The second bill, AB 671, creates a voluntary fast-track process for small, independent restaurants retrofitting existing spaces. Licensed architects and engineers are permitted to self-certify basic plans.
Takeaway: The California Restaurant Association supported both bills as a boon for neighborhood restaurants. By its very nature, the bills appear to benefit small businesses and consumers without raising prices. Hopefully, the legislature will enact more laws like this that advance the interests of employers, employees, and the public.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
