The time for passing new laws in 2025 has expired and now we know what will be new for 2026 and beyond. Outlined below are the new laws most likely to affect our clients. We have not included every new law that may impact your organization, but instead, we have included employment laws that many California employers should be informed of, and highlighted a few industry-specific laws. As a reminder, employers should always check for any new laws that may specifically impact their organization. These new laws become effective January 1, 2026, unless otherwise noted. For a full copy of the new laws covered here, simply follow the links. Let us know if you have specific questions about the new laws or how they affect your organization.

INDUSTRY-SPECIFIC BILLS

AB 130 & SB 131 – CEQA Exempt Affordable Housing Projects – Employer Requirements

  • Existing law establishes the California Environmental Quality Act (CEQA).
  • Two new bills provide carve out exemptions to CEQA’s burdensome environmental review process providing relief to housing developers.
  • AB 130 provides an exemption from CEQA for infill or affordable housing projects that meet specific criteria. If the project qualifies as an infill or affordable housing project under AB 130, the contractors and subcontractors on the project must pay prevailing wage to the construction workers. Employers are required to certify and document prevailing wage payments in compliance with state labor standards or face audits, penalties and potential disqualification.
  • This bill also requires contractors and subcontractors to use a skilled and trained workforce for all work within apprentice occupations. Monthly verification reports are required and become public records.

AB 1002 – Contractor License Discipline for Wage Violations

  • Existing law requires the Contractors State License Board (CLSB) Registrar to initiate disciplinary action (suspension, revocation) against a contractor after a Labor Commissioner finding of willful or deliberate Labor Code violations within an 18-month window.
  • This bill expands enforcement authority by allowing the Attorney General (AG) to bring civil action to suspend, revoke, or deny a contractor’s license when the contractor has failed to pay wages owed, failed to satisfy a wage judgment, or violated a court order relating to wage payment.
  • This bill requires the AG to notify the CLSB Registrar at least 30 days in advance of filing such an action. The CSLB may intervene in the AG’s proceedings within 60 days; if it declines, it is deemed to consent to any enforcement orders issued by the court.
  • This bill directs the court to issue an order requiring the CLSB Registrar to take appropriate licensing action (suspend, revoke, deny application, or deny continued maintenance) based on the findings.

SB 597 – Direct Contractor Liability Reform

  • Existing law provides a direct contractor (i.e. one with a direct contract with the project owner) is liable for unpaid wages, contributions, or debts owed by a subcontractor performing labor on that private work.
  • This bill significantly revises joint liability for contracts dated on or after January 1, 2026.

Key features include:

  • This bill expands the reach of who qualifies as a direct contractor—for example, entities that engage contractors on the owner’s behalf might also be brought within liability.
  • This bill provides that a direct contractor may avoid liability for subcontractor fringe-benefit debts (e.g. health, pension contributions) if they pay the subcontractor and benefit plan(s) via a joint check arrangement under specified rules.
  • This bill extends the existing liability regime (pre-2026 contracts) to include contracts made between January 1, 2022, and December 31, 2025, under the current rules, before the new rules fully phase in.
  • This bill grants joint labor-management cooperation committees (existing enforcement actors) standing to sue under the revised liability regime.

SB 809 – Construction Trucking: Employee vs. Independent Contractor Classification

  • Existing law presumes most workers are presumed to be employees unless the hiring entity satisfies the “ABC test.” The law includes a limited exemption for certain construction trucking services, originally enacted through AB 170 and AB 2257, which allowed specific owner-operators and subcontracted motor carriers to be treated as independent contractors under defined conditions. That exemption was set to sunset on January 1, 2025.
  • This bill extends and revises the construction trucking exemption.

Key features include:

  • Extension of the sunset date of the construction trucking carve-out from January 1, 2025, to January 1, 2030, preserving independent-contractor treatment for qualified trucking owner-operators.
  • Clarification that the exemption applies only if the truck owner-operator possesses their own motor carrier permit, directly negotiates and contracts with the licensed contractor or business entity, and operates with their own equipment and employees.
  • Reaffirmation that if any of these conditions are not met—or if the motor carrier does not hold a valid registration—the worker is deemed an employee subject to full wage and hour protections.

