California Employers’ To-Do List to Prepare for 2026

This fall, the California Legislature and Governor Gavin Newsom enacted various laws expanding employee protections and employer obligations.

This Insight summarizes the more significant aspects of these laws, which may necessitate changes to employers’ policies or procedures.

Unless otherwise indicated, the laws discussed below take effect on January 1, 2026.

➢ ACTION ITEM: Revise Approach to Agreements with Repayment Obligations

AB 692 – “Stay-or-pay” contracts

One of the more significant updates taking effect soon will limit an employer’s ability to claw back sign-on bonuses, recoup relocation expenses, and even obtain repayment of voluntarily covered educational expenses (sometimes referred to as training repayment agreement provisions, or TRAPs) from an employee whose employment has terminated.

With certain exceptions, existing California law declares void any contract that restrains a person from engaging in a lawful profession, trade, or business of any kind. Further, updates to this law that went into effect in 2024 made it explicitly unlawful for an employer to include a noncompete clause in an employment agreement or to require an employee to enter into a noncompete agreement.

AB 692 adds a section to California’s restrictive covenants law that makes it unlawful to require, or to include in any contract a requirement, that workers repay debts, including, but not limited to, employment- and education-related costs, upon termination of employment, making such terms void and unlawful in contracts executed on or after January 1, 2026.

The law excludes (and therefore permits) the following:

• Contracts for the receipt of discretionary or unearned payments made at the outset of employment, such as “signing bonuses,” as long as specific requirements are met, including that:
  • the payment is not tied to performance,
  • the employee is notified of the right to consult an attorney and provided with a reasonable review period of at least five business days,
  • the employee is provided with the option to defer receipt of the payment until it is fully earned and not subject to claw back, and
  • the repayment obligation:
    • is included in a separate contract from the primary employment agreement,
    • is not tied to a required employment period of longer than two years,
    • does not include interest,
    • is prorated based on the remaining portion of any required employment period, and
    • is only applicable if the employee resigns or is terminated for misconduct.
• Contracts related to the repayment of tuition for a transferable credential offered by a third-party institution, but only if such contract is separate from any employment agreement, obtaining the credential is not a condition of employment, and the contract includes repayment terms, including:
  • a specific repayment amount that does not exceed the employer’s cost;
  • a prorated repayment amount that may not be accelerated if the employee separates from employment; and
  • no requirement for a worker to repay if involuntarily terminated, unless for misconduct
• Contracts under government-provided loan repayment assistance or loan forgiveness programs
• Apprenticeship program enrollment contracts
• Leases or other real estate financing or purchase agreements

AB 692 also creates a private right of action under the California Labor Code, providing for actual damages or $5,000 per employee, whichever is greater, in addition to injunctive relief and reasonable attorneys’ fees and costs. See our previous discussion of AB 692’s requirements here.

➢ ACTION ITEM: Distribute New Notice and Update Paperwork

SB 294 – The Workplace Know Your Rights Act

By February 1, 2026, and annually thereafter, SB 294 requires all employers to provide a stand-alone written notice to all California employees (and any collective bargaining representative, if applicable) describing specified workers’ rights. These will be included in a new model notice, which the law requires the California Labor Commissioner to post on the Department of Industrial Relations (DIR) website by January 1, 2026. Employers will need to provide a compliant notice to all new employees upon hire and to all employees every year.

In addition, on or before March 30, 2026, for current employees, and thereafter for new hires, the new law requires employers to give employees the opportunity to designate an emergency contact, to update that contact information over the course of their employment, and to indicate whether the emergency contact should be notified if the employee is arrested or detained on the worksite and/or off the worksite during work hours if the employer has actual knowledge of the arrest or detention. If an employee has so indicated, employers must notify an employee’s designated emergency contact if the employee is arrested or detained while at the worksite, or if the arrest or detention has occurred off the worksite but during work hours, and the employer has actual knowledge of it.

The law imposes a penalty of up to $500 per employee for each violation of the notice requirement and up to $500 per employee for each day an employer does not permit an employee to provide an emergency contact or notify that contact in the event of the employee’s arrest, up to a maximum of $10,000 per employee.

➢ ACTION ITEM: Refine Wage Ranges in Job Postings and Prepare for More Pay Data Reporting

SB 642 – Pay transparency and equal pay

California’s existing pay transparency law already requires employers to disclose a position’s pay scale upon request by an applicant or employee and requires employers with 15 or more employees to include the pay scale for a position in any job posting. SB 642 modifies the definition of “pay scale” to mean a good-faith estimate of the wage range the employer reasonably expects to pay for the position upon hire.

