California ushered in 2026 with a comprehensive overhaul of its employment laws, enacting changes that will affect millions of workers and thousands of businesses across the state. The new regulations touch nearly every aspect of the employer-employee relationship, from base wages to pay transparency to the controversial practice of requiring workers to repay training costs if they leave too soon.

For workers, the changes represent an expansion of protections and earning power. For employers, they require immediate attention to compensation structures, employment contracts, and compliance procedures. Here's what you need to know.

Minimum Wage Rises to $16.90 Per Hour

The California Labor Commissioner's Office has increased the state minimum wage from $16.50 to $16.90 per hour as of January 1, 2026. The adjustment follows the annual cost-of-living formula established in Labor Code section 1182.12(c) and applies to all employers regardless of size.

The ripple effects extend beyond hourly workers:

  • Exempt employee threshold: Salaried employees who are exempt from overtime must earn at least twice the state minimum wage for full-time employment. This means exempt employees must now earn an annual salary of at least $70,304—up from $68,640 in 2025.
  • Industry-specific minimums: Fast food workers continue to earn a minimum of $20 per hour, while healthcare workers are subject to a separate scale that reaches as high as $25 per hour depending on employer type.
  • Local ordinances: Many California cities maintain higher minimums than the state floor. San Diego's minimum rises to $17.75, San Jose to $18.45, and several Bay Area jurisdictions exceed $18 per hour.

For workers earning close to the minimum, the change translates to approximately $832 in additional annual income before taxes—modest but meaningful for households living paycheck to paycheck.

The End of 'Stay-or-Pay' Agreements

Perhaps the most significant change involves restrictions on so-called "stay-or-pay" provisions in employment contracts. Assembly Bill 692, which took effect January 1, prohibits many forms of agreements that require employees to repay employers for training, relocation, or other expenses if they leave before a specified period.

The practice had become controversial in recent years as some employers used training repayment agreements to effectively trap workers in jobs. A nurse might be required to repay $15,000 in training costs if she left within two years; a truck driver might face a $10,000 bill for CDL training. Critics argued these arrangements functioned as a form of debt bondage.

Under the new law:

  • Training repayment agreements are largely prohibited: Employers cannot require employees to repay costs for training that is required for the job or primarily benefits the employer.
  • Relocation cost repayment is restricted: While some relocation reimbursement agreements remain permissible, they are subject to new limitations on duration and amount.
  • Signing bonuses receive scrutiny: Repayment provisions for signing bonuses must be proportional and decline over time.

Employers with existing stay-or-pay provisions should review their agreements immediately, as enforcement begins with the new year.

'Know Your Rights' Notice Requirements

Beginning February 1, 2026, California employers must provide a standalone "Know Your Rights" notice to all current employees on an annual basis and to new hires upon commencement of employment. The requirement stems from Senate Bill 294 and aims to ensure workers are aware of their legal protections.

Key implementation details:

  • Template required: Employers must use the Labor Commissioner's official template, not create their own documents.
  • Annual distribution: The notice must be provided each year, not just at hire.
  • Acknowledgment recommended: While not legally required, employers should document that employees received the notice.

The notice covers topics including minimum wage, overtime, meal and rest breaks, sick leave, and anti-retaliation protections.

Expanded Pay Equity Enforcement

California has long been a leader in pay equity legislation, and 2026 brings additional strengthening of these requirements. Two key laws expand employer obligations:

Senate Bill 642 (Pay Equity Enforcement Act): This law updates California's Equal Pay Act by expanding the definition of "wages" to include all forms of compensation—not just base salary. Bonuses, equity awards, stock options, vacation pay, life insurance, and other incentive compensation must now be considered when evaluating pay equity.

The practical implications are significant. An employer might pay identical base salaries to comparable employees but provide vastly different equity compensation, creating disparities that were previously difficult to challenge. The new law closes that loophole.

Senate Bill 464 (Pay Data Reporting): Employers must now store demographic information gathered for pay data reporting separately from personnel files, creating an additional administrative burden but also additional privacy protections. Civil penalties for failure to file pay data reports increase to $100 per employee for initial failures and $200 per employee for subsequent violations.

Wage Judgment Enforcement Gets Teeth

Workers who win wage theft cases often struggle to actually collect their judgments. Senate Bill 261 addresses this problem by dramatically increasing penalties for employers who fail to satisfy wage judgments.

Under the new law:

  • 180-day deadline: Employers must pay wage judgments within 180 days of the judgment becoming final.
  • Triple damages: Failure to pay within the deadline exposes employers to penalties of up to three times the original judgment amount.
  • Personal liability: In some circumstances, individual owners or managers may face personal liability for unpaid judgments.

The change is designed to prevent employers from using delay tactics to avoid paying workers what they're owed.

Rideshare Drivers Can Now Unionize

Assembly Bill 1340 creates a first-of-its-kind framework allowing rideshare drivers to form unions and negotiate contracts with companies like Uber and Lyft—while maintaining their status as independent contractors.

The hybrid approach is unusual. Traditional labor law assumes that union members are employees, not independent contractors. California's new law creates a separate category that preserves driver flexibility while granting collective bargaining rights.

Implementation details remain to be worked out, and legal challenges are likely. But for the state's hundreds of thousands of rideshare drivers, the law represents a potential path to improved pay and working conditions.

What Employers Should Do Now

For California employers, the 2026 changes require immediate action:

  • Audit compensation: Ensure minimum wage and exempt salary thresholds are met for all employees.
  • Review contracts: Examine all employment agreements for stay-or-pay provisions that may now be unenforceable.
  • Prepare notices: Download the Labor Commissioner's Know Your Rights template and develop a distribution plan.
  • Update pay equity analysis: Expand analysis to include all forms of compensation, not just base salary.
  • Strengthen judgment compliance: Ensure procedures exist to promptly pay any adverse wage judgments.

The Bottom Line

California's 2026 employment law changes represent one of the most significant packages of worker protections enacted in recent years. For employees, they offer higher wages, stronger pay equity rights, and freedom from predatory training repayment agreements. For employers, they demand careful attention to compliance. The California model continues to influence employment policy nationally, making these changes worth watching even for those outside the Golden State.