STATE & FEDERAL LEGAL UPDATES

One, Big, Beautiful Bill Act (OBBBA)

  • On July 14, 2025, the IRS published its OBBBA fact sheet for tax deductions for working Americans and seniors: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors
  • No tax on tips: Eligible taxpayers may deduct up to $25,000.00 of their tip income annually. The deductible amount phases out when the taxpayer’s adjusted gross income exceeds $150,000.00 (or $300,000.00 if filing jointly).
  • On September 19, 2025, the IRS published proposed regulations listing tip eligible occupations and defining “qualified tips” for the purpose of the deduction. Comments on the proposed regulations may be made through October 23, 2025.
  • Employees receiving overtime pursuant to the Federal Labor Standards Act (FLSA) are eligible to deduct up to $12,500 (or $25,000.00 if filing jointly) of FLSA qualifying overtime.
  • Note that the totality of overtime paid to California employees will likely include overtime not considered FLSA overtime due to the daily and weekly overtime rules of California. Employers will be required to ensure separate tracking of FLSA eligible overtime from non-FLSA-eligible overtime.
  • On August 7, 2025, the IRS announced there will be no changes to individual information returns, or withholding tables for 2025 under the One, Big, Beautiful Bill Act.
  • Deductible tips and overtime are still subject to FICA (Social Security and Medicare) taxes and withholding, Federal Unemployment Tax, California State Disability Insurance, and California Unemployment Insurance.
  • Although the IRS has stated it will provide transition relief for the 2025 tax year for employees and employers subject to the new reporting requirements, employers should work with their payroll providers to develop processes to report tips and overtime accurately for purposes of the OBBBA, including separately reporting the portion of the employee’s pay considered “qualified tips” and identifying the employee’s tip-earning occupation, and separating weekly FLSA overtime from California’s additional overtime required payments.

California Minimum Wage Increase

  • Effective January 1, 2026, all California employers must pay a minimum wage of $16.90 per hour, an increase from the $16.50 rate in 2025.
  • Concurrent with the minimum hourly wage increase, the minimum salary threshold for an exempt employee increases to $70,304.00. In addition to meeting the salary threshold, an exempt employee must also meet the stringent duties test and perform exempt duties more than 50% of the time.
  • Note that the minimum salary threshold for a Computer Software Employee remains unchanged from the 2025 threshold of $118,657.43. These employees must also meet the stringent duties test.
  • Also note that several local ordinances have a minimum wage rate higher than what the state requires.

DEPARTMENT OF LABOR & LITIGATION

AB 288 – California Public Relations Board Allowed Jurisdiction over National Labor Relations Act Charges

  • Existing law established the California Public Employment Relations Board (PERB) as a means of resolving disputes and enforcing statutory duties and rights of California public employers and employees. Existing law gives the National Labor Relations Board (NLRB) power to enforce the National Labor Relations Act (NLRA) and to conduct elections and make determinations and grant relief for unfair labor practices (ULPs).
  • This bill allows the PERB to exercise jurisdiction over private employer ULPs and elections and to make findings and grant relief including civil penalties in matters subject to the NLRA and NLRB jurisdiction when the NLRB declines or is unable to act. It authorizes the PERB to decide ULPs, and order all appropriate relief, including civil penalties.
  • This bill is similar to one passed in New York. The NLRB filed a lawsuit seeking an injunction against the New York law. It is anticipated it will similarly seek to enjoin California’s AB 288.
  • This bill also further expands prior authorization of the California Agricultural Labor Relations Board (ALRB) to prevent ULPs by agricultural employers and removes the prior mandate that the ALRB follow NLRA precedents. The ALRB is no longer obligated to follow NLRA precedent if it deems “it inappropriate to do so”.

SB 513 – Personnel Records

  • Existing law grants current and former employees, or their representatives, the right to inspect and receive a copy of personnel records maintained by an employer relating to an employee’s performance or to any grievance concerning the employee.
  • Existing law requires an employer to make the contents of those personnel records available for inspection, as specified, and makes it a crime for an employer to violate these requirements.
  • This bill expands the scope of personnel records to include education and training records maintained by an employer.
  • This bill requires that an employer ensure the education and training records include: the name of the employee; the name of the training provided; the duration and date of the training; the core competencies of a training, including skills in equipment and software; and the resulting certification or qualification.

SB 648 – Labor Commissioner Jurisdiction Over Payment of Gratuities (Tips)

  • Existing law prohibits an employer or agent from collecting, taking, or receiving any gratuity or a part thereof that is paid, given to, or left for an employee by a patron, and prohibits an employer or agent of the company from deducting from the wage of an employee any part of a gratuity, or requiring an employee to credit any part of a gratuity against wages. Gratuities are the “sole property” of the employee or employees to whom they are paid to, given to, or left for, including those paid by credit card.
  • This bill authorizes the Labor Commissioner to investigate and issue a citation or file a civil action for gratuities taken or withheld in violation of the law.

