2026 California New Laws: Key Updates & Practical Impacts – Labor & Employment Law
2026 Employment Laws Update Wages, Labor Relations, Workplace Rights and Key Compliance Requirements for Employers
Each year, California enacts a number of new laws impacting employers across the state. New legislation for 2026 includes significant updates affecting wages and compensation, labor relations and enforcement, personnel records and pay equity, employment contracts, workplace rights and notices, leave and benefits, public works compliance, and independent contractor classification. Best Best & Krieger LLP’s (BBK) Labor & Employment 2026 California New Laws overview highlights key takeaways and analysis of California’s minimum wage increase, OBBA, AB 288, SB 597, SB 513, SB 624, AB 692, SB 294, SB 590, AB 538, SB 8, and SB 809.
Wage and Compensation
California Minimum Wage Increase
On January 1, 2026, the state minimum wage increased to $16.90/hour. Many cities and industries continue to retain different minimum wage requirements that are typically higher than the state minimum wage, such as cities in the Bay Area (e.g., Alameda, Cupertino, San Francisco) and Los Angeles County (e.g., Los Angeles, Malibu, West Hollywood). Employers should review their hourly rates to ensure they comply with this minimum.
Employers should also remain mindful that exempt employees must earn a full-time equivalent salary at least twice the state minimum wage in order to maintain exempt status. Thus, the minimum full-time salary for exempt status has increased to $70,304.00.
Finally, employers that are party to a collective bargaining agreement (CBA) may qualify for a number of Labor Code exemptions, provided the CBA meets certain conditions. Among them, the CBA must guarantee at least 1.3 times the minimum wage for all employees. Employers should, therefore, ensure that their CBA provides for at least $21.97/hour as of January 1, 2026, for all employees to continue to take advantage of any available exemptions.
One Big Beautiful Bill Act (OBBA)
The OBBA’s changes to federal income tax allow employees to take advantage of a tax deduction for “qualified tips,” effective for tax years 2025–2028. State taxes remain unchanged. Employees may deduct up to $25,000 per year, which will phase out for taxpayers with modified adjusted gross income above $150,000 ($300,000 for joint filers).
“Qualified tips” are defined as voluntary payments from customers that are received in occupations which customarily and regularly receive tips, according to an approved list provided by the IRS. Employers should, therefore, carefully account for employee tip income and exercise caution to only include tips that comply with the legal definition of qualified tips. Also effective for tax years 2025–2028, individuals who receive “qualified overtime compensation” can deduct the pay that exceeds their regular rate of pay from their taxable income. “Qualified overtime compensation” includes overtime that is required by the Fair Labor Standards Act (FLSA), but not overtime required solely by virtue of state law or a CBA.
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Labor Relations & Enforcement
Assembly Bill 288 (AB 288) expands the jurisdiction of the Public Employment Relations Board (PERB) by authorizing a worker in the private sector to petition PERB to enforce labor policies in the absence of action by the National Labor Relations Board (NLRB). The new law guarantees private sector workers a state forum for organizing and vindicating their collective bargaining rights if the NLRB is unwilling or unable to act due to a lack of a quorum, staff, or funding required to fulfill its statutory duties.
Senate Bill 597 (SB 597) revises the framework for joint liability between contractors and subcontractors for wages and fringe benefits. This makes the general contractor responsible for unpaid wages and certain labor costs owed by its subcontractors, incentivizing contractor oversight of subcontractors. This law applies to contracts entered into on or after January 1, 2026, and in the context of private construction projects.
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Personnel Records and Pay Equity
Senate Bill 513 (SB 513) expands what documents must be included in an employee’s personnel file, which current or former employees have a right to access, to include education and training records, if the employer maintains them. Employers that maintain training and education records in employees’ personnel files must ensure they include the specified required information:
- The full name of the employee
- The name of the trainer
- The duration and date of the training
- The core competencies covered in the training, including skills in equipment or software
- The resulting certification or qualification earned
The law does not create an independent obligation for an employer to maintain training and education records, but requires that the employer retain such records and follow the requirements above if such records are maintained.
The new law also does not extend the time scope of penalties. An employee’s personnel records must be produced or available for inspection within 30 days of the request or an employer could face a $750 penalty. These records must be maintained for no less than three years after termination of employment.
Senate Bill 624 (SB 62) amends California’s Equal Pay Act to remove references to the “opposite sex” for consistency with anti-discrimination laws, revising language referring to gender as binary and signaling that non-binary workers are also protected. The law also updates the terms “wages” and “wage rates” to include all forms of compensation, irrespective of the time of payment, including bonuses and stock options, gasoline allowances, profit sharing and other benefits. Any form of compensation or wages must be paid equally to all employees unless there is a business necessity or other meritorious reason.
