California Governor Gavin Newsom has signed several Assembly Bills (AB) and Senate Bills (SB) that expand employee rights and increase workplace compliance obligations for employers. Here is a rundown on the key new laws. Unless otherwise specified, the laws take effect on January 1, 2026.
Workplace Bias Protections
Pay Transparency – SB 642
Under California’s existing pay transparency law, Labor Code section 432.3, employers are required to share the pay scale for a position in a job posting or on request by an applicant or employee. SB 642 revises the definition of “pay scale” to mean a good faith estimate of the expected salary or hourly wage range that an employer reasonably expects to pay for the position upon hire. As such, to ensure compliance with the pay transparency law, employers will be required to refine the pay ranges included in job postings or in response to applicant or employee requests.
Equal Pay – SB 642
SB 642 also makes a number of revisions to California’s equal pay law, Labor Code section 1197.5. First, SB642 updates the language on the existing prohibition with respect to pay disparity based on sex, which currently refers to paying an employee of the “opposite sex” different wage rates. The new law now refers to paying an employee of “another sex” different wage rates, which makes clear that the law also encompasses equal pay for non-binary employees. Second, SB 642 adds a definition of “wages” and “wage rates” to expansively 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.” Third, the new law extends the statute of limitations for equal pay claims to three years (previously two years except for willful violations) and permits recovery of wages for up to six years. And finally, SB 642 sets out the bases for a cause of action under section 1197.5, including when (1) an alleged unlawful compensation decision or other practice is adopted; (2) an individual becomes subject to an alleged unlawful compensation decision or other practice; or (3) an individual is affected by application of an alleged unlawful compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from the decision or other practice.
In light of these expansive changes, employers should review their pay policies and practices and ensure that they are considering all forms of “wages” when reviewing compensation or auditing pay equity. Employers should also train HR on the revisions and ensure documentation supports compensation decisions.
Pay Data Reporting and Demographic Data – SB 464
Under existing law, California requires employers with 100 or more employees to submit an annual pay data report (similar to the federal EEO-1) to the California Civil Rights Department (CRD), broken down by race, ethnicity, and sex within 10 job categories. Starting in 2027, the number of specified job categories increases to 23. The new law also makes it mandatory for courts to impose penalties for non-reporting if requested by the CRD.
In addition, SB 464 requires employers to store employee demographic data collected for the pay data report separately from employee personnel records. Given this new requirement, employers should consider auditing their recordkeeping practices to ensure demographic data and other sensitive or confidential information is properly stored separately from personnel records with appropriate access restrictions.
Bias Training Protections – SB 303
SB 303 introduces protections in the California Fair Employment and Housing Act for unconscious bias training, with a stated goal of encouraging employers to conduct such training. The law provides that an employee’s assessment, testing, admission, or acknowledgment of their own personal bias that was made in good faith and solicited or required as part of a “bias mitigation training” does not constitute unlawful discrimination, and that conducting bias mitigation training is not, by itself, unlawful discrimination. For purposes of the new law, “bias mitigation training” means bias mitigation or bias elimination training, education, and activities an employer provides to educate employees on understanding, recognizing, or acknowledging the influence of conscious and unconscious biases. Bias mitigation training also includes implementing strategies to mitigate the impact of personal biases, such as assessments or tests, workshops, toolkits, and tracking bias mitigation efforts.
FEHA Enforcement – SB 477
SB 477 strengthens enforcement of the California Fair Employment and Housing Act by giving the California Civil Rights Department (CRD) additional tools and flexibility to investigate, pause (with the parties’ consent), or prosecute certain complex cases. Also, under existing law a complainant’s statute of limitations is tolled while the CRD investigates and until the CRD brings its own suit or issues a right to sue letter. The complainant then has one year from receiving a right to sue letter to file a civil action. The new law provides that if a complainant appeals CRD’s decision to close a complaint, and CRD affirms the closure, the statute of limitations is tolled for one additional year from the date of the appeal decision.
