A recent TC webinar highlighted the myriad of changes affecting California employment law in 2026. From wage and hour updates to challenges around enforcement of arbitration agreements, equal pay obligations, and new notice requirements, the compliance landscape is shifting fast. Below, we expand on the webinar’s key takeaways and outline practical steps every in-house legal and HR team should take now to protect the company, assess risk, and preserve leverage.
1. Update Employee Handbooks and Policies
Why it matters:
California’s 2026 legislative changes touch nearly every facet of employment compliance—from expanded equal pay protections to new notice obligations under the Workplace Know Your Rights Act (SB 294). Employers must also prepare for emerging requirements around bias mitigation training (SB 303), expanded job-protected leave (AB 406), and broader definitions of personnel records under Labor Code §1198.5.
Action Steps:
- Incorporate new leave entitlements and bias training provisions into your handbook.
- Add protocols for annual distribution of SB 294 notices and emergency contact collection.
- Ensure pay transparency language aligns with SB 642 requirements for job postings.
- Confirm compliance with existing mandates like workplace violence prevention programs and indoor heat illness protections.
2. Review and Revise Arbitration Agreements
Why it matters:
California courts continue to scrutinize arbitration agreements, and recent developments raise the stakes for employers. Challenges to electronic signatures and the Ending Forced Arbitration Act (EFAA) complicate enforceability. Even once an arbitration agreement is enforced, under CCP §§1281.97–1281.98, failure to pay arbitration fees within 30 days can result in a case being returned to court.
Action Steps:
- Audit your arbitration agreements for clarity and compliance with current law.
- Strengthen e-signature protocols (handwritten signatures where possible, or unique electronic IDs, secure authentication, and audit trails).
- Prepare for EFAA-related challenges by anticipating mixed claims and venue implications.
- Implement internal controls to ensure arbitration invoices are paid on time.
3. Audit Wage-Hour Compliance
Why it matters:
California’s minimum wage will rise to $16.90/hour on January 1, 2026, increasing the minimum salary threshold for most exempt employees to $70,304 annually. Employers must also ensure overtime, meal/rest premiums, and sick pay are calculated using the correct “regular rate”—which includes non-discretionary bonuses and other incentive pay. Missteps here are among the easiest for plaintiffs to prove and can trigger costly class actions or PAGA claims.
Action Steps:
- Recalculate exempt salary thresholds and confirm duties tests.
- Conduct a privileged wage-hour audit to identify and correct compliance gaps.
- Verify “regular rate” calculations for all forms of premium pay.
- Review reimbursement policies under Labor Code §2802 for remote work expenses (vehicles, phones, internet, and potentially furniture).
Beyond the Basics: Additional Compliance Priorities
- Equal Pay & Transparency: Expand pay equity reviews to cover all genders and compensation types; update job postings with good-faith pay ranges; extend record retention to six years.
- Notice & Reporting: Prepare for SB 294’s annual notice and emergency contact requirements; begin mapping job categories for SB 464’s expanded pay-data reporting in 2027.
- Agreement Overhauls: Eliminate “stay-or-pay” repayment provisions (AB 692) and move permitted incentives to standalone agreements with statutory guardrails.
- AI Governance: Inventory any use of automated decision-making technology (ADMT) and plan for compliance with CCPA/CPPA rules effective January 1, 2027.
Our Labor & Employment team in California is here to help you navigate these complex updates, from wage and hour audits to litigation prevention strategies, notice requirements, and pay equity compliance. Contact us today to discuss how these changes impact your organization.
