After more than twenty years defending California employers, I have seen a consistent pattern: even companies with sophisticated systems struggle with one of the most fundamental compliance obligations in California employment law—maintaining, accessing, and analyzing employee time records. These challenges are not merely operational inconveniences. They routinely lead to unnecessary legal exposure, inflated PAGA penalties, and missed opportunities to extract meaningful business insights. Scaled Comp was built to solve these exact problems.

Here are the five reasons I founded Scaled Comp:

1. Employers were struggling just to keep and store basic time records.
California law requires employers to maintain accurate employee time and payroll records, yet many organizations still rely on systems that scatter data across PDFs, screenshots, or outdated exports. Time records were difficult to store in an organized manner, hard to preserve over time, and even harder to retrieve years later—particularly when litigation arose. What should have been a basic compliance function was becoming a persistent liability.

2. Accessing time records during litigation or audits was far more difficult than it should be.
When a claim was filed, employers were often scrambling: Where are the records? Are they complete? Are they readable? Too often, the answer was no. I watched clients spend weeks hunting down files, reconstructing data, and manually preparing materials just to respond to a lawsuit or a PAGA notice. This was especially true when employers had changed payroll providers; obtaining historical time data from former providers was often difficult, if not impossible. The result was increased risk, higher legal fees, and unnecessary stress.

3. Even when records were available, they were nearly impossible to analyze at scale.
Time records are one of the most critical data sets an employer possesses, yet most companies cannot run even a basic compliance-rate analysis without significant manual effort. Determining whether employees took compliant meal or rest breaks, identifying missed premiums, or estimating potential exposure often required hours of spreadsheet work and hand-coding. The lack of clean, structured data prevented employers from proactively managing risk—and in litigation, it slowed defense strategies and drove up costs.

4. Clean, analyzable time records are essential to reducing PAGA penalties—and unlocking operational insights.
Under California’s 2024 PAGA reforms, employers that can demonstrate reasonable and consistent efforts to comply with wage-and-hour obligations may reduce penalties to as low as 15 percent. But compliance cannot be proven without reliable, well-organized time data. Centralizing and structuring time records allows employers to demonstrate good-faith compliance, quantify true exposure, and negotiate from a position of strength.
Beyond compliance, structured time data reveals valuable operational insights, including manager performance trends, scheduling efficiency, productivity patterns, and workforce behaviors that would otherwise remain hidden.

5. With AI-ready time data, employers can finally use information strategically—not just defensively.
Once time and payroll data is standardized and loaded into an AI-driven platform, employers can begin asking more sophisticated questions:

  • Can we predict labor needs weeks in advance?
  • What happens to labor costs under different scheduling scenarios?
  • Can we identify early indicators of compliance risk before claims arise?
  • What insights exist that we have not yet considered?

This is the future of workforce management—moving from reactive to predictive, from manual cleanup to automated intelligence, and from fragmented systems to accessible, actionable data.

Scaled Comp was founded to address a problem I encountered daily: employers already had the data they needed to protect themselves and improve operations, but that data was locked in formats that made it difficult—or impossible—to use. By transforming time records into clean, structured, AI-ready data, employers gain a powerful compliance tool, a litigation shield, and a new source of operational insight.

We have been working with a select group of clients and recently completed our beta phase. The feedback has been extremely positive. In addition, the platform has enabled my legal team to analyze client records more quickly, efficiently, and comprehensively—resulting in stronger assessments of legal defenses and litigation strategy.

If you would like help evaluating whether your current timekeeping data is litigation-ready or AI-ready, visit Scaled Comp’s website or I am always happy to discuss, you can sign up for a call here.

As we approach 2026, California employers face a new round of legal and financial adjustments that will directly impact payroll budgeting, exempt classifications, and compliance risk. From statewide wage increases to industry-specific salary thresholds, these updates require careful planning to avoid misclassification claims, PAGA exposure, and penalties.

