New Employment Laws Taking Effect January 1, 2026 

Starting on January 1, 2026, several new California employment laws will take effect, including significant changes to California law regarding bonuses paid at the outset of employment and additional workplace protections for employees when interacting with immigration agencies or law enforcement agencies in the workplace.

More information on the new employment laws is available below.  This alert covers developments that will affect all or most California employers, but additional laws will impact specific industries and situations.  Please reach out to Katherine Forster, Margaret Maraschino and David Moreshead for more information.

**New California Employment Laws**

Minimum Wage Increases Effective January 1, 2026

– California state minimum wage will increase to $16.90 per hour and the salary minimum for California exempt-status employees will increase to $70,304 annually.

– The minimum hourly rate of pay for a computer software employee to qualify as exempt from overtime is $58.85 per hour, or $122,573.13 annually.

– The minimum hourly rate of pay for certain licensed physicians and surgeons to qualify as exempt from overtime is $107.17 per hour.

Ban on “Stay or Pay” Clauses:  AB 692 continues California’s focus on banning employment contracts that place a restraint on trade.  Beginning January 1, 2026, workers cannot enter into employment contracts or agreements which require the worker to repay the employer for any debt—including a signing or relocation bonus—upon separation of employment, unless the contract falls under one of the five statutory exceptions.  For most employers, the most relevant exception will be the one that permits repayment requirements for signing bonuses or other financial incentives given in connection with hiring if the following conditions are met: (1) the terms of the repayment obligation are set forth in a separate agreement; (2) the employee is informed of the right to consult with an attorney regarding the agreement and is given at least five business days to do so; (3) the term of the repayment obligation is no longer than two years from the receipt of payment; (4) the repayment obligation is not subject to interest; (5) the repayment amount is prorated based on the employee’s term of employment prior to separation; (6) the employee is provided with the option to defer receipt of the payment until the end of the repayment obligation term; and (7) the separation of employment is either the employee’s choice or due to misconduct.   

The other four exceptions deal with repayment obligations for government loan assistance or repayment programs, tuition assistance, enrollment in apprenticeship programs, and contracts related to the lease, finance, or purchase or residential real estate.   

Employers will need to review the agreements given to employees to sign in connection with signing bonuses to ensure compliance with AB 692 or risk facing penalties: Any contract or contract term that violates AB 692 is void as contrary to public policy and the worker may bring a civil action under the Business and Professions Code on behalf of themselves, or others similarly situated, and recover actual damages or $5,000 per worker (whichever is greater), injunctive relief, and reasonable attorney’s fees and costs.  Because the statute permits an individual to bring an action on behalf of themselves or other persons similarly situated (or both), it is possible that workers will be able to bring representative-only actions that cannot be compelled to individual arbitration.   

Preservation of Training Records:  SB 513 expands employer recordkeeping obligations under Labor Code section 1198.5 to include education and training records.  Employers must retain education and training records, which should include the names of the employee and training provider, duration and date of the training, the core competencies of a training (such as any skills in equipment or software obtained in the training), and the resulting certification or qualification.  Because of this change, an employer must include education and training records as part of the employee’s personnel file when requested under section 1198.5. 

The Workplace Know Your Rights Act:  SB 294 establishes the Workplace Know Your Rights Act, which requires employers to provide a standalone written notice to each new hire and current employee of certain workers’ rights, new legal developments deemed material and necessary by the Labor Commissioner, and a list of enforcement agencies that may enforce the underlying rights in the notice.  The Labor Commissioner will develop a template notice which must be provided to current employees beginning on or before February 1, 2026, and annually on a going-forward basis, in addition to being provided to employees upon hire.  The notices must be provided in the language the employer normally uses to communicate with the employee and can be distributed in the way that the employer typically distributes employment-related information.  Employers must keep a record of compliance with the notice requirement for three years, including the date each written notice was provided to employees. 

SB 294 also establishes new circumstances when employers are required to contact an employee’s designated emergency contact.  If an employee has notified their employer that they want the employer to contact the employee’s designated emergency contact in the event that the employee is detained or arrested, the employer must contact the designated emergency contact in the event the employee is detained or arrested (1) at the workplace, or (2) during work hours or during the performance of the employee’s job duties, even if not at the workplace, if the employer has actual knowledge of the arrest or detention.  Failure to properly notify an employee’s emergency contact (if requested by the employee) can result in a penalty of up to $500 per employee per day up to a maximum of $10,000.00 per employee.

Employers may not discriminate or retaliate against an employee for exercising or attempting to exercise their rights under SB 294.  The Labor Commissioner, a public prosecutor, or the employee (in a civil action) may enforce the Workplace Know your Rights Act, and the employee may obtain injunctive relief, penalties, punitive damages, and reasonable attorneys’ fees and costs.     

Amendment to Equal Pay Act:  SB 642 revises several components of the Equal Pay Act.  The definition of pay scale has been amended so that job postings must include “a good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire” (new language in italics). 

SB 642 also adds definitions for “sex,” “wages,” and “wage rate” to Labor Code 1197.5, which prohibits employers from paying employees who perform substantially similar work differently based on the employee’s sex.  The new definitions clarify that “wages” and “wage rate” include all forms of pay, including but not limited to salary, overtime pay, bonuses, stock or stock options, profit sharing and bonus plans, vacation and holiday pay, and other benefits. Employers will now have to ensure that employees who perform substantially similar work are not paid differently and are not entitled to different benefits on the basis of sex.  The Act’s language regarding equal pay for substantially similar work has also been amended to apply to employees of “another sex,” (instead of the “opposite sex”), making the language inclusive of non-binary people. 

Finally, SB 642 makes a number of changes that apply to civil actions for violation of the Equal Pay Act.  Notably, the statute of limitations has been expanded from two to three years, and employees may also obtain relief for the entire period that the violation existed up to a maximum of six years.  SB 642 also adds language specifically outlining that a cause of action for violation of the Act occurs when: (1) an alleged unlawful compensation decision or other practice is adopted; (2) an individual becomes subject to an alleged unlawful compensation decision or other practice; or (3) when an individual is affected by the application of an alleged unlawful compensation decision or other practice.

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