The law also amends California’s equal pay law to add a definition of “wages” and “wage rates” broadly to include “all forms of pay, including, but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.” The amendment explicitly provides that this definition does not apply to other sections of the Labor Code, meaning that this new definition of “wages” does not affect employers’ disclosure obligations under the pay transparency law.

SB 642 further updates the equal pay law to remove binary references to gender, so that it prohibits an employer from paying any employee less than “another sex” (replacing the term “opposite sex”) for substantially similar work.

The bill also includes significant enforcement provisions. It expands the statute of limitations for equal pay claims, both by increasing it from two to three years and by adding language that expressly provides for continuous claim accrual (long recognized by California courts). Additionally, the new law permits a plaintiff to recover wages for up to six years’ worth of ongoing violations.

SB 464 – Pay data reporting records

Existing California law requires employers with 100 or more employees and at least one employee in California to submit annually to the California Civil Rights Department (CRD) a data report on the pay, hours worked, and demographics of their California employees within certain job categories (e.g., professionals, sales workers, service workers, etc.). SB 464 increases the number of job categories from 10 to 23 beginning January 1, 2027.

The law now also requires a court to impose a civil penalty of up to $100 per employee for a first offense, or a maximum of $200 per employee for subsequent violations, on employers who fail to file a required pay data report, if requested by the CRD.

In addition, SB 464 adds a requirement that employers collect and store separately from employee personnel records any demographic information gathered for pay reporting purposes.

➢ ACTION ITEM: Expand Response to Personnel Record Requests

SB 513 – Education or training records

Existing California law gives employees the right to inspect and request a copy of the personnel records maintained by the employer that relate to the employee’s performance or any grievance concerning the employee. SB 513 specifies that education and training records are related to an employee’s performance and are thus subject to inspection and requests for copies. The new law also provides that if an employer maintains education or training records, the employer shall ensure those records include the name of the employee, the name of the training provider, the duration and date of the training, the core competencies of the training, and the resulting certification or qualification.

➢ ACTION ITEM: Confirm Sick and Safe Time Policies Are Up to Date

AB 406 – Sick leave

As we wrote about last year, California expanded the reasons for which an employee may use paid sick time to include time off in connection with a “qualifying act of violence,” which includes domestic violence, sexual assault, stalking, or acts involving bodily injury or death, a dangerous weapon, or a threat of physical injury or death.

Effective October 1, 2025, AB 406 amended the paid sick leave law to reflect that employees may use their accrued sick leave for jury duty, subpoenaed witness appearances, and other court-related services and bridged some statutory gaps between the California Government Code and Labor Code inadvertently created by AB 2499, among other things.

Importantly for parties with pending cases, the legislation clarifies that claims based on alleged violations of victim protections previously contained in the Labor Code are within the jurisdiction of the California Division of Labor Standards Enforcement if the claims arose on or before December 31, 2024, while claims arising on or after January 1, 2025, are enforced by the CRD. These technical amendments took immediate effect.

Effective January 1, 2026, an employee who is a victim or a family member of a victim may also take unpaid time off, or use paid sick time, to attend judicial proceedings related to certain crimes, including any delinquency proceeding, a post-arrest release decision, plea, sentencing, post-conviction release decision, or any proceeding where a right of that person is an issue. Furthermore, an employer may not discharge or retaliate against an employee for taking time off for these purposes.

SB 590 – “Designated person” added to paid family leave benefits

Starting July 1, 2028, California Paid Family Leave benefits will be more broadly available to employees who take time off work for caregiving. Current law already provides up to eight weeks of partial wage replacement benefits for workers who take time off to care for a seriously ill family member, among other reasons. Under SB 590, such benefits will also be available when an employee takes time off to care for a seriously ill “designated person,” which is defined as “any care recipient related by blood or whose association with the employee is the equivalent of a family relationship” and is incorporated into the new law’s definition of “family member” as well.

➢ ACTION ITEM: Check New Rules on Reductions in Force

SB 617 – The California Worker Adjustment and Retraining Act

Existing California law requires covered employers to give employees 60 days’ advance notice of a mass layoff, relocation, or termination (“Cal-WARN notice”). These notices must include contact information for certain agencies and elected officials, along with the elements required by the Federal Worker Adjustment and Retraining Notification Act. SB 617 expands the information covered employers must include in their Cal-WARN notices to include:

• whether the employer plans to coordinate services (such as a rapid response orientation) through the local workforce development board, another entity, or not at all;
• information regarding CalFresh, the statewide food assistance program;
• the following description of the rapid response activities offered by the local workforce development board: “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”; and
• a functioning contact email and telephone number of the employer and the local workforce development board.

Note that employers that state they will coordinate services must do so within 30 days of the notice’s issuance.

