New Laws in 2026 – What Employers and Businesses Should Know

1.10.26

Beginning January 1, 2026, California employers should be aware of new obligations imposed by recently passed employment laws. A summary of key insights is as follows.

FOR CA EMPLOYERS, the following compliance obligations became effective January 1st:

Tip Enforcement Authority (SB 648)

Under California Labor Code Section 351, tips are the sole property of employees and may not be taken, retained, deducted or used by employers — including owners, managers and supervisors — to offset wages. S.B. 648 authorizes the Division of Labor Standards Enforcement to investigate gratuity-related complaints and pursue civil actions against employers that unlawfully take, delay, or improperly distribute tips. Pooling tips and distributing them to a group of employees is permissible in California. However, managers, supervisors, or other “agents” cannot participate in the pool. Employers should ensure pool participants are reasonably defined and that the formula for distributing the pool is fair and reasonable and should implement a clear internal complaint procedure for employees to report concerns about tip distribution or handling.

Pay Data Reporting (SB 464)

As of Jan. 1, 2026, employers with 100 or more employees on their payroll, or an employer utilizing 100 or more workers hired through labor contractors, must annually submit pay data reporting to the Civil Rights Department. Employers must also maintain all demographic information that is collected for pay data reporting separately from personnel files, ensuring that such information is distinctly segregated and properly secured. S.B. 464 mandates civil penalties for noncompliance. In anticipation of the new changes, employers should review their data collection and reporting systems to ensure demographic information is segregated appropriately and workforce classifications align with the new standard occupational classification structure.

Equal Pay Act (SB 642)

Under the Equal Pay Law (Labor Code section 1197.5), employers are prohibited from paying employees less wages for substantially similar work based on sex. Prior, to Jan. 1, 2026, the Equal Pay Law prohibited employers from paying an employee less than an employee of the “opposite sex.” S.B. 642 amends the Labor Code section 1197.5 to now prohibit pay disparity between an employee of “another sex,” which encompasses non-binary genders. Further, S.B. 642 broadens the definition of “wages” to include bonuses, equity awards, profit-sharing plans, lodging or housing benefits, cleaning or gasoline allowances, paid time off, reimbursement for travel expenses, and insurance benefits. Consequently, employers must evaluate wages or wage rates as total compensation rather than limiting pay equity assessments to base salary or hourly pay.

For Employers with 15 or More Employees:

S.B. 642 updates the definition of "pay scale" to require employers’ job postings to reflect a “good faith estimate” of the compensation the employer reasonably expects to pay upon hire, rather than estimates for the position as a whole. S.B. 642 also extends the statute of limitations for pay equity claims to three (3) years with recovery for the entire period a violation exists, not to exceed six (6) years, and codifies a broader continuing violation doctrine. Recordkeeping expectations are likewise expanded by requiring employers to retain detailed documentation of compensation decisions for longer periods.

Bias Mitigation Training (SB 303)

Effective Jan. 1, 2026, “an employee’s assessment, testing, admission, or acknowledgment of their own personal bias that was made in good faith and solicited or required as part of a bias mitigation training does not, by itself, constitute unlawful discrimination.” S.B. 303 clarifies that under Government Code Section 12940.2, which now falls under the Fair Employment and Housing Act, an employee's good faith acknowledgment or assessment of personal bias during an employer-required or employer-solicited bias mitigation training does not, on its own, constitute unlawful discrimination. The statute defines "bias mitigation training" broadly to encompass any employer-provided education, assessments, workshops, or activities that are designed to help employees understand, recognize, or acknowledge conscious or unconscious bias, and to implement identifiable strategies to reduce such bias. These protections apply only within the confines of the training environment and do not excuse discriminatory conduct or shield employers from liability for actual discriminatory acts.

Personnel Records (SB 513)

S.B. 513 expands California Labor Code Section 1198.5 to expressly include education and training records within the definition of an employee’s personnel record. If an employer maintains such records, the documentation must include the employee's name, the name of the trainer, the date and duration of the training, the core competencies or skills addressed in the training, and any resulting certification, qualification, or credential. Current and former employees may request copies of these records and employers must produce them within 30 days (or up to 35 days by mutual agreement). Employers should review their training documentation practices to ensure that all required information is consistently captured and retained. Violations are classified as an infraction under the Labor Code and may result in a $750 penalty, injunctive relief, and attorney’s fees.

Be sure to reach out to one of our attorneys at Schwartz Semerdjian to discuss your specific workplace, handbook, and/or policy needs.  This article was written by Scott Kerr.