California Employment Law: Legislative Update – October 2025

Governor Gavin Newsom recently approved and vetoed a myriad of bills that will affect employers in California. Below is a summary of some prominent bills and other developments:

Minimum Wage Update

Starting January 1, 2026, the minimum wage in California for all employees will be $16.90 per hour. But some local jurisdictions require higher minimum rates. For example:

• Los Angeles City: $17.87/hr (as of July 1, 2025)
• Los Angeles County (unincorporated areas): $17.81/hr (as of July 1, 2025)
• Santa Monica: $17.81/hr (as of July 1, 2025)
• San Francisco: $19.18/hr (as of July 1, 2025)
• South San Francisco: $17.70/hr (as of January 1, 2025)
• San Jose: $17.95/hr (as of January 1, 2025)
• Mountain View: $19.20/hr (as of January 1, 2025)

Note the applicable rate is determined based on the employee’s location (i.e., where the work is being performed).

Further, certain industries may have their own minimum rates (e.g., fast food and certain healthcare workers) that may exceed the state or local jurisdiction’s minimum wage rates.

The increase in the State’s minimum wage also raises the minimum salary threshold for exempt employees:

• $70,304 annually;
• $5,858.67 monthly;
• $1,352 weekly

Assembly Bill 692: Limitations on “Stay-or-Pay” Contracts

Assembly Bill 692 establishes new restrictions on employment agreements in California, making it unlawful, effective January 1, 2026, for employers to require a worker to repay a “debt” if their employment terminates.

The bill defines “worker” broadly to include employees and prospective employees. The term “debt” is defined as “money, personal property, or their equivalent that is due or owing or alleged to be due or owing from a natural person to another person, including, but not limited to, for employment-related costs, education-related costs, or a consumer financial product or service, regardless of whether the debt is certain, contingent, or incurred voluntarily. “

Despite the broad prohibition, AB 692 exempts several types of repayment contracts, including contracts related to the lease, financing, or purchase of residential property; contracts entered into under any loan repayment assistance program or loan forgiveness program; and contracts for the repayment of the cost of tuition for a “transferable credential” or sign-on bonuses, both of which are subject to specific conditions detailed below.

Repayment for a Transferable Credential

For contracts related to the repayment of the cost of tuition for a “transferable credential” to be lawful, the employee must voluntarily enroll in a program that earns a degree offered by an accredited third-party institution authorized to operate in California. Critically, the credential must be transferable and useful for employment beyond the employee’s current employer.

The contract must also meet all of the following conditions:

1. The contract is offered separately from any contract for employment.
2. The contract does not require obtaining the transferable credential as a condition of employment.
3. The contract specifies the repayment amount before the worker agrees to the contract, and the repayment amount does not exceed the cost to the employer of the transferable credential received by the worker.
4. The contract provides for a prorated repayment amount during any required employment period that is proportional to the total repayment amount and the length of the required employment period and does not require an accelerated payment schedule if the worker separates from the employment.
5. The contract does not require repayment to the employer by the worker if the worker is terminated, except if the worker is terminated for misconduct.

Repayment for Sign-On Bonuses

For repayment of a sign-on bonus to be lawful, the initial payment must be discretionary, paid at the outset of employment, and not tied to specific job performance.

The contract must also meet all of the following conditions:

1. The terms of any repayment obligation are set forth in a separate agreement from the primary employment contract.
2. The employee is notified that they have the right to consult an attorney regarding the agreement and provided with a reasonable time period of not less than five business days to obtain advice of counsel prior to executing the agreement.
3. Any repayment obligation for early separation from employment is not subject to interest accrual and is prorated based on the remaining term of any retention period, which shall not exceed two years from the receipt of payment.
4. The employee has an option to defer receipt of the payment to the end of a fully served retention period without any repayment obligation.
5. Separation from employment prior to the retention period was at the sole election of the employee, or at the election of the employer for misconduct.

Enforcement and Penalties

AB 692 also adds Labor Code § 926, which authorizes a private right of action for affected workers, including damages or five thousand dollars ($5,000) per worker, whichever is greater, in addition to injunctive relief, and attorney’s fees and costs.

