It’s time to update those handbooks for 2026 and while there are numerous new laws California employers must comply with, not all of them are, what I call, “handbook worthy.” Here are three changes I’m making to this year’s handbooks to stay compliant and ensure policies are clear for all employees.
First, under the new Civil Rights Department regulations that took effect October 1, 2025, it’s prohibited for employers to use automated-decision systems (ADS) such as AI tools in hiring, promotion or other employment-related decisions if those systems discriminate against applicants or employees based on protected characteristics under the Fair Employment and Housing Act (FEHA). Employers must retain ADS-related data (including screening data, outcomes, vendor reports) for at least four years and vendors of such tools may be treated as “agents” of the employer, making the employer liable. Because of this, our handbooks’ non-discrimination/EEO policy will be expanded to say that any use of software, algorithm or automated tool in recruitment, promotions, performance or termination decisions must be carefully vetted to ensure no disparate impact; that employees may ask about use of such tools; and that the company will maintain appropriate documentation and oversight.
Second, AB 406 expands upon last year’s AB 2499 legislation reorganizing California’s crime victim time off and accommodations law. This law prohibits employers from retaliating against or terminating an employee who is a victim or a family member of a victim taking time off in order to attend judicial proceedings related to that crime. AB 406 creates a different definition of “victim” which includes being subjected to one of 14 different crimes. It also revises notice requirements under California’s jury duty law, requiring reasonable advance notice, unless the “advance notice is not feasible.”
Third, given the passage of SB 648, amending Labor Code section 351, which empowers the state labor commissioner to investigate and issue citations and fines for tip theft, we recommend ensuring all tip policies and pools are clear and in writing. Handbook policies should clarify that tips left by patrons (including credit-card tips) are the sole property of the employee, that the employer or its managers may not deduct credit-card processing fees or take any portion of the tips, and that tips paid via credit card must be paid to the employee no later than the next regular payday following the date the patron authorized the payment.
These updates are meant to keep handbook language aligned with California’s evolving employment-law landscape and reduce legal risk for the upcoming year.