Employment Contracts
“Stay-or-Pay” Contracts – AB 692
AB 692 expands California’s prohibition on covenants not to compete and other contracts in restraint of trade by now making it unlawful to enter into “stay or pay” contracts. Specifically, the law adds new section 16608 to the Business & Professions Code to provide that for contracts entered into on or after January 1, 2026, employers are prohibited from either including in an employment contract or requiring a worker to execute as a condition of employment or work relationship, the following types of contract terms: (1) that require a worker to pay an employer, training provider, or debt collector for a debt if the employment or other work relationship terminates; (2) that authorize the employer, training provider, or debt collector to resume or initiate collection or end forbearance on a debt if the work relationship terminates; or (3) that impose any penalty, fee, or cost on a worker if the work relationship terminates. A “debt” includes money, personal property, or their equivalent that is due or owing, such as for employment- or education-related costs or a consumer financial product or service, even if incurred voluntarily. “Penalty, fee, or cost” includes a replacement hire fee, retraining fee, replacement fee, quit fee, reimbursement for immigration or visa-related costs, liquidated damages, lost goodwill, and lost profit. “Worker” includes an employee or prospective employee and does not appear to include independent contractors.
The law does include exceptions to its otherwise broad prohibition of stay-or-pay contracts. For example, the law permits tuition reimbursement contracts for a transferable credential, so long as the contract (1) is separate from the employment contract, (2) does not require obtaining the credential as an employment condition, (3) specifies the repayment amount in advance and the amount does not exceed the cost to the employer, (4) provides for prorated repayment proportional to the total repayment amount and length of the required employment period, (5) does not require an accelerated payment schedule upon separation from employment, and (6) does not require repayment if the worker is terminated unless it is for misconduct.
Similarly, the law exempts a contract for a signing bonus with retention incentives, so long as (1) the repayment terms are in a separate agreement, (2) the employee is notified of the right to consult with an attorney and has at least five business days to review the agreement, (3) any repayment obligation for early separation from employment is not subject to interest and is prorated based on the remaining term of the retention period but no more than two years from receipt of the payment, (4) the worker can defer receipt of the payment to the end of a fully served retention period without any repayment obligation, and (5) separation prior to the retention period was at the employee’s sole election or was by the employer for misconduct.
SB 692 also adds a new Labor Code section specifying that a contract or contract term that violates new Business & Professions Code section 16608 is void as against public policy. Employees have a private right of action under the new law, and can recover actual damages or $5,000 per worker, whichever is greater, as well as injunctive relief and attorney’s fees and costs.
Employers should be certain to review contract templates to ensure that any stay-or-pay provisions in contracts entered into on or after January 1, 2026 are removed or revised to comply with the new law.
Labor Relations
State Authority in Private Sector Labor Disputes – AB 288
With AB 288, California joins New York in attempting to create state authority over private-sector labor disputes where the federal National Labor Relations Board (NLRB) does not act. In particular, AB 288 adds a new section to the Labor Code to give the California Public Employee Relations Board new authority to hear and decide unfair labor practice cases that the NLRB does not act on and to impose relief, including civil penalties, for labor violations.
The bill is already facing a legal challenge over whether it is preempted by the National Labor Relations Act. The NLRB, which previously sued to enjoin the New York law from taking effect, has now filed suit to block enforcement of AB 288.
Gig Driver Rights to Unionize – AB 1340
AB 1340, the Transportation Network Company (TNC) Drivers Labor Relations Act, grants certain app-based drivers who are independent contractors rights to form, join, and participate in the activities of TNC driver organizations, to bargain through representatives of their own choosing, to engage in concerted activities for the purpose of bargaining or other mutual aid or protection, or to refrain from such activities. The new law covers drivers who use their personal vehicles in connection with a TNC’s online-enabled application or platform to connect with passengers. The bill sets out procedures for forming driver organizations and for bargaining, including actions by a TNC or the driver organization that would amount to unfair labor practices.