Senate Bill 642: Amendments to the California Equal Pay Act and Pay Transparency Act

Amendments to the California Equal Pay Act

The California’s Equal Pay Act (Labor Code § 1197.50) prohibits employers from paying an employee a lower wage than another employee of the opposite sex or a different race or ethnicity for substantially similar work.

For purposes of the Equal Pay Act only, SB 642 defines “wage” as “all forms of pay, including, but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.”

The bill further extends the time an Equal Pay Act lawsuit can be commenced from two, to three years “after the last date the cause of action occurs,” which is defined as any of the following:

(1) an alleged unlawful compensation decision or practice is adopted,

(2) when an individual becomes subject to the decision or practice, or

(3) when an individual is affected by the application of the decision or practice.

SB 642 also provides that an employee is entitled to obtain relief for the entire period of time in which a violation of its provisions exists, but not to exceed six years.

Amendments to the California Pay Transparency Law

The California Pay Transparency Law (Labor Code § 432.3) mandates pay transparency by requiring all employers to disclose the pay scale upon request to employees and applicants and indicate the pay scale on job postings (for employers with 15+ employees). The existing definition of “pay scale” is the salary or hourly wage range the employer reasonably expects to pay for the position.

The bill revises this to require the range be a “good faith estimate” of what an employer reasonably expects to pay for the “position upon hire.”

Senate Bill 513: Personnel Records

Under California law, current and former employees have the right to inspect the personnel records that the employer maintains “relating to the employee’s performance or to any grievance concerning the employee.” (Labor Code § 1198.5)

This senate bill amends Labor Code § 1198.5 to expand an employee’s right to also access education or training records. If these records are maintained by the employer, they must include the following information:

• The name of the employee.
• The name of the training provider.
• The duration and date of the training.
• The core competencies of the training, including skills in equipment or software.
• The resulting certification or qualification.

Senate Bill 294: Workplace Notices and Payment of Wages (Workplace Know Your Rights Act)

The new Labor Code Sections 1550–1559 establish the Workplace Know Your Rights Act. This Act requires an employer, on or before February 1, 2026, and annually thereafter, to provide employees with a stand-alone written notice of their rights as workers.

The notice must detail the following:

(1) The right to workers’ compensation benefits, including disability pay and medical care for work-related injuries or illness, as well as the contact information for the Division of Workers’ Compensation.

(2) The right to notice of inspection by immigration agencies pursuant to Labor Code Sec. 90.2(a).

(3) Protection against unfair immigration-related practices against a person exercising protected rights.

(4) The right to organize a union or engage in concerted activity in the workplace.

(5) Constitutional rights when interacting with law enforcement at the workplace, including an employee’s right under the Fourth Amendment to the United States Constitution to be free from unreasonable searches and seizures and rights under the Fifth Amendment to the United States Constitution to due process and against self-incrimination.

Labor Commissioner’s Template

The Labor Commissioner will prepare a template notice for employers to use, which will include a description of any new legal developments as well as a list of relevant enforcement agencies. Additionally, the Labor Commissioner will develop a video advising employees of their rights, which an employer may choose to provide to employees.

Notice to Emergency Contact

Senate Bill 294 further requires employers to notify an employee’s designated emergency contact (if one exists) if the employee is arrested or detained at the worksite. Notification is also required if the employer has actual knowledge of an arrest or detention that occurred off-site, but during work hours or performance of job duties.

Enforcement

The Labor Commissioner and a public prosecutor are responsible for enforcing the Act.

In addition to other remedies, employers may face a civil penalty of up to $500 per employee for each violation. A higher penalty may be imposed to violations involving the emergency contact notification, up to $500 per employee per day, with a maximum of $10,000 per employee. The bill explicitly prohibits the recovery of both a penalty under the Act and a civil penalty for the exact same violation.

Senate Bill 261: Triple Penalties for Unsatisfied Judgment for Nonpayment of Wages

Currently, under California Labor Code §238, employers who fail to satisfy a final judgment for nonpayment of wages are not permitted to continue conducting business in California unless they obtain and file a bond with the Labor Commissioner. A stop order is not issued if the employer reaches an agreement with the creditor.

This bill bolsters the enforcement mechanism by adding Labor Code §238.05. Under SB 261, if a judgment for nonpayment of wages remains unsatisfied for 180 days after the time to appeal has expired and no agreement with the creditor is reached, the employer will be subject to a “civil penalty not to exceed three times the outstanding judgment amount, including postjudgment interest…” The penalty may be reduced if the employer can “demonstrate by clear and convincing evidence good cause to reduce the amount of the penalty.”

