By Guest commentary Friday, January 2nd, 2026

By Jonathan Fraser Light

It’s time to look at some of the new employment laws that will impact businesses in 2026. 

The state’s mandatory minimum wage is going up from $16.50 an hour in 2025 to $16.90 in 2026.  If a local jurisdiction has a higher rate, that’s the one to follow. Note that the “salary test“ (the minimum salary for “exempt” employees who don’t receive overtime) is based on the state minimum wage. It is twice the minimum wage, which works out to $70,304 beginning January 1, 2026.

Beginning July 1, 2026, companies in healthcare (or that service healthcare, such as outside janitorial services) are also subject to increased minimum wage rates under California’s special health care wage laws. Depending on the type of healthcare facility, minimum wages will be between $23 and $24 an hour.

On the AI front, companies may not use AI, algorithms or other “automated decision systems” (ADS) to make hiring decisions that result in discrimination. 

For example, companies have used ADS to create an algorithm that assesses the likelihood of pregnancy, and then shuts out such workers from the hiring or advancement process. Also, using personality testing or other AI testing using facial recognition software during interviews might be an issue under this new law if it contributes to discrimination.

As of next year, a sole proprietor with a single additional employee and no retirement plan will be subject to the CalSavers retirement plan mandate for that single employee. The amended law lowered the minimum mandate coverage number from five employees to one.

Construction companies that misclassified their truck drivers as independent contractors may get some penalty relief under an amnesty program pursuant to SB 809. 

AB 406 requires language modification in employee handbooks. The new law expands protection for victims of violence and their families by amending section 230 of the Labor Code. It expands reasons why victims may take time off from work for judicial proceedings and other activities, and allows employees to use sick leave for jury duty.

Under SB 261, an employer hit with a judgment from the California Division of Labor Standards Enforcement (DLSE or Labor Commission) must pay the judgment promptly or be subject to significant new penalties, including triple damages.

AB 692 affects employers paying for employee tuition, signing bonuses, loans, or immigration-related expenses when the employer imposes conditions for repayment by the employee. 

Contracts related to those items must be in a separate document and cannot be part of a general employment agreement. Repayment timeframes for stay bonuses cannot exceed two years, and the pay-off provisions must be proportional to the time spent at the company. 

For discretionary bonuses offered at the beginning of employment (i.e., signing bonuses), specific regulations apply to the content of the document and repayment obligations. An exception exists for employees terminated for “misconduct” or who resign.

SB 642 clarifies the definition of wages and “wage rates”  to include what the employer reasonably expects to pay upon hire. The statute makes clear that the definition does not expand the definition of “wages“ for any other purpose. 

Otherwise, it would have significantly increased the value of the “regular” hourly rate for an employee in wage and hour class actions, as things like non-discretionary bonuses already must be included in hourly employees’ regular rate of pay for calculating overtime. 

The statute also clarifies that discrimination related to “pay scales” includes all forms of pay, including bonuses, stock options, profit sharing, vacation, holiday pay, housing allowances and other categories that might be implemented in a discriminatory manner.

Under SB 294, California will be issuing a new poster advising employees of their constitutional rights and other protections against unfair immigration practices when interacting with law enforcement at work. 

The Labor Commission is mandated to post a form of this notice by January 1, 2026, and employers must start using it or an equivalent document by February 1, 2026. Also, 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 an arrest or detainment while working offsite. This would be a good time to update employee emergency contact information.

For companies required to report EEO-1 information (workforce demographic data) to the state, the state has increased the number of categories of information from 10 to 23. This will be more burdensome on the employer.

Under SP 513, which amends Labor Code section 1198.5, employers now need to include additional information in employee personnel records, including education and training records. For trainings, for example, the employer must provide the name of the trainer, the training provided, the duration and date of the training, and the core competencies of the training.  

This is only a small snapshot of the 70+ bills related to employment law signed by Governor Newsom.  Happy New Year! Or not. 

• Jonathan Fraser Light is the Managing Partner of LightGabler, representing management in employment law issues and related litigation. He may be reached at [email protected].