Business Lawyers Blog
California employers will see several important changes to state employment laws beginning in 2026. Recent legislative updates affect a wide range of workplace issues, including paid leave, wage protections, and the terms permitted in employment agreements. Understanding these developments early allows businesses to plan ahead and update their policies with minimal disruption.
Below is an overview prepared by Structure Law Group’s California employment law attorneys in our Los Angeles and Silicon Valley offices.
Paid Leave for Crime Victims (California AB 406)
Employees may use leave if they or a family member is a crime victim and needs to attend court proceedings related to the crime. For example, an employee might need time off to testify.
Prohibitions on Employment Contracts and Agreements (California AB 692)
California AB 692, which takes effect January 1, 2026, significantly limits the use of “stay-or-pay” provisions in employment agreements. Under the new law, most clauses that require employees to repay training costs, relocation expenses, or similar expenditures if they leave before a set period will no longer be enforceable. The Legislature’s aim is to promote employee mobility by restricting repayment obligations that function like non-compete agreements.
There are narrow exceptions, such as reimbursement for tuition that provides broadly transferable skills or certain signing bonuses. Employers are encouraged to review their compensation and training structures with Structure Law attorneys to ensure future agreements comply with the new rules.
Increased Penalties for Unpaid Wages (California SB 261)
Employers should meet all wage obligations. If they do not pay a final judgment, then they can face a penalty of up to three times the outstanding amount for any unpaid wages which are left unsatisfied 180 days after the appeal period ends.
For example, if an employee wins a $5,000 judgment for unpaid wages and the employer does not pay within 180 days, penalties can increase the employer’s total liability to $20,000.
Recall and Reinstatement Rights for COVID-Affected Employees (California AB 858)
The law which provides recall and reinstatement rights to employees laid off due to COVID was set to expire December 31, 2025. California extended the law until January 1, 2027.
Notice Requirements (California SB 294)
Starting February 1, 2026, employers must provide notices of labor rights to all new employees, as well as to current employees each year.
The notice, which must use the Labor Commissioner’s template, is required to address key workplace rights and protections, including wage and hour laws such as misclassification and paid sick leave, workers’ compensation benefits and where to obtain additional information, employees’ rights to engage in union organizing, constitutional rights related to law enforcement interactions and searches, immigration-related protections and notice of inspections, and any material developments in employment law.
Prohibiting Certain Defenses Related to Artificial Intelligence (California AB 316)
Effective January 1, 2026, California’s AB 316 eliminates the ability for businesses to argue that an AI system acted autonomously as a defense in civil lawsuits. This means companies remain legally responsible for harms caused by the AI tools they develop, deploy, or use. While employers may still raise traditional defenses such as lack of causation or unforeseeability, the law shifts primary accountability to the human decision-makers behind AI systems. As a result, employers must take greater care in selecting, training, and monitoring AI technologies to reduce legal risk and ensure responsible use.
Contact an Experienced California Employment Attorney
With multiple new California employment laws taking effect in 2026, California employers face an increasingly complex compliance landscape. From paid leave expansions and wage enforcement penalties to new contract restrictions and AI-related liability, these legal updates can significantly impact your business operations if not addressed proactively. Taking the time now to review your policies, agreements, and workplace practices with SLG can help reduce risk, avoid costly penalties, and ensure a smoother transition into the new year.
Structure Law Group’s California employment law attorneys in Silicon Valley and Los Angeles regularly advise employers on compliance, risk management, and workforce strategy. If you have questions about how these 2026 laws affect your business, or if you need assistance updating your policies and employment agreements, we encourage you to contact our Silicon Valley office at (408) 441-7500 or our Los Angeles office at (310) 818-7500 to schedule a consultation or contact us online.