A successor employer will be jointly and severally liable for penalties assessed under SB 261 if the new entity meets any of the following criteria:

• It has substantially the same workforce or facilities.
• It has substantially the same owners or managers.
• It employs as a managing agent the same person who was in charge of the previous employer’s workforce.
• It operates a business in the same industry and the new business has an owner, partner, officer, or director who is an immediate family member of any owner, partner, officer, or director of the judgment debtor.

Senate Bill 468: Labor Commissioner’s Enforcement of Tips

Labor Code Section 351 prohibits employers or their agents from collecting, taking, or receiving any gratuity or any part of a gratuity that is paid to an employee. It also specifically prohibits employers from deducting any processing fees or costs from gratuities left by credit card.

Senate Bill 468 amends Labor Code § 351 law by authorizing the Labor Commissioner to investigate and either issue a citation or file a civil action against an employer for gratuities taken or withheld from an employee.

Assembly Bill 1514: Licensed Manicurist Exemption Reinstated

In 2020, Assembly Bill 5, created the “ABC” test which determines that a worker is an employee unless the hiring entity can prove all three of the following conditions:

(A) That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;

(B) That the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Assembly Bill 5 also created several exemptions from the ABC test, and instead, applied the multi-factor test established in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal. 3d 341. Licensed manicurists with a high degree of control over their work were one of the groups exempted from the ABC test, but that exemption ended on January 1, 2025.

Despite the lapse, AB 1514 extends the sunset on the licensed manicurists’ exemption through January 1, 2029.

The extension includes new reporting requirements by the Employment Development Department and the Division of Labor Standards Enforcement on labor violations in the industry. This, per the author of AB 1514 “will help stakeholders and policymakers develop the appropriate regulatory framework for this profession and better protect these workers from misclassification and wage theft.”

Assembly Bill 858: Right of Recall

In 2021, Governor Newsom signed Senate Bill 93, which implemented recall rights for hospitality and service workers laid off due to the COVID-19 pandemic. This law was originally set to sunset on December 31, 2024, but was extended to December 31, 2025, by Senate Bill 723.

Assembly Bill 858 now extends these recall requirements through January 1, 2027, and extends enforcement actions after the sunset date. This, per the author “ensures that hospitality and service workers who were laid off during the COVID-19 pandemic will continue to have rehiring protections.”

Senate Bill 617: Notice Requirements Under CalWARN

Existing law, the California Worker Adjustment and Retraining Act, requires employers with 75+ employees to provide a 60-day notice prior to mass layoffs, relocations, and terminations and to include in the notice the reason for the action, the effective date, and the contact information for a company representative.

Employers must now include additional information under SB 617:

• Whether the employer plans to coordinate services through the local workforce development board or another entity, as specified.
• Information regarding the statewide food assistance program known as CalFresh, and
• A functioning email and telephone number for the local workforce development board, regardless of whether the employer chooses to coordinate services with the board.

Senate Bill 303: Bias Mitigation Training

California’s Fair Employment and Housing Act (FEHA), requires employers to prevent discrimination in the workplace. As part of this requirement, some employers conduct bias mitigation and anti-discrimination programs.

However, per the author, this has raised a concern “that information regarding individuals’ bias derived from training and education programs, including the testing of unconscious bias, can be used against employees and employers alike. This can create a chilling effect in both the adoption of such programs and participation in them.”

Accordingly, SB 303 provides that 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.

Senate Bill 464: Additional Requirements for Pay Data Reporting

In 2020 the state legislature enacted SB 973 which required employers with 100 or more employees to submit a yearly pay data report to the California’s Civil Rights Department (CRD), in addition to the EEO-1 reporting required by the U.S. Equal Employment Opportunity Commission. The CRD report must include the number of employees categorized by race, ethnicity, and sex – along with their respective wages. The purpose of SB 973 was to detect and address, pay discrimination.

In 2023, Senate Bill 1162 added a requirement to disclose the median and mean hourly rate within each job category, for each combination of race, ethnicity, and sex, as well as a requirement to submit to the CRD a separate pay data report covering labor contractor employees and the names of all labor contractors.

