California Employment Law: 2025 Year in Review (and What’s in Store for 2026)

As 2025 closes and 2026 gears up, California’s employment law landscape continues to evolve rapidly. Over the past year, the state legislature and regulatory authorities enacted a wide range of changes affecting wage & hour compliance, pay equity, leave rights, personnel records, enforcement penalties, employer notice obligations, and more. Understanding these developments and the new laws that take effect beginning January 1, 2026, is essential for both employees and employers working in California’s complex workplace law environment.

Below, we highlight the most impactful employment law changes from 2025 and preview key priorities for 2026. For help with workplace discrimination or harassment claims, contracts or other employment practices in the Bay Area, contact Richard Koss, Attorney at Law, to speak with an experienced San Francisco employment lawyer.

Major Developments in California Employment Law During 2025

1. Expanded Enforcement and Reporting Obligations

The Legislature passed several bills that significantly broaden employer obligations related to data reporting and transparency:

• Pay Transparency and Reporting – New equal pay reforms via SB 642, the Pay Equity Enforcement Act, expand both the definition of “wages” to include benefits and non-salary compensation (like stock options) and reporting requirements for employers. These reforms aim to strengthen wage equity enforcement and align California’s framework more closely with evolving pay equity standards. Starting January 1, 2026, job postings will need to include a “good faith estimate” of pay for a position upon hire, and the statute of limitations for claims has been extended to three years with a six-year look-back.

• Mandatory Pay Data Reporting Penalties – SB 464 increases the number of job categories for pay data reporting and requires mandatory civil penalties when employers fail to file compliant reports at the request of the California Civil Rights Department (CRD).

• Personnel Records Access Expansion – SB 513 expands employees’ rights to inspect personnel records to include training and education records, increasing transparency for workers and illustrating California’s continued expansion of employee information rights.

2. Wage & Hour Adjustments

Several wage & hour provisions saw updates in 2025 with a continuing compliance impact:

• Minimum Wage Changes – California’s statewide minimum wage increased multiple times, with local ordinances in many cities and counties further raising required rates. Employers with multiple worksites must remain vigilant about differing local wage floors.

• Exempt Salary Thresholds Adjusted – In alignment with wage increases, salary minimums for exempt California employees were updated, affecting overtime qualification and exempt status compliance.

These impacts carried forward into compliance obligations through the rest of 2025 and now play into planning for 2026 as employers audit wage classifications, salary thresholds, and payroll systems.

Top 2026 Employment Law Changes Employers and Employees Must Prepare For

As we look ahead, several new laws becoming effective on January 1, 2026, or later will substantially affect California workplaces.

1. Expanded Pay Equity and Pay Scale Transparency (SB 642)

Effective January 1, 2026, SB 642 revises the Equal Pay Act in California:

• Pay scale definitions now require a good-faith estimate of expected compensation in job postings.

• The statute of limitations for wage discrimination claims has been extended, and employees can seek relief for wage discrimination up to six years.

• Protections explicitly cover wage differences based on sex, race, or ethnicity and extend to nonbinary employees.

These changes strengthen California’s pay equity regime and require employers to reassess their pay practices, job postings, and compensation documentation.

2. Wage Judgment Enforcement & Greater Penalties (SB 261)

Another new measure, effective January 1, 2026, tightens enforcement of wage judgments. Employers that fail to satisfy wage awards within 180 days face mandatory court costs, attorneys’ fees, and additional penalties potentially up to triple the outstanding judgment amount.

This strong incentive underscores the importance of prompt compliance once wage violations are adjudicated.

3. Minimum Wage and Exempt Salary Adjustments

California’s state minimum wage increases to $16.90 per hour in 2026, requiring payroll and classification updates across employers of every size. Corresponding increases in exempt salary thresholds will affect overtime eligibility and exempt classification compliance.

Employers must audit job classifications, salary bases, and payroll systems to avoid wage & hour exposures beginning in the new year.

4. Notice and Reporting Requirements

Under new legislation like the Workplace Know Your Rights Act (SB 294), employers will be required to provide comprehensive written notices to employees of key workplace rights, including rights to:

• Workers’ compensation benefits

• Protection from unfair immigration-related practices

• Notice of immigration inspections

On or before February 1, 2026 (and annually thereafter), this expanded posted notice regime will become a new compliance obligation for California employers.

5. Changes to Leave and Family Benefits

California continues to expand leave protections:

• Paid Family Leave (PFL) Expansion — Eligibility will be extended to allow employees to take leave to care for a “designated person” related by blood or whose association is the equivalent of a family relationship, effective July 1, 2028.

• Rehire and Retention Protections Extended — Laws protecting displaced hospitality and service industry workers from COVID-19 layoffs have been extended through 2027.

6. Ban on “Stay or Pay” Employment Contract Provisions

Effective January 1, 2026, California will prohibit certain employment contract provisions requiring employees to reimburse training or other costs upon separation, subject to limited exceptions. This change reflects California’s continued push against contractual terms seen as unduly punitive to workers.

Looking Ahead: Regulatory and Enforcement Priorities

In addition to legislative changes, California enforcement agencies are shifting priorities in 2026 and beyond:

• Pay Data Enforcement — More granular reporting and mandatory penalties make compliance with pay data reporting critical.

• Wage Theft Enforcement Enhancements — Broader authority for enforcement of wage theft claims, including tips and gratuities, holds employers to heightened accountability.

• AI and Algorithmic Tools Oversight (Federal & Local) — While not strictly state law, algorithm-driven HR tools are under scrutiny for disparate impact risks, an area of enforcement attention that employers should monitor closely given California’s robust discrimination enforcement climate.

Key Takeaways for California Employers and Employees

For Employers

• Audit and update wage, salary, and exempt classifications in light of new minimum wage and exempt threshold changes.

• Review and revise job postings to comply with expanded pay scale transparency rules.

• Implement updated notice postings and reporting mechanisms for personnel records and pay data.

• Prepare internal systems for new penalties tied to unpaid wage judgments and more rigorous enforcement of wage & hour laws.

For Employees

• Stay informed about your rights to wage transparency, pay equity, leave protections, and compensation history access.

• Understand that expanded reporting and enforcement mechanisms provide additional tools to address pay discrimination and wage violations.

• Seek legal advice early if you believe your rights under these updated laws have been violated.

Contact San Francisco Employment Law Attorney Richard Koss

California’s employment law environment continues to evolve with some of the most expansive and worker-centric protections in the nation. The 2025 legislative session concluded with meaningful new requirements taking effect in 2026 that affect wages, pay equity, leave, personnel records, contract provisions, and enforcement mechanisms. Both California employees and employers must stay ahead of these changes to protect their rights and maintain compliance in the year ahead.

For help with employment laws as a San Francisco employer or employee, contact Richard Koss, Attorney at Law, with offices in Redwood City and Antioch and serving clients throughout the Bay Area.