Wage Protections
Enforcement Against Tip Theft – SB 648
Existing California law prohibits employers from taking any gratuity that is given to or left for an employee by a patron, or from deducting gratuities from wages. SB 648 authorizes the Labor Commissioner to investigate and issue a citation or file a civil action with respect to gratuities taken or withheld; while the Labor Commissioner already has authority to investigate wage theft, it previously lacked such authority with respect to tips. Employers should consider reviewing any tip policies and practices to ensure they are aligned with California requirements.
Unsatisfied Wage Judgments – SB 261
SB 261 raises the stakes for employers that fail to timely pay wage judgments. The law imposes a civil penalty of up to three times the outstanding judgment amount if an employer fails to pay a wage judgment for 180 days after an appeal period lapsed. The law also requires courts to award reasonable attorney’s fees and costs to a prevailing plaintiff in an action to enforce a final wage judgment brought by a judgment creditor, Labor Commissioner, or public prosecutor.
Vehicle Expenses and Independent Contractors – SB 809
SB 809 clarifies that mere ownership of a vehicle, including a personal vehicle or a commercial vehicle, used by a person in providing labor or services for remuneration does not make that person an independent contractor. The new law also clarifies that existing Labor Code section 2802, which requires employers to reimburse employees for business expenses, applies to reimbursement for use of an employee’s personal or commercial vehicle to perform their job duties.
Leaves of Absence
Expanded Leave Rights for Victims of Violence – AB 406
Last year, California revised and expanded rights for victims of qualifying acts of violence – including domestic violence, sexual assault, stalking, and other violent crimes causing injury or death or involving use of a weapon or force – to take time off work for specified reasons. The bill also moved the protections from the Labor Code to the Fair Employment and Housing Act section 12945.8 (see our prior blog post here).
AB 406 now further updates protections under section 12945.8, to prohibit all employers from discharging or retaliating against employees who are a victim or a family member of a victim for taking time off from work to attend judicial proceedings related to the crime, including, but not limited to, any delinquency proceeding, a post-arrest release decision, plea, sentencing, postconviction release decision, or any proceeding where a right of the employee or family member is an issue. This time off is applicable where the crime involves either a violent felony, serious felony, or theft or embezzlement felony, or where the victim has suffered direct or threatened physical, psychological, or financial harm due to the commission or attempted commission of vehicular manslaughter while intoxicated, felony child abuse, assault resulting in the death of a child under age eight, felony domestic violence, felony physical abuse of an elder or dependent adult, felony stalking, solicitation for murder, a serious felony, hit-and-run causing death or injury, felony driving under the influence causing injury, or sexual assault.
Also, California’s paid sick leave law previously provided that employees could use paid sick leave for certain reasons under the crime victim leave/protections law. AB 406 updates the sick leave law to make clear that employees may use paid sick leave for additional reasons covered under the crime victim law, including for an employee to appear in court as a witness to comply with a subpoena or other court order or to serve in an inquest or trial jury. The new sick leave provisions took effect on October 1, 2025.
Employers should review and update their leave of absence and sick leave policies immediately, to ensure they reflect the rights.
Paid Family Leave for Designated Persons – SB 590
SB 590 revises California’s Paid Family Leave (PFL) law to allow employees to collect PFL benefits during a leave to care for a seriously ill “designated person,” starting July 1, 2028. A designated person means any care recipient related by blood or whose association with the employee is the equivalent of a family relationship. An employee who requests PFL benefits to care for a designated person must identify the person and, under penalty of perjury, attest how they are related by blood or how the association is the equivalent of a family relationship. Employers should be sure to update their policies as needed to reflect this expansion of PFL eligibility.
Personnel Records
Education and Training Records – SB 513
Under existing Labor Code section 1198.5, employees have the right to review or request a copy of their personnel records that relate to the employee’s performance or any grievance concerning the employee. SB 513 amends section 1198.5 to also permit employees to inspect records related to their training and education, and employers must retain such records to include employee name, name of training provider, duration and date of training, core competencies of the training, and the resulting certification or qualification. Employers should update recordkeeping practices and personnel file review policies and procedures to comply with these new requirements.