SB 261 – DLSE Orders, Decisions & Awards – Enforcement and Penalties

  • Existing law authorizes the Division of Labor Standards Enforcement (DLSE) to issue Orders, Decisions, and Awards (ODAs) for unpaid wage claims that become enforceable judgments if not appealed.
  • This bill increases transparency and enforcement by requiring the DLSE to publicly post final ODAs (with personal details redacted) and list employers with unsatisfied wage judgments.
  • This bill requires an employer that appeals an ODA to post a bond or cash deposit as security; and authorizes civil penalties up to triple the unpaid judgment amount plus interest if a final ODA remains unpaid 180 days after all appeals are exhausted.
  • This bill requires the court to award attorneys’ fees and costs to the prevailing party in relation to enforcing a judgement rendered or to take other lawful measures to induce compliance or impose consequences on an employer that fails to satisfy final judgement.

SB 477 – Fair Employment and House Act Enforcement and Procedural Reforms

  • Existing law requires an aggrieved employee to file a verified complaint with the Civil Rights Department (CRD) before pursuing a civil action. The CRD investigates, may attempt conciliation, and may bring the case in its own name; if not, it issues a right-to-sue notice, after which the employee has one year to file suit. The CRD has statutory deadlines to issue notices and file actions.
  • This bill clarifies the term “group or class complaints” to include any complaint alleging a pattern or practice.
  • This bill expands tolling rules for individual right-to-sue deadlines and extends tolling for the department’s deadlines (including petitions to compel and appeals), potentially subjecting an employer to significantly longer administrative investigations and uncertainty regarding closure of potential claims.
  • This bill alters when the CRD must issue right-to-sue notices in class/group complaint contexts and provides the CRD with broader discretion to investigate on behalf of multiple employees or a representative class, increasing the likelihood of coordinated or systemic-bias claims being developed at the administrative level before litigation.

EMPLOYEE TRAINING & SAFETY COMMUNICATIONS

SB 294 – The Workplace Know Your Rights Act

  • This bill establishes the Workplace Know Your Rights Act, expanding the notices required to be provided to employees upon hire, and annually thereafter to existing employees and collective bargaining representatives. This stand-alone notice must include a notification of rights to protection against unfair immigration-related practices; the right to a notice of inspection by immigration agencies, constitutional rights when interacting with law enforcement in the workplace; the right to workers’ compensation benefits; and the right to unionize or engage in concerted action in the workplace.
  • On or before February 1, 2026, this stand-alone notice must be provided using a method that can reasonably be anticipated to be received by the employee within one business day of sending.
  • This bill specifies that the Labor Commissioner shall create and post the notice to their website on or before January 1, 2026, with an updated version to be posted annually. On or before July 1, 2026, the Labor Commissioner shall also develop two videos, one for employees to advise them of their rights and another for employers advising them of both their rights and requirements.
  • This bill allows for an employee to designate an emergency contact for notification if the employee is arrested or detained at their worksite. If such an event occurs, an employer is required to contact the designated emergency contact. If the employee is not arrested or detained on the worksite but the arrest/detention occurs during work hours or during the performance of their job duties, an employer is only required to notify the emergency contact if they have actual knowledge of the event.
  • An existing employee shall be given the opportunity to appoint an emergency contact on or before March 30, 2026. An employee hired after March 30, 2026, shall be given the opportunity at the time of hire.
  • This bill prohibits an employer from taking any unlawful action against an employee for exercising any of their rights under this bill.
  • This bill allows a collective bargaining agreement to supersede the requirements in whole or in part provided that the terms of the waiver are explicitly clear and unambiguous.
  • This bill establishes a penalty of up to $500 per employee for each violation, which shall be in addition to any other remedy available to the employee. A violation regarding the emergency contact provision of this bill shall be subject to an amount of up to $500 per employee for each day the violation occurs, up to a maximum of $10,000 per employee.

