Updated January 26, 2026
How to Master California Employment Laws: A Workplace Survival Guide
California employment laws are notorious for being the most complex and frequently updated in the nation, with over 25 major changes taking effect in 2026 alone.
Are you confident your workplace policies are still compliant? Most employers aren't. Indeed, a recent survey found that 78% of California businesses are operating with outdated employment practices that could result in significant penalties.
From new mandatory "Know Your Rights" notices to the ban on controversial stay-or-pay agreements, staying current with these regulations isn't just good practice—it's essential for business survival. Furthermore, with expanded wage transparency requirements and strengthened rehiring obligations, even well-intentioned employers can find themselves facing costly litigation.
This comprehensive guide breaks down the most critical updates to California employment laws, specifically focusing on workplace notices, contract restrictions, wage transparency, leave protections, and enforcement mechanisms. By understanding these key changes, you'll be better equipped to protect your business while ensuring your employees receive the rights and benefits they deserve under the law.
New Workplace Notices and Employee Rights
Senate Bill 294 represents one of the most significant changes to California employment laws in 2026, establishing new employer obligations for workplace notices and employee rights protections.
SB 294: Annual Know Your Rights Notice
The "Workplace Know Your Rights Act" requires employers to provide a stand-alone written notice to all employees starting February 1, 2026, and annually thereafter [1]. Additionally, this notice must be provided to new employees upon hire and to the employee's authorized representative, if any [2]. The Division of Labor Standards Enforcement (DLSE) will create a template notice by January 1, 2026, that employers must use [2].
This comprehensive notice must include several key elements:
- Description of workers' compensation benefits and contact information
- Rights regarding immigration inspection notices
- Protections against unfair immigration-related practices
- Rights to organize unions or engage in concerted workplace activities
- Constitutional rights during law enforcement interactions at work
- Material legal developments and relevant enforcement agencies [3]
Emergency Contact Designation and Notification Rules
By March 30, 2026, employers must provide all employees the opportunity to designate an emergency contact [4]. Employees must also be allowed to indicate whether they want their designated contact notified if they are arrested or detained during work hours [1].
Notably, employers have two distinct notification obligations: they must promptly notify the designated emergency contact if an employee is arrested or detained at the worksite, as well as when an employee is detained offsite during work hours or while performing job duties—provided the employer has actual knowledge of the incident [2]. Employees must also be permitted to update their emergency contact information throughout their employment [1].
Language and Delivery Requirements for Notices
The law establishes clear language accessibility standards. Employers must provide the notice in the language they normally use to communicate employment-related information to employees, as long as the DLSE template is available in that language [2]. If not available in the employee's language, the notice may be provided in English [5].
The Labor Commissioner will make the template available in Chinese, English, Hindi, Korean, Punjabi, Spanish, Tagalog, Urdu, and Vietnamese, with potential for additional languages [2].
As for delivery methods, employers may use their customary communication channels—including personal service, email, or text message—provided delivery can be reasonably anticipated within one business day [2]. Employers must maintain records documenting compliance, including the date each notice was provided, for three years [2].
Penalties for Non-Compliance
Non-compliance carries substantial financial risk. Employers failing to meet these requirements face penalties of up to $500 per employee for each day the violation occurs [1]. For violations of the emergency contact notification provisions, penalties can reach a maximum of $10,000 per employee [1].
The law authorizes enforcement by the Labor Commissioner or public prosecutors [3]. Moreover, it explicitly prohibits retaliation against employees who exercise their rights, file complaints, or assist in investigations related to these requirements [2]. Employers found in violation may face not only civil penalties but also civil actions seeking injunctive relief, punitive damages, and reasonable attorneys' fees and costs [2].
Employment Contracts and Rehiring Obligations
Two significant laws governing employment contracts and rehiring practices in California have emerged for 2026, creating new compliance challenges for employers throughout the state.
AB 692: Ban on stay-or-pay agreements
Assembly Bill 692, effective January 1, 2026, prohibits employers from including "stay-or-pay" provisions in employment contracts. These arrangements traditionally required workers to reimburse employers for costs associated with training programs, education, relocation expenses, or other employment-related costs if they terminated employment before a specified date [6].
The law defines "debt" broadly to include money, personal property, employment-related costs, and education-related costs, regardless of whether the debt was incurred voluntarily [7]. Specifically prohibited are contract terms that:
- Require workers to pay an employer, training provider, or debt collector for a debt if employment ends
- Authorize resumption or initiation of debt collection if employment terminates
- Impose penalties, fees, or costs (including replacement hire fees, retraining fees, immigration costs, or liquidated damages) when employment ends [8]
Penalties for violations are substantial – employers face damages of USD 5,000 per affected worker or actual damages, whichever is greater, plus attorney's fees and costs [9].
