California Employment Law Updates Employers Should Address in 2026

As we settle into 2026, several changes in California employment law will be critical to consider as businesses and employers update their policies. Below is an overview of employment law changes that California employers should consider as they plan for the new year.

Employee Handbook Updates

There were several changes in California law that require employee handbook updates to ensure compliance and consistency.

Leave of Absence Changes

California’s paid sick leave law expanded permissible uses to include crime victims leave (including employees who are victims of crime and employees who are family members of a victim).  Covered leave includes time off to attend judicial proceedings related to the crime, as well as witness duty and jury duty.  Employers should review all leave-related handbook sections to include the expanded definition and ensure consistent language across policies.

Tips and Gratuities

A change in the law provides that tips given to employees or a group of employees are now defined as the property of those employees.  Employers may not collect, take, or receive any portion of a tip, nor use tips as a credit against wages.  Employers must distribute tips paid by credit card to employees no later than the next regular payday.

Other Policy Changes

“Stay-or-Pay” Agreements

California law now prohibits employers from requiring employees, as a condition of employment, to sign agreements that:

• Require debt repayment if employment ends (e.g., education-related expense);
• Allow debt collection upon termination; or
• Impose penalties, fees, or costs if employment ends.

There are limited exceptions, including certain tuition reimbursement arrangements and upfront discretionary bonuses (e.g., sign-on bonuses or relocation assistance), but they must conform to the requirements of the new law.

Personnel Records Requirements

Existing law requires employers to allow current and former employees to inspect and receive copies of personnel records that their employer maintains related to performance or grievances. Employers must retain personnel records for at least three years after employment termination.

The new law requires that employers who maintain education or training records to include:

• The name of the employee;
• The name of the training provider;
• The duration and date of the training;
• The core competencies of a training, including skills in equipment or software; and
• The resulting certification or qualification.

Pay Scale Disclosures

Employers, upon request, must provide an employee the pay scale for the position in which the employee is currently employed. Employers with 15 or more employees must include pay scale information in job postings.  The definition of “pay scale” has been updated to mean a “good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire,” rather than a broad range for the position generally.

Equal Pay Law Updates

California’s Equal Pay Law now defines “sex” to include non-binary genders, rather than only “opposite sex.”  The law also significantly expands the definition of “wages” to include all forms of compensation, such as bonuses, stock and stock options, allowances, hotel accommodations, and travel reimbursements.  Employers must ensure equity across all forms of compensation unless a legitimate business necessity applies.

Employers should review pay policies, audit compensation across employees, and ensure that job postings on or after January 1, 2026 include compliant pay scale disclosures.

Demographic Pay Data Reporting

Private employers with 100 or more employees, or who utilize 100 or more workers through labor contractors, must report pay, demographic, and other workforce data to the Civil Rights Department. Effective January 1, 2026, demographic pay data must be stored separately from personnel files, and additional demographic categories must be reported.

New Required Workplace Notice

Beginning February 1, employers must provide an annual written Workplace Know Your Rights Act Notice to employees. This notice should be provided as a standalone document and not embedded in the employee handbook.

The notice must contain a description of employee rights relating to:

• Workers’ compensation benefits;
• Immigration inspection notices and protections against unfair immigration related practices;
• Union organizing and concerted activity; and
• Constitutional rights during interactions with law enforcement at the workplace.

The notice must be provided in the language the employer normally uses for employee-related information and that the employee understands.  The required notice is available on the California Department of Industrial Relations website in Spanish and English here: https://www.dir.ca.gov/dlse/RequiredPosters.html

Additional Requirements

• Employers must keep records of compliance for three years, including documenting the date that each notice was provided.
• By March 30, 2026, employers must allow employees to designate an emergency contact.
• If an employee is arrested or detained at the worksite, or the employer has knowledge of an arrest or detention of an employee offsite during the performance of their work, the employer must notify the designated emergency contact.
• Violations may result in penalties of up to $500 per employee, or up to $10,000 per employee for ongoing violations.

Cal-WARN Act Notice Updates

Existing law under the California Worker Adjustment and Retraining Act (Cal-WARN) prohibits an employer, with certain exceptions, from ordering a mass layoff, relocation, or termination at a covered entity without giving prescribed written notice to the employees, the Employment Development Department, and other local agencies. Employers conducting mass layoffs, relocations, or terminations must now include additional information in Cal-WARN notices, including:

• Whether or not the employer plans to coordinate services with a local workforce development board or another entity;
• Contact information and a description of services provided by local workforce development boards;
• Information about CalFresh (California’s food assistance program), including  the benefits helpline and website link; and
• A functioning employer contact email and phone number.

If the employer elects to coordinate services, arrangements must be made within 30 days of the notice.

A “covered establishment” is an entity that employs, or has employed in the preceding 12 months, 75 or more full and part-time employees.

“Mass layoff, termination, relocation or relocation of a call center” includes;

• Plant closure affecting any amount of employees;
• Layoff of 50 or more employees within a 30-day period regardless of % of workforce. Relocation of at least 100 miles affecting any amount of employees; and
• Relocation of a call center to a foreign country regardless of the percentage of workforce affected.

Website Requirements – Effective January 1, 2027

Websites must allow users to opt out of the sale and sharing of their personal data. The opt-out mechanism must allow for consumers to opt out in a single step and must be reasonably easy for an average user to locate and configure. The law is scheduled to go into effect January 1, 2027. Employers should coordinate with IT to confirm compliance.

Forward-Looking Considerations for Employers

Technology and AI in the Workplace

Automated hardware (e.g., smart watches or smart glasses) and AI-driven tools are increasingly common in the workplace. These technologies raise issues related to productivity, safety, privacy, and discrimination.

Although a recent bill regulating automated decision-making was vetoed, we can expect similar legislation to come.  Mobley v. Workday, Inc. is a pending federal case, potentially the largest collective action case in US history, highlighting potential risks associated with AI-based hiring tools and alleged discrimination with automated decision tools

Employers using AI-enhanced tools for HR and talent acquisition should adopt policies clarifying that automated tools do not make employment decisions independently (e.g., screening, recruiting, performance reviews, promotions).

If companies or employees  are using AI tools, permitted or not, should implement a clear AI Use policy, either within the handbook or as a standalone document.

Updating Traditional Policies

Employers should also review and update legacy policies that may no longer reflect actual practices.  For example:

• Progressive discipline policies;
• Remote work policies; and
• Meal and rest break waiver policies.

Employers should confirm that their policies align with how the business actually operates and update the policy if necessary.

Rolling Out Handbook Changes

Effective implementation is as important as having the policy.  Employers should consider:

• Holding a brief meeting or sending a memo explaining what has changed;
• Highlighting top compliance priorities; and
• Training supervisors to apply policies accurately consistently.

Supervisor training is critical and should not be overlooked, as inconsistently enforcing policies can create liability.

Ensure Your Business is Compliant

As these legal changes come into effect, ensuring your business is fully compliant is more important than ever. Navigating new employment laws can be complex, but our experienced employment legal team is here to help. Whether you need a comprehensive review of your policies, employee handbook, or training programs to ensure compliance, Myers Widders provides tailored solutions to keep your business protected and up to date. Reach out to employment law partner, Steven Lee, today for a consultation and ensure a smooth transition into 2026: slee@mwgjlaw.com or 805-644-7188.