You have 30 days. Multiple new California employment laws take effect January 1, 2026, and several require immediate action—including revising employment contracts, updating handbooks, and recalculating exempt salaries.
California employers enter 2026 facing what Dykema describes as laws that “focus on strengthening existing laws to further expand employee rights and extend job protections.” While the total number of new employment statutes is fewer than in prior years, the penalties for non-compliance have increased significantly.
Here’s your compliance roadmap.
1. Minimum Wage and Exempt Salary Threshold Increases
Effective: January 1, 2026
California’s statewide minimum wage increases from $16.50 to $16.90 per hour under Labor Code section 1182.12, according to Fennemore.
This triggers a critical secondary effect: the minimum salary for employees classified as exempt under the executive, administrative, and professional exemptions rises to $70,304 annually (from $68,640). As HR Dive notes, this is nearly double the federal Fair Labor Standards Act threshold.
Healthcare employers take note: According to Pacific Coast Business Times, beginning July 1, 2026, healthcare workers (and those who service healthcare facilities, such as outside janitorial services) will see minimum wages increase to between $23 and $25 per hour, depending on the type of facility.
Action required:
- Verify all exempt employees earn at least $70,304 annually
- Confirm non-exempt employees are paid at or above $16.90/hour (or higher local rates)
- Remember the “California Multiplier Effect”—as Dykema warns, when minimum wages increase, meal and rest period premiums, reporting time pay, split-shift premiums, and waiting time penalties also increase at comparable rates
2. The End of “Stay-or-Pay” Agreements (AB 692)
Effective: January 1, 2026 (applies only to contracts entered on or after this date)
This is the most consequential change for many employers. Assembly Bill 692 prohibits most contractual provisions requiring employees to repay training costs, signing bonuses, relocation expenses, or other employment-related debts if they leave before a specified date.
According to Perkins Coie, AB 692 adds Section 16608 to California’s Business and Professions Code, making it unlawful for any employment contract to:
- Require a worker to repay an employer, training provider, or debt collector if employment ends
- Authorize the initiation or resumption of debt collection if employment ends
- Impose any penalty or fee on a worker if employment ends
McGuireWoods specifies that prohibited costs include “replacement-hire fees, retention fees, replacement fees, quit fees, reimbursement for immigration or visa-related costs, or liquidated damages.”
Limited Exceptions
The law permits repayment provisions in narrow circumstances:
Tuition for Transferable Credentials — According to Fennemore, tuition support for obtaining a “transferable credential” (defined as a degree from an accredited third-party institution not required for the employee’s current job) may include repayment terms if:
- The agreement is separate from the employment contract
- The credential is not a condition of employment
- The repayment amount is specified in advance and does not exceed actual cost
- Repayment is prorated, with no accelerated payment schedule
- No repayment is required if the employee is terminated (except for misconduct)
Sign-On Bonuses — Per Reed Smith, discretionary sign-on bonuses may include repayment terms if:
- Terms are in a separate agreement from the employment contract
- The employee is notified of the right to consult an attorney and given at least five business days to do so
- Repayment is prorated over a retention period not exceeding two years
- No interest may accrue on the repayment amount
- The employee may defer receipt of the bonus until the end of the retention period
- Repayment is only required if separation is at the employee’s sole election or due to misconduct
Significant Penalties
Akin Gump reports that AB 692 creates a private right of action with remedies including:
- Actual damages or $5,000 per worker (whichever is greater)
- Injunctive relief
- Reasonable attorneys’ fees and costs
- Potential representative actions under PAGA
Action required:
- Audit all offer letters, employment agreements, training repayment agreements, relocation agreements, and bonus agreements
- Remove non-compliant provisions from any agreements to be signed on or after January 1, 2026
- Draft new standalone agreements for any lawful tuition or sign-on bonus repayment provisions
- Do not modify pre-2026 agreements—the law is not retroactive
3. Pay Transparency and Equal Pay Act Updates (SB 642)
Effective: January 1, 2026
SB 642 makes significant changes to California’s pay equity requirements. According to Gibson Dunn, the term “pay scale” is now expressly defined to include “a good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.”