Exceptions for tuition and discretionary bonuses
Despite its broad prohibitions, AB 692 permits certain carefully structured arrangements. Tuition repayment agreements remain permissible if:
- The agreement is separate from the employment contract
- The credential is transferable and not required for the job
- The repayment amount is specified in advance and cannot exceed the employer's actual cost
- Repayment is prorated over the employment period without acceleration
- No repayment is required if the worker is terminated (except for misconduct) [10]
Similarly, discretionary bonus repayments (including signing bonuses) are allowed provided:
- Terms are in a separate agreement from the employment contract
- Workers receive notice of their right to consult an attorney with at least five business days to do so
- No interest accrues on repayment amounts
- Repayment is prorated based on a retention period not exceeding two years
- Workers can opt to defer receiving the payment until completing the retention period
- Repayment is only required for voluntary separation or termination for misconduct [11]
AB 858: Rehiring protections for laid-off workers
Concurrently, AB 858 extends California's COVID-19 recall rights through January 1, 2027, continuing protections for workers in hospitality and service industries who were laid off during the pandemic [12]. This law applies to hotels, private clubs, event centers, airport operations, and building services providers [12].
The law protects employees who worked for six months or more before January 1, 2020, and whose separation occurred on or after March 4, 2020, due to COVID-19-related reasons [13]. Importantly, the law presumes that separations due to lack of business, reduction in force, or other economic, non-disciplinary reasons were pandemic-related unless the employer proves otherwise [14].
Steps to ensure compliance with recall rules
To meet these rehiring obligations, employers must:
Within five business days of establishing a position, offer it in writing to qualified laid-off employees via mail and, where available, email and text message [13].
Allow laid-off employees at least five business days to accept or decline the offer [13].
If multiple qualified employees accept, hire based on seniority (length of service with the employer) [15].
Maintain records for at least three years from the layoff date, including employee names, job classifications, hire dates, contact information, layoff notices, and all communications about job offers [15].
Provide written explanation within 30 days to any laid-off employee passed over for lack of qualifications, including reasons and the length of service of those hired instead [13].
Violations can result in penalties of USD 100 per employee whose rights were violated, plus USD 500 per day in liquidated damages until the violation is cured [5]. The Division of Labor Standards Enforcement has exclusive jurisdiction to enforce these provisions and can order hiring, reinstatement, front or back pay, and benefits [5].
Wage Transparency, Pay Equity, and Tips
Pay transparency and equitable compensation take center stage in California's 2026 employment law updates, with three significant bills reshaping employer obligations regarding compensation disclosures and employee protections.
SB 642: Expanded definition of wages and pay scale
Senate Bill 642 fundamentally changes how employers must approach pay transparency and equity. Beginning January 1, 2026, the definition of "wages" and "wage rates" under California's Equal Pay Act now encompasses all forms of compensation, including salary, overtime, bonuses, stock options, profit sharing, benefits, and even expense reimbursements [16]. This expanded definition applies exclusively to equal pay claims, not to other Labor Code sections.
For job postings, SB 642 redefines "pay scale" to mean "a good faith estimate" of the salary or hourly wage range employers expect to pay "upon hire" [17]. This clarifies that posted ranges should reflect what employers actually intend to pay new hires, rather than broader theoretical ranges. The amendments also extend the statute of limitations for equal pay claims to three years after the last discriminatory pay act, allowing recovery for up to six years [16].
SB 464: New pay data reporting categories and deadlines
Beginning January 1, 2027, SB 464 significantly transforms California's annual pay data reporting requirements. First, the bill increases job categories from 10 to 23, shifting from EEO-1 categories to Standard Occupational Classification (SOC) codes used by the U.S. Bureau of Labor Statistics [18]. This more detailed classification includes new categories such as:
- Healthcare support occupations
- Community and social service occupations
- Educational instruction and library occupations [19]
Importantly, employers must now collect and store demographic information gathered for pay data reports separately from personnel records [1]. This separation reinforces compliance and protects sensitive information.
SB 648: Tip pooling rules and enforcement authority
Starting January 1, 2026, SB 648 strengthens protections for tipped employees. The law mandates that when customers pay gratuities by credit card, businesses must remit the full amount to employees without deducting processing fees [4]. These payments must occur no later than the next regular payday [4].
The Labor Commissioner will have expanded authority to investigate violations and issue citations [4]. Civil penalties include $250 per violation and $1,000 for willful violations [20]. Employers must maintain accurate records of all gratuities and make them available to the Department of Industrial Relations upon request [4].
How to update job postings and pay policies
To ensure compliance with these new laws, employers should:
- Audit job postings to include genuine, role-specific pay ranges that reflect actual hiring practices [21]
- Develop consistent methodologies for valuing equity compensation [21]
- Maintain detailed documentation of compensation decisions and rationales [21]
- Separate demographic data from personnel files [18]
- Review tip handling practices and ensure full payment of credit card tips without deductions [22]
These changes demand immediate attention, as the extended statute of limitations means decisions made today could face scrutiny years into the future.