The law also extends the statute of limitations for claims under California’s Equal Pay Act from two years to three years after “the last date the cause of action occurs.” The last date of the cause of action is specifically the last date when either:
- The employer adopts an unlawful compensation decision or practice;
- The individual becomes subject to the unlawful compensation decision or practice; or
- The individual is “affected” by the decision or practice prohibited by the Act, including each time wages are paid resulting from the unlawful decision or practice.
The law expands the period for recovery, allowing the employee to obtain relief for the entire period of time in which a violation occurs, for up to six years.
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Employment Contracts
As of January 1, 2026, Assembly Bill 692 (AB 692) states employers are prohibited from executing contract terms that require repayment, collection or penalties triggered by termination of employment. Employees have the right to bring a civil action against employers who include such prohibited clauses in agreements signed on or after January 1, 2026. The remedies available include the greater of actual damages or $5,000 per employee, injunctive relief, and recovery of attorneys’ fees and costs. The new law expressly excludes the following:
- Discretionary sign-on payments or retention bonuses
- Tuition reimbursements
- Apprenticeships
- Government programs
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Workplace Rights and Notices
Senate Bill 294 (SB 294), a new law as of January 1, 2026, implements a new process and documentation to be provided by the labor commissioner, a stand-alone notice on workplace rights that employers will be required to issue to each current employee by February 1, 2026, and annually thereafter. New hires are to be provided this notice at the time of hire. The content of the notice includes rights related to workers’ compensation benefits, notice of immigration agency inspections or arrests in the workplace, unionization, and constitutional rights when interacting with law enforcement under the Fourth and Fifth Amendments. Records of compliance must be retained for three years. The labor commissioner will publish videos regarding employee rights and employer obligations by July 1, 2026.
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Leave and Benefits
Senate Bill 590 (SB 590) provides eligibility benefits under the state-paid family leave program to include individuals who take time off work to care for a seriously ill “designated person,” as of July 1, 2028. This includes “any care recipient related by blood or whose association with the individual is the equivalent of a family relationship.” The law allows the employee to designate one person per 12-month period. The law also requires an attestation from the employee under penalty of perjury, the first time the employee files a claim for disability insurance benefits stating, (1) how the designated person is related by blood, or (2) how the employee’s association with the designated person is equivalent to that of a family relationship.
The new law essentially broadens the definition of “family” and recognizes that family relationships are not one-size-fits-all.
Existing law entitles local law enforcement, probation officers, and firefighters employed on a regular full-time basis to a leave of absence without loss of salary while disabled by injury or illness arising out of and in the course of duties. Senate Bill 8 (SB 8) expands this salary protection to peace officers employed on a regular, full-time basis by a county of the “eighth class,” which includes counties containing a population of 600,000 and under 650,000.
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Public Works Compliance
Under California Labor Code Section 1776, all contractors and subcontractors are required to maintain certified payroll records on all “public works,” which generally covers contractor-type work that is paid at least partially with public funds. Such records are open to inspection or delivery upon request to (1) the employee doing the work, (2) the awarding body, (3) the California Department of Industrial Relations (DIR), and (4) members of the general public. The employer must separately submit electronic payroll information to the California labor commissioner every month, without request.
Members of the general public may request certified payroll records if their requests are directed to the awarding body or the DIR. Assembly Bill 538 (AB 538) creates a new obligation upon the awarding body, where the awarding body must now demand the records from the relevant contractor if the awarding body receives a request from the public and does not already have the records. If the contractor refuses to comply within 10 days, the awarding body must notify the DIR, and penalties can be imposed for noncompliance. Employers who do not comply with requests can be subject to stringent penalties of $100 per worker, per day.
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Independent Contractors
Senate Bill 809 (SB 809) clarifies that owning a vehicle does not make a worker an independent contractor and reiterates that employers must reimburse employees for using their personal vehicles for work. This includes costs of use, upkeep, and depreciation of a commercial truck, tractor, or trailer that the employee owns and uses to perform job duties. The law also creates the “Construction Trucking Employer Amnesty Program” for eligible construction contractors who have misclassified construction trucking drivers as contractors. This program relieves eligible contractors from statutory or civil liability for misclassifying drivers as independent contractors. To qualify, the contractor must execute a settlement agreement with the labor commissioner by January 1, 2029, that includes driver classification provisions and payment of owed wages.
Disclaimer: BBK Legal Alerts are not intended as legal advice. Additional facts, facts specific to your situation, or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.