 

EMPLOYER – EMPLOYEE RELATIONS

SB 464 – Expanded Pay Data Reporting & Demographic Transparency

  • Existing law requires an employer with 100 or more employees to submit an annual pay data report to the Civil Rights Department (CRD). The report includes employee counts by race, ethnicity, and sex across ten job categories, and median/mean pay data within federal pay bands, plus hours worked.
  • This bill requires such an employer to collect and store demographic information (e.g. race, ethnicity, sex, sexual orientation) used for pay data reporting separately from personnel records; expands reporting categories and dimensions—adding sexual orientation (if voluntarily disclosed); and increases the job categories.
  • This bill strengthens enforcement by requiring that courts mandate civil penalties when an employer fails to file the required report upon request by the CRD of up to $100 per employee and up to $200 per employee for subsequent failures.

AB 692 – Employment Contracts: Restraints on Trade

  • Existing law prohibits an employer from restraining an individual’s ability to engage in lawful trade, business, or other profession.
  • This bill strengthens those protections by prohibiting an employer from including in any employment contract, or as a condition of employment, a requirement that an employee repay an employer, training program, or debt collector when employment terminates; that an employee authorize an employer, training provider, or debt collector to resume or initiate collection on a debt when employment terminates; or any such penalty, fee, or cost imposed on an employee when employment terminates. Any such contract that does so will be void.

This bill provides limited exceptions for:

  • Transferable Credential: An employer may include a repayment provision in the contract if it:
    • Is offered separately from any contract for employment;
    • Does not require obtaining the transferable credential as a condition of employment;
    • Specifies the amount to be repaid before the employee agrees to the contract and the repayment amount does not exceed the cost to the employer;
    • Provides a prorated repayment amount if the employee separates employment early, with no accelerated payment component; and,
    • Does not require repayment if the employee is terminated, unless the termination is for misconduct.
  • Discretionary Payment: An employer may include a repayment provision for a discretionary payment in the form of a bonus or otherwise if:
    • The contract is provided at the outset of employment and not contingent on job performance;
    • The contract is separate from the primary employment contract;
    • The employee is informed of their right to seek legal counsel and given at least five business days to do so;
    • Any repayment obligation for early separation from employment is prorated based on the remaining term of the retention period (not to exceed two years) and does not accrue interest;
    • The employee separation from employment is voluntary or due to misconduct; and,
    • An employee has the option to defer payment until the end of the retention period, which eliminates any repayment obligation.
  • Contracts related to enrollment in an apprenticeship program approved by the Division of Apprenticeship Standards.
  • Contracts entered into under any loan repayment assistance program or loan forgiveness program provided by a federal, state, or local governmental agency.
  • An aggrieved employee may bring civil action on their own behalf and on behalf of others similarly situated. An employer found in violation may be liable for actual damages or $5,000 per employee (whichever is greater), in addition to injunctive relief and reasonable attorney’s fees and costs.

SB 303 – Bias Mitigation Training Safe Harbor

  • Existing law prohibits an employer from discriminating against an employee based on protected characteristics and an employer will often conduct Diversity Equity and Inclusion (DEI) or bias-awareness trainings to promote inclusion. Some employers have expressed concern that statements made during these sessions could later be used as evidence of bias or discrimination.
  • The bill clarifies that an employee’s good-faith assessment, testing, admission, or acknowledgment of personal bias, made as part of required or solicited bias-mitigation training, does not by itself constitute unlawful discrimination. The Legislature intends to encourage bias-mitigation education while preventing these limited acknowledgments from becoming stand-alone evidence of discriminatory conduct.
  • This bill does not eliminate all legal risk for these trainings. The protection is limited to personal bias acknowledgments made in good faith. It does not extend to the content, delivery, or later use of training information. Claims could still arise from how training content is presented, how employees are treated during sessions, or if training outcomes influence workplace actions.

AB 858 – Hiring and Retention of Displaced Workers Related to the COVID-19 Pandemic

  • Existing law defines the term “laid-off employee” to mean any employee who was employed by an employer for six months or more and whose most recent separation from active employment occurred on or after March 4, 2020, and was due to a reason related to the COVID-19 pandemic, including a public health directive, government shutdown order, lack of business, reduction in force, or other economic, non-disciplinary reason due to the COVID-19 pandemic.
  • Existing law includes a presumption that a separation due to a lack business, reduction in force, or other economic, non-disciplinary reason is due to a reason related to the COVID-19 pandemic, unless an employer establishes otherwise by a preponderance of the evidence.
  • Existing law requires employers operating one of the following enterprises: hotel, private club, event center, airport hospitality operation, airport service provider, janitorial, building maintenance, or security services, to offer its laid-off employees specified information about job positions that become available for which the laid-off employees are qualified, and to offer positions to those laid-off employees based on a preference system, in accordance with specified timelines and procedures.
  • This bill extends the December 31, 2025, repeal deadline until January 1, 2027.