FBT Gibbons reports additional changes:
- The law now prohibits paying employees at wage rates less than rates paid to employees of “another sex” (rather than the “opposite sex”)
- “Wages” now include all forms of compensation: salary, overtime pay, bonuses, stock, stock options, profit sharing, life insurance, vacation and holiday pay, and benefits
- The statute of limitations for pay discrimination claims is extended from two to three years
- Employees may recover for the entire period during which the violation occurred, not to exceed six years
Action required:
- Review job postings to ensure pay scales reflect good-faith expectations of actual pay upon hire
- Conduct a pay equity audit across all forms of compensation
- Retain wage and pay data for at least six years
4. Immigration-Related Workplace Protections (SB 294)
Effective: January 1, 2026 (poster requirement); February 1, 2026 (employer posting); March 30, 2026 (emergency contact)
According to Pacific Coast Business Times, SB 294 requires:
New workplace poster: California will issue a poster advising employees of their constitutional rights and protections against unfair immigration practices when interacting with law enforcement at work. The Labor Commissioner must post this notice by January 1, 2026, and employers must begin using it (or an equivalent) by February 1, 2026.
Emergency contact designation: Prior to March 30, 2026, employers must allow employees to identify a “designated person” to be contacted if the employee is arrested or detained at work, or if the employer has actual knowledge of such arrest or detainment while working offsite.
Gibson Dunn notes that if an employee names an emergency contact, the employer must notify that contact if the employee is detained or arrested while on the work site or during work hours. The Labor Commissioner can fine employers up to $500 per employee for each violation.
Action required:
- Monitor the Labor Commissioner’s website for the new poster
- Post the required notice by February 1, 2026
- Update emergency contact forms to include the designated-person option
- Collect designated-person information from employees by March 30, 2026
5. Wage Judgment Penalties Triple (SB 261)
Effective: January 1, 2026
SB 261 significantly increases the cost of failing to pay Labor Commissioner judgments. According to K&L Gates, if a final judgment from the Labor Commissioner remains unpaid 180 days after the appeal period expires, employers face civil penalties of up to three times the unpaid judgment amount, including interest.
FOX LA reports that within 60 days of a final judgment, employers must provide documentation to the Labor Commissioner that:
- The judgment is fully satisfied
- A bond has been posted, or
- The employee has entered into an installment agreement and is in compliance
The Labor Commissioner must also publicly post any unsatisfied awards on its website.
K&L Gates further notes that SB 261 extends joint and several liability for these penalties to successor employers, ensuring that business reorganizations or sales cannot be used to avoid responsibility.
Action required:
- Prioritize timely payment of any Labor Commissioner judgments
- Review acquisition due diligence processes to identify potential successor liability
6. Extended Statute of Limitations for Sexual Assault Claims (AB 250)
Effective: January 1, 2026
According to Gibson Dunn, California previously amended Civil Procedure Code section 340.16 to give plaintiffs until December 31, 2026, to revive otherwise time-barred sexual assault claims against employers. AB 250 extends this deadline by one year—plaintiffs now have until December 31, 2027.
The extended revival period also applies to related claims for wrongful termination and sexual harassment predicated on the same underlying sexual assault.
7. FEHA Amendments and Tolling Provisions (SB 477)
Effective: January 1, 2026
K&L Gates reports that SB 477 makes several changes to the Fair Employment and Housing Act:
Definition of “group or class complaint”: The law now codifies this term to include any complaint alleging a pattern or practice of unlawful conduct, ensuring systemic discrimination claims fall within the Civil Rights Department’s group-complaint authority.
Expanded tolling: Starting January 1, 2026, statutory filing periods are tolled:
- During any appeal within the CRD following a closure notice (through one year after the appeal is resolved)
- During the pendency of any petition to compel CRD action
- While a written tolling agreement between the complainant and CRD is in effect
8. Pay Data Reporting Penalties (SB 464)
Effective: 2026 (penalties); 2027 (expanded categories)
HR Dive reports that starting in 2026, penalties for failing to submit required pay data reports become mandatory upon CRD request: $100 per employee ($200 for repeat offenders).
