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2026 California Employment Law Changes

January 2026

Happy New Year! We hope you had a wonderful and restful holiday season! Along with a new year, particularly in California, comes new employment laws.  Flourish HR specializes in small to mid-sized companies and are here to help.  Here are the highlights of legal changes that affect California employers plus one change that affects all companies, regardless of state.

 

Note that we focused mainly on laws that affect our client companies: those under 100 employees, without collective bargaining agreements. 

 

Unless otherwise specified, the new laws take effect January 1, 2026.  If you find you need help with ensuring compliance, reach out to us!


For All US Employers: 401K/403b New Catch-Up Contribution Requirements   [i]

As part of changes created by the law Secure 2.0 passed in 2022, beginning this year, high earners aged 50 and above will be required to make catch-up retirement contributions via Roth (post-tax) contributions rather than pre-tax contributions.  High income is defined as at least $150,000 in the prior year.  This applies to employees who earned at least $150,000 on your payroll last year.  Employees hired in 2025 who, because of a partial year, earned less than $150,000 would be excluded for 2026.

Note that the 401K/403b maximum employee contribution limits for 2026 are $24,500 for regular contributions, $8,000 for those 50 and older, and those between ages 60 and 63 are eligible for a “super” catch-up maximum of $11,250.

 

California’s Artificial Intelligence (AI) Rules took effect October 1, 2025  [ii]

This law requires the employer to be responsible for potentially discriminatory outcomes of “automated data systems” that include applicant tracking systems that use AI, machine learning or algorithms to help with decision-making.  In addition to an automated data system that you use, this would also apply to third-part vendors such as staffing agencies that use these systems.

In short, you must conduct bias audits and other measures to ensure there is no discrimination and retain records on data used to make decisions for at least four years.  Be sure to review your vendor agreements, require transparency and ensure the contract is clear on liability for non-compliance.

 

Minimum Wage Changes

Beginning January 1st, the minimum wage in California goes up to $16.90/hour for all employers. Fast Food Restaurant employers, (effective April 1, 2024), and Healthcare Facility employers, (effective October 16, 2024), have a higher minimum wage. Additionally, many localities have higher minimum wages than the state’s rate. Here are some sample cities where Flourish has clients:

 

  • Emeryville - $19.90

  • Los Angeles - $17.87

  • Oakland - $17.46

  • Richmond - $19.18

  • San Francisco - $19.18

 

Here is a complete list of City and County minimum wages in California maintained by UC Berkeley.

 

Exempt Threshold

One of the requirements for an employee to be exempt from overtime provisions in California is that they meet a salary test that is at least twice the state minimum wage.  For 2026 this amount is going to $70,304 and cannot be prorated for employees working less than full time.  If you have someone who otherwise qualifies as exempt, but does not meet this salary threshold, you will need to either change them to non-exempt status or raise their salary to the new threshold.

 

Updates to Job Posting Requirements  [iii]

California’s new law — SB 642 —affects how employers handle pay ranges and pay equity. It takes effect January 1, 2026. Here’s what you should know:

 

  • Real pay ranges required: Job postings must include a good-faith salary range you actually expect to pay — not wide or placeholder ranges.


  • Longer liability window: Employees can bring claims up to 3 years later and recover up to 6 years of back pay.


  • What to do now:
Review your job postings, pay ranges, and compensation policies to be sure they comply.

 

Leaves of Absence  [iv]

California’s AB 406 updates protected leave and anti-discrimination rules related to victims of crime and related court appearances. Key points for employers:

 

  • Protected time off for victims & family members: Employees (or their family members) who are victims of certain crimes can take protected time off to attend judicial proceedings related to that crime without retaliation or discrimination. 


  • Paid sick leave uses expanded: Employees may now use accrued paid sick leave for jury duty, subpoenaed witness appearances, and certain crime-related court proceedings. 


  • Effective dates: Some paid sick leave uses took effect Oct. 1, 2025, and the broader judicial-proceeding protections take effect Jan. 1, 2026. 


  • Update notices & policies: Employers must post/distribute required CRD leave notices and revise handbook leave sections to reflect the new covered reasons.

 

New Limits on “Stay-or-Pay” Clauses in CA [v]

California’s AB 692 takes effect January 1, 2026 and limits certain contract terms for employees:

 

  • No “stay-or-pay” clauses: You can’t require workers to repay fees, training costs, or penalties just because they leave.


  • Applies to new contracts only: Covers agreements entered into on or after Jan. 1, 2026.
Enforcement risk: Employees can sue for damages and attorneys’ fees.


  • Few exceptions: Only narrow, clearly defined repayment arrangements may still be allowed.

 

New “Workplace Know Your Rights Act”  [vi]

California’s SB 294  takes effect in 2026 and requires employers to provide annual “Know Your Rights” notices:

 

  • Annual employee notice required: Employers must give all employees a stand‑alone written notice of specified workplace rights by Feb. 1, 2026 and annually after — and to new hires at onboarding.

  • What to include: Rights such as workers’ compensation, immigration inspection notice rights, protections against unfair immigration practices, the right to organize/act in concert, and constitutional rights during law‑enforcement interactions.

  • Emergency contacts: Employees can name an emergency contact; notify if arrested/detained at work.

  • Penalties: Failure to provide notices or follow procedures may result in enforcement action.

 

Action: Update onboarding and annual processes and track emergency contacts. Use the Labor Commissioner’s template when available.

 

SB 513 Expanded Personnel Records Access  [vii]

California’s SB 513  updates employer personnel record requirements effective January 1, 2026:


  • Training/education records now personnel records: If you keep training or education records for employees, they must be treated as personnel records and made available for inspection and copies on request.

  • Required details: Those records must include the employee’s name, training provider, training date/duration, core skills/competencies, and any certification/qualification earned.


Be sure to update your HR recordkeeping so that any training documentation you maintain contains the required information and is accessible upon employee request.


Extended Recall & Rehire Rights

California’s AB 858 extends certain recall rights for laid-off workers another year to January 1, 2027:

  • Recall first: Covered employers must offer jobs to qualified laid-off employees before hiring others.


  • Anti-retaliation: Protections remain in place for acts through 2026.


  • Who it affects: Hospitality, airport, event-center, and building services employers.


Action: Update recall/rehire processes to ensure compliance through 2026.


Expands Protections for Tipped Employees  [viii]

California’s SB 648 takes effect January 1, 2026 and strengthens protections around employee tips:

  • Tips belong to employees: Reinforces that gratuities left by customers are the sole property of employees.

  • New enforcement tools: The Labor Commissioner can now investigate, issue citations, or file civil actions for improper handling of tips.

  • Private right of action & penalties: Employees can sue directly for violations, with civil penalties (e.g., $250 per violation, $1,000 for willful violations) plus attorneys’ fees and costs.


If applicable, review your company’s gratuity/tip policies to ensure tips are properly distributed and not withheld or misapplied.


Information was gathered from the following sources:


 

 

 

 

 

 

 



 
 

© 2026 by Flourish HR

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