Reductions in Force
Cal-WARN Notices – SB 617
AB 617 revises notice requirements under Cal-WARN, which requires employers to provide advance notice of mass layoffs, relocations, or termination at a covered establishment in the state. Under existing law, Cal-WARN notices track the requirements for notice under federal WARN. Now, Cal-WARN notices will be required to also specify whether the employer plans to coordinate services, such as rapid response orientation, through the local workforce development board or another entity, or not at all. The employer must also include in notices certain other information related to rapid response activities by the local workforce development board. Additionally, notices must include information regarding CalFresh, which is California’s food assistance program.
COVID Recall Rights – AB 858
AB 858 extends the sunset date of existing recall and reinstatement rights for employees laid off in the hotel, private clubs, event centers, airport, and building services (office, retail, commercial) industries for a reason related to the COVID-19 pandemic to January 1, 2027. The law requires employers to offer laid off employees information about job positions that become available for which the employees are qualified and to give those employees preference in hiring for such positions. The recall rights were originally due to expire on December 31, 2025.
Other Employee Rights
New Notice of Workplace Rights – SB 294
SB 294, the Workplace Know Your Rights Act, mandates that employers provide employees with a new standalone workplace notice that advises employees of rights under various California workplace laws, including workers’ compensation, notice requirements related to inspections conducted by an immigration agency, protections regarding unfair immigration-related practices, union organizing rights, and more. The notice must be provided as follows: (1) to current employees by February 1, 2026 and then annually, and in a manner the employer normally uses to communicate employment-related information, whether by personal service, email, text message, or other means, so long as it can reasonably be anticipated to be received by the employee within one business day of sending; (2) to new hires, and (3) annually to an employee’s authorized representative (if any).
The Labor Commissioner will post a model notice by January 1, 2026, and will develop videos advising employees and employers of their rights. The notice must be in the language the employer normally uses to communicate employment-related information to the employee, and which the employee understands, if the template notice is available in that language on the Labor Commissioner’s internet website. If the template notice is not available in that language, the employer may provide the notice in English. Employers are required to keep records of compliance with the notice requirement for three years, including the date each notice was provided or sent.
Worksite Arrests – SB 294
SB 294 also requires employers, at an employee’s request, to notify the employee’s designated emergency contact if the employee is arrested or detained on the worksite. If the arrest or detention occurs during work hours or when the employee is performing their job duties, but not at the worksite, the employer is only required to notify the emergency contact if the employer has actual knowledge of the arrest or detention of the employee. Employers must provide existing employees the opportunity to name an emergency contact on or before March 30, 2026, and do the same for new hires after March 30, 2026.
AI Whistleblower Protections – SB 53
SB 53, the Transparency in Frontier Artificial Intelligence Act, adds new whistleblower protections to the California Labor Code for certain employees of companies developing advanced AI systems. The law, which aims to foster transparency and accountability in a rapidly evolving AI industry, prohibits large AI developers from retaliating against employees who have responsibility for assessing, managing, or addressing risk of critical safety incidents when the employee reports a violation of the Act or raises concerns to the government or employer that the developer’s AI activities pose “catastrophic risks.” “Catastrophic risks” are threats that could materially contribute to the death of, or serious injury to, at least 50 lives or cause $1 billion in damages. The new law also mandates anonymous internal reporting channels within large AI companies, provides that safety concerns can be reported to regulators or the California Attorney General without fear of reprisal, and requires covered companies to post a workplace notice of these new whistleblower rights.
Workers’ Compensation
Workers’ Compensation Penalties for Licensed Contractors – SB 291
SB 291 strengthens workers’ compensation compliance requirements for licensed contractors or applicants for licensure and imposes stricter penalties for contractors that lack workers’ compensation coverage. The law sets a maximum civil penalty of $10,000 per violation for sole owner licensees, $20,000 maximum civil penalty for partnerships, corporations, LLCs or tribal business licensees, and $30,000 penalty for repeat violations.
If you have any questions concerning the material discussed in this post, please contact the members of our employment practice.