Starting January 1, 2027, SB 464 will require employers to store any demographic data collected on employees separate from employees’ personnel files. It also removes the court’s discretion and requires the imposition of a civil penalty against employers who fail to submit the required report(s).

Further, SB 464 increases the number of job categories that employers must report on “to more accurately measure the occupations that workers are employed in.” Specifically, the new job categories include:

1. Business and financial operations occupations.
2. Computer and mathematical occupations.
3. Community and social science occupations.
4. Legal occupations.
5. Educational instruction and library occupations.
6. Health care practitioners and technical occupations.
7. Health care support occupations.
8. Food preparation and serving-related occupations.
9. Building and ground cleaning and maintenance occupations.
10. Farming, fishing, and forestry occupations.
11. Construction and extraction occupations.

Senate Bill 590: PFL Benefits

Employees in California who need to take time off to care for a family member may be eligible to receive Paid Family Leave benefits (PFL) from the state. Currently, PFL defines “family member” to mean a child, parent, grandparent, grandchild, sibling, spouse, or domestic partner.

Starting July 1, 2028, SB 590 expands eligibility for benefits under PFL to include employees who take time off work to care for a “designated person,” defined as “any care recipient related by blood or whose association with the individual is the equivalent of a family relationship.”

Notably, this bill complements the changes in the California Family Rights Act (CFRA) of a few years ago, which added a “designated person” to the definition of “family member.”

Assembly Bill 288: Providing the Public Employment Relations Board Jurisdiction Over Private Employers

The federal National Labor Relations Act (NLRA) establishes a comprehensive statutory scheme regulating unfair labor practices on the part of employers and labor organizations in industries affecting interstate commerce. The NLRA also vests in the National Labor Relations Board (NLRB) the power to conduct elections to determine employee representatives and to prevent unfair labor practices affecting commerce.

In California, the Public Employment Relations Board (PERB) acts as the agency responsible for resolving disputes between California public employers and employees within state government.

Assembly Bill 288 would expand PERB’s jurisdiction by authorizing a private worker to petition PERB to protect and enforce prescribed rights where the NLRB expressly or impliedly cedes jurisdiction.

We expect this law will face legal challenges on preemption grounds.

Bills Vetoed by the Governor

Senate Bill 7: Limitations on Using Automated Decision Systems in Employment

Given the growing use of Automated Decision Systems (ADS) in employment, SB 7 sought to regulate their use by requiring employers to provide written notice of ADS use to employees and applicants, prohibiting employers from relying on ADS alone in employment-related decisions, and granting workers the right to request a copy of their own data used by the ADS over the prior 12 months.

In the veto notice, the governor stated that while he shared “the author’s concern that in certain cases unregulated use of ADS by employers can be harmful for workers,” the bill sought to impose “unfocused notification requirements on any business using even the most innocuous tool.”

Newsom also indicated that some protections sought by the bill, mainly with respect to an employer’s use of ADS to make employment-related decisions, “are partially covered by forthcoming California Privacy Protection Agency regulations” and, therefore, “before enacting new legislation… we should assess the efficacy of these regulations.”

Assembly Bill 1136: Re-hiring Mandate

This bill sought to provide job protections to workers who are detained or need to take time off from work to resolve immigration-related matters including requiring employers to provide up to 12 months of unpaid leave and reinstate the employee to their former job.

In the veto message Newsom stated that while he commended “the author for her efforts to protect our most vulnerable workers” the bill would have created “significant confusion” and the 12-month rehiring provision presented “logical and compliance challenges that may undermine their effectiveness” and is “impractical for many employers and employees.”

Senate Bill 355: Unpaid Judgments

Senate Bill 355 aimed to implement additional penalties on employers with unsatisfied judgments for unpaid wages and would have authorized the Labor Commissioner to notify the Employment Development Department of the judgment as a potential instance of tax fraud.

Newsom vetoed the measure, noting that the proposed process “would be costly, duplicative, and unlikely to significantly improve collections of unpaid wages.”

Assembly Bill 1326: Right to Wear Masks

This bill sought to provide individuals the right to wear a mask in a public place “for the purpose of protecting their individual health or the public health.”

The governor rejected the bill, noting he was “not convinced this measure [was] necessary” and “create[d] confusion…”