AB 858 – COVID-19 recall rights extended

Existing California law requires covered employers to provide employees who were laid off due to the COVID-19 pandemic with information about positions that become available, and to reinstate those laid-off employees based on a preference system. The employers covered by this law are those that own or operate a hotel, private club, event center, airport hospitality operation, or airport service provider, or that provide building services to office, retail, or other commercial buildings. AB 858 extends these recall and reinstatement rights from December 31, 2025, to January 1, 2027.

➢ ACTION ITEM: Take Care of Outstanding Wage Judgments

SB 261 – Wage judgments

SB 261 imposes a civil penalty of up to three times the outstanding award amount (including post-judgment interest) if an employer fails to pay a final judgment for unpaid wages within 180 days after the appeal period expires (and no appeal is pending). The law also requires a court to award reasonable attorneys’ fees and costs to a prevailing plaintiff in any action brought by a judgment creditor, the Labor Commissioner, or a public prosecutor.

➢ ACTION ITEM FOR FRONTIER ARTIFICIAL INTELLIGENCE (AI) DEVELOPERS: Be Mindful of Employee Whistleblower Protections

SB 53 – The Transparency in Frontier Artificial Intelligence Act

While SB 53 doesn’t directly regulate most employers, this new law includes whistleblower protections for employees of “frontier developers,” in that certain employees of such employers cannot be retaliated against for reporting risks or non-compliance.

Among other things, the Transparency in Frontier Artificial Intelligence (TFAI) Act creates whistleblower protections for “covered employees” responsible for assessing or managing risks of critical safety incidents involving a “frontier model,” defined in the statute as “a foundation model that was trained using a quantity of computing power greater than 10^26 integer or floating-point operations.” The law defines a “frontier developer” as “a person who has trained, or initiated the training of, a frontier model.”

The TFAI Act prohibits frontier developers from preventing a covered employee from, or retaliating against a covered employee for, disclosing information about the developer’s activities that the employee has reasonable cause to believe endanger public health or safety resulting from a catastrophic risk. A “catastrophic risk” is a risk arising from the frontier developer’s activities that will contribute to the death or serious injury of over 50 people or result in more than one billion dollars in damages.

A covered employer must provide a written notice to its employees of their rights under the law. Additionally, large frontier developers (those with gross annual revenues exceeding $500 million) must implement an internal process for the submission and investigation of anonymous disclosures about activity that presents a “specific and substantial danger to the public health or safety.”

The whistleblower protections include a private right of action.

What California Employers Should Do Now

• Review agreements. Formal employment agreements, offer letters, and other agreements with claw-back or repayment features should be revised and updated as necessary to avoid noncompliance with the new “stay-or-pay” constraints.
• Include proper pay scales in job postings. Employers with 15 or more employees should ensure that job postings include the wage range that the employer reasonably expects to pay to the selected candidate upon hire.
• Prepare and distribute required notices. All employers should monitor the DIR website for publication of the new required Workplace Know Your Rights notice by January 1, 2026, and prepare to distribute it to all employees by February 1, 2026, and yearly thereafter.
• Offer to collect emergency contact information. Employers should provide employees with the opportunity to designate an emergency contact by March 30, 2026; implement procedures that allow employees to update their designated contact; and provide managers with procedures regarding notification of emergency contacts in the event of an employee’s arrest or detention.
• Adjust onboarding. Employers should adjust their onboarding procedures to comply with all new notice requirements described above.
• Check recordkeeping and approach to personnel file requests. If an employer maintains education and training records, such records will now need to include specific details. They will also need to be produced in response to a personnel file request by an employee or former employee. Demographic information gathered for pay reporting purposes should continue to be stored separately from employees’ personnel records.
• Assess leave policies. While the practical effects of technical legislation amending sick and safe leave laws are minimal, the availability of paid and unpaid leave for victims of certain crimes as of January 1, 2026, may require employers to update leave policies to ensure compliance.
• Prepare for expanded pay data reporting. Covered employers may want to begin planning and preparing for expanded pay data reporting requirements during 2026 in anticipation of the additional 13 categories designated to be included in mandatory reports beginning in 2027.
• Consider revisiting pay equity. Employers may want to consider conducting a privileged pay equity audit in light of newly added statutory language that specifies the inclusion of every possible form of compensation, the extended statute of limitations, and expanded remedies available for equal pay claims.

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For additional information about the issues discussed in this Insight, please contact the attorney(s) listed on this page or the Epstein Becker Green Employment, Labor & Workforce Management attorney who regularly handles your legal matters.

Staff Attorney Elizabeth A. Ledkovsky also contributed to the preparation of this Insight.