SB 617 – California Worker Adjustment and Retraining Act (Cal-WARN)

  • Existing state law requires any employer who directly or indirectly owns and operates an industrial or commercial facility that employs or has employed 75 or more workers within the preceding 12 months shall not order a mass layoff, relocation, or termination unless written notice is provided to the affected employees and other agencies, including the Local Workforce Development Board, 60 days prior to the order taking effect.
  • This bill requires this notice to include whether or not an employer intends to utilize the local workforce development board or another entity to coordinate services for the affected employees, provide a functioning email and telephone number for the board, and the following language: “Local Workforce Development Boards and their partners help laid off workers find new jobs. Visit an America’s Job Center of California location near you. You can get help with your resume, practice interviewing, search for jobs, and more. You can also learn about training programs to help start a new career.”
  • This bill requires an employer who chooses to coordinate services through the Local Workforce Development Board or another entity to arrange these services within 30 days of the date of the notice.
  • This bill requires this notice include information regarding the CalFresh food assistance program, the CalFresh benefits helpline, and a link to the CalFresh website.

EMPLOYEE BENEFITS & RIGHTS

SB 590 – Paid Family Leave: Care for Designated Persons

  • Existing law requires an employer to provide an eligible employee with time off work under California Paid Sick Leave and the California Family Rights Act to care for a “designated person,” defined as any individual related by blood or whose association with the employee is the equivalent of a family relationship.
  • Existing law allows an eligible employee to apply for up to a maximum of eight weeks in each 12 month period of partial wage replacement benefits through the state disability insurance program to care for a “family member,” defined as a spouse, child, parent, parent-in-law, registered domestic partner, grandchild, grandparent, or sibling of the employee.
  • This bill establishes a new family temporary disability insurance program within the state disability insurance program to provide eligible employees with up to a maximum of eight weeks in each 12 month period of partial wage replacement benefits to care for a family member.
  • This bill expands the family member list to also include a “designated person”.
  • This bill becomes effective July 1, 2028.

SB 642 – Payment of Wages

  • Existing law defines “pay scale” as the salary or hourly wage range that an employer reasonably expects to pay for the position.
  • Existing law prohibits employers from paying an employee at wage rates less than the rates paid to an employee of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, when performed under similar working conditions unless the wage differential is based on a seniority system, merit system, a system that measures earnings by quantity or quality of production, or a bona fide factor other than sex such as education, training, or experience.
  • This bill modifies the definition of “pay scale” as the good faith estimate of the salary or hourly wage range an employer reasonably expects to pay for the position upon hire.
  • This bill replaces the term “opposite sex” with the term “another sex.”
  • Existing law places the statute of limitations on a civil action for recovery of wages for violations related to a reduced payment of wages based on sex, race, or ethnicity to commence no later than two years after the cause of action occurs with a special provision for three years if the cause of action was willful.
  • This bill alters the statute of limitations so that a civil action shall commence no later than three years after the last date the cause of action occurs and limits recovery time where the employee is entitled to obtain relief for the time in which a violation existed, not to exceed six years.
  • This bill provides that a cause of action shall be deemed to have occurred when an alleged unlawful compensation decision or practice is adopted, an employee becomes subject to that unlawful compensation practice, or when an employee is affected by application of the unlawful compensation practice.

AB 406 – Victim/Crime-Related Employment Protections and Enforcement Restoration

  • Existing law prior to January 1, 2025, provided certain employee protections (e.g. time off work as a victim for crime-related relief, attending judicial proceedings) were enforceable under the Labor Code through the Division of Labor Standards Enforcement (DLSE). After that date, those protections and enforcement authority were transferred into the Fair Employment and Housing Act (FEHA) under the newly formed Civil Rights Department (CRD), and the Labor Code enforcement provisions were repealed.
  • This bill reinstates the former Labor Code enforcement provisions for actions or inactions occurring on or before December 31, 2024, thereby closing the enforcement gap for those earlier claims. It also transfers enforcement authority for specified protections relating to attendance at judicial proceedings to the CRD.
  • This bill is an urgency measure, and its provisions became effective on October 1, 2025.
Valerie Albert
Author: Valerie Albert

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