Leave Laws and Employee Accommodations
California's leave law landscape expands considerably in 2026, with new provisions broadening employee protections for family care responsibilities and victims of violence.
SB 590: Paid Family Leave for designated persons
Starting July 1, 2028, California's Paid Family Leave (PFL) program will extend benefits to employees caring for a "designated person" with a serious health condition. This change aligns PFL with the California Family Rights Act (CFRA), which already permits unpaid leave for caring for designated persons. The definition encompasses "any care recipient related by blood or whose association with the employee is the equivalent of a family relationship" [23].
Employees must identify their designated person when first requesting benefits and attest under penalty of perjury about their relationship [24]. This attestation must explain either the blood relation or how their association equals a family relationship [25].
AB 406: Leave protections for crime victims
Effective January 1, 2026, AB 406 substantially expands leave rights for employees affected by violence. Previously limited to domestic violence, sexual assault, and stalking victims, the law now covers employees who are victims of a broader range of "qualifying acts of violence" [3].
The expanded definition includes crimes causing bodily injury or death, those involving dangerous weapons, and threats of physical injury [3]. Employees may use accrued sick leave to attend judicial proceedings like post-arrest hearings, sentencing, or post-conviction matters [26]. They may consequently take protected time to meet with law enforcement, access victim services, or seek restraining orders [27].
Employers cannot discharge or retaliate against employees for exercising these rights [28]. For unscheduled absences, employers may request certification "within a reasonable time" afterward [3].
Clarifying overlap with CFRA and PFL
Understanding how these leave laws interact is essential. The California Family Rights Act provides up to 12 weeks of unpaid, job-protected leave, whereas PFL offers up to 8 weeks of partial wage replacement without job protection [2].
Most employees typically use both simultaneously: receiving PFL benefits during weeks 1-8 while their job is protected under CFRA, then continuing with unpaid CFRA leave or using accrued PTO for weeks 9-12 [2]. Although CFRA's substantive provisions aren't changing in 2026, more absences will qualify for protection under multiple statutes simultaneously [27].
For example, an employee attending a criminal sentencing for a victimized family member might qualify for crime victim leave under AB 406 while possibly qualifying for CFRA leave if that family member has a serious health condition [27].
Labor Relations and Legal Enforcement
California employers face robust new enforcement mechanisms in 2026, with three laws markedly strengthening labor protections and compliance obligations.
AB 288: PERB authority over private sector labor disputes
Assembly Bill 288 expands the California Public Employment Relations Board's (PERB) authority to hear private sector labor disputes traditionally under National Labor Relations Board (NLRB) jurisdiction. The law permits PERB to resolve cases when the NLRB has "expressly or impliedly ceded jurisdiction" or engaged in "undue delay" (defined as failing to act within specific timeframes). However, the NLRB filed suit in October 2025, challenging AB 288 as violating federal preemption principles under the Supremacy Clause.
SB 261: Penalties for unpaid wage judgments
Senate Bill 261 creates substantial consequences for employers who fail to satisfy wage judgments:
- Courts may impose penalties up to three times the outstanding judgment amount if unpaid 180 days after the appeal period ends
- Fifty percent of penalties go directly to affected employees, with the remainder funding enforcement
- Employers must demonstrate "good cause" by clear and convincing evidence to reduce penalties
- The law extends successor liability to prevent evasion through business reorganization
SB 303: Bias mitigation training protections
SB 303 clarifies that an employee's good-faith acknowledgment of personal bias during employer-provided bias mitigation training cannot constitute unlawful discrimination. The law explicitly aims to encourage such training while protecting participants who honestly assess their biases.
Conclusion
Navigating California's employment laws requires vigilance and proactive compliance strategies. The 2026 updates clearly demonstrate California's continued commitment to expanding worker protections across multiple fronts. Undoubtedly, these changes create substantial new obligations for employers throughout the state.
The extensive workplace notice requirements demand immediate attention, particularly the annual "Know Your Rights" notices and emergency contact protocols that carry significant penalties for non-compliance. Additionally, the ban on stay-or-pay agreements fundamentally changes how employers structure training programs and employee compensation packages.
Wage transparency rules have likewise evolved, expanding both the definition of wages and mandating genuine pay scales in job postings. During this transition, employers must also adapt to strengthened protections for tipped workers and prepare for more detailed pay data reporting.
The expansion of leave laws further challenges employers to coordinate overlapping protections for employees caring for designated persons or those affected by qualifying acts of violence. These changes, coupled with enhanced enforcement mechanisms, create a compliance landscape that demands careful attention.
California businesses should accordingly review their employment policies, update handbooks, retrain supervisors, and consider seeking qualified legal counsel before these changes take effect. Remember that proactive compliance not only helps avoid costly penalties but also fosters a fair workplace environment that benefits both employers and employees.
Staying informed about these evolving requirements remains essential. Though complex, these laws reflect California's ongoing effort to balance business interests with meaningful worker protections in an evolving employment landscape.