FBT Gibbons calculates the exposure: “A 500-employee company that failed to submit a report would face $50,000 to $100,000 in fines.”
Looking ahead, Pacific Coast Business Times notes that beginning in 2027, the number of job categories for reporting will expand from 10 to 23.
9. COVID-19 Recall Rights Extended (AB 858)
Effective: Extended through January 1, 2027
According to Gibson Dunn, Labor Code section 2810.8 protections for employees in hospitality and business services who were laid off due to COVID-19 were set to expire December 31, 2025. AB 858 extends these protections through January 1, 2027.
Covered employers must continue to:
- Offer available positions in writing to qualified laid-off employees within five days of creating a new position
- Maintain records (employee name, job classification, date of hire, contact information, and all layoff-related communications) for three years from the date of layoff
Your December Compliance Checklist
| Priority | Task | Deadline |
|---|---|---|
| High | Recalculate exempt salaries to meet $70,304 threshold | January 1, 2026 |
| High | Update non-exempt pay to $16.90/hour minimum | January 1, 2026 |
| High | Revise employment contracts to remove AB 692 violations | Before any 2026 signings |
| High | Create standalone agreements for lawful bonus/tuition repayment | Before any 2026 signings |
| Medium | Review pay scales in job postings for SB 642 compliance | January 1, 2026 |
| Medium | Conduct pay equity audit | Q1 2026 |
| Medium | Obtain new immigration rights workplace poster | February 1, 2026 |
| Medium | Update emergency contact forms for SB 294 | March 30, 2026 |
| Ongoing | Pay any Labor Commissioner judgments promptly | Immediate |
The Bottom Line
As Fennemore advises: “With the January 1, 2026 effective date now at hand, employers should focus on finalizing compliance efforts. This includes conducting a legal review of existing policies and agreements, coordinating updates across human resources, payroll, and information technology functions, and training managers on new requirements before they take effect.”
The window for preparation is closing. The time to act is now.
Need help preparing for 2026? Contact Kohan LLC for a compliance assessment and action plan tailored to your organization.
Sharam Kohan is an HR consultant and the founder of Kohan LLC, providing strategic human resources guidance to California employers. Connect with him on LinkedIn.
Sources
- Akin Gump, “California’s Assembly Bill 692, Restricting Many So-Called ‘Stay-or-Pay’ Employment Contract Terms, Set to Take Effect January 1, 2026”
- Dykema, “New 2026 California Employment Laws: How Businesses Can Protect Themselves” (December 2025)
- FBT Gibbons, “California Employers Face Sweeping Employment Law Changes in 2026”
- Fennemore, “New Year, New Rules: Key California Employment Law Updates for 2026”
- Fennemore, “‘Stay-or-Pay’ No More: California’s New Limits on Training and Retention Agreement Payback”
- FOX LA, “California New Laws 2026”
- Gibson Dunn, “2026 California Employment Law Update” (December 2025)
- HR Dive, “10 California Employment Law Changes on Tap for 2026”
- K&L Gates, “The Essentials—California Employment Law Update for 2026” (November 2025)
- McGuireWoods, “California Bans ‘Stay or Pay’ Clauses” (December 2025)
- Pacific Coast Business Times, “New Employment Laws for 2026” (January 2026)
- Perkins Coie, “California Reshapes ‘Stay-or-Pay’ Contracts: What Employers Must Do by January 1, 2026”
- Reed Smith, “California’s AB 692 – Immediate Action Required for Employee Repayment Agreements”
DISCLAIMER: The information in this article is provided for general informational and educational purposes only and does not constitute legal, tax, or other professional advice. No consultant-client or attorney-client relationship is created by your use of this content. Kohan LLC is an HR consulting firm, not a law firm. Before taking any action based on this information, consult with a licensed attorney or other qualified professional who can evaluate your specific circumstances. Kohan LLC makes no representations regarding the accuracy or completeness of this information.