Here are the top five increases California employers must prepare for in 2026 — and what you should be doing now.

1. California’s Minimum Wage Increases

Effective January 1, 2026, California’s minimum wage increases to $16.90 per hour for all employers, regardless of size.

Remember:

  • Many cities and counties — including San Francisco, Los Angeles, West Hollywood, Santa Monica, Emeryville, and Oakland — have higher local minimum wage rates.
  • Employers must always pay the highest applicable wage, even if employees work remotely or split time across jurisdictions.

Employer Action Item:
Map your workforce locations now and confirm which local ordinances apply. Multi-location employers are particularly vulnerable to accidental underpayments.

2. Increased Minimum Salary for Exempt Employees

California’s exemptions require employees to meet both the duties test and the salary basis test. Because the salary test is tied to the state minimum wage, it will rise in 2026.

Beginning January 1, 2026, the minimum salary for the white-collar exemptions (executive, administrative, professional) increases to:

  • $70,304 annually (up from $68,640 in 2025)

Fast-food employers covered by AB 1228 have a higher threshold (see Item 3).

Employer Action Item:
Audit your exempt employee salaries before the end of the year. Even a small shortfall can invalidate the exemption and trigger unpaid overtime claims going back four years — often accompanied by PAGA penalties.

3. Fast Food Industry: Minimum Wage & Exempt Salary Threshold Updates

Fast food employers covered by AB 1228 must continue monitoring industry-specific wage rules:

  • The $20 per hour minimum wage took effect April 1, 2024.
  • The Fast Food Council may increase this rate annually based on inflation and economic factors. While the Council did not increase wages for 2025, employers should be prepared for changes as we move into 2026.

Exempt Salary Threshold for Fast Food Employers:
To classify an employee as exempt, covered employers must pay a minimum annual salary of:

  • $83,200 per year

This figure is tied directly to the fast-food minimum wage. If the hourly rate increases, the exempt salary threshold will rise automatically.

Employer Action Item:
Document all positions that may be affected and prepare alternative staffing or scheduling plans in the event of a 2026 rate increase.

4. Adjusted Salary Thresholds for Computer Software Professionals

Under Labor Code section 515.5, certain computer professionals may be exempt from overtime if they meet strict duties and salary requirements.

For 2026 (effective January 1):

  • Hourly rate: $58.85 (up from $56.97 in 2025)
  • Monthly salary: $10,214.44 (up from $9,888.13 in 2025)
  • Annual salary: $122,573.13 (up from $118,657.43 in 2025)

Employer Action Item:
Review all engineering, software development, and IT roles to ensure they still meet both the duties test and the new salary thresholds. This exemption is frequently misapplied — and commonly targeted in PAGA actions.

5. Updated IRS Mileage Reimbursement Rates

The IRS adjusts its standard mileage rates annually. While the 2026 rates have not yet been announced, employers should monitor the update closely.

As a reminder, the 2025 mileage rates are:

  • 70 cents per mile for business-related travel
  • 21 cents per mile for qualified medical or moving purposes
  • 14 cents per mile for charitable organizations (unchanged)

Mileage reimbursement is required under California law to ensure employees are fully indemnified for work-related expenses.

Employer Action Item:
Confirm your travel reimbursement policy automatically updates to the new IRS rate each year, and train managers not to approve outdated reimbursement amounts.

Final Takeaway These changes require proactive planning — not last-minute adjustments. Wage increases and salary threshold changes are among the most common sources of wage-and-hour disputes, and compliance now can help avoid litigation later.

As we move toward 2026, California employers—especially in hospitality—are navigating one of the most complex wage-and-hour landscapes in the country. The 2024 PAGA reform brought meaningful relief, but only for employers who take their compliance obligations seriously and can prove it.

At the same time, technology and AI are beginning to transform what compliance looks like. Our firm has been developing an AI-powered compliance platform designed specifically for California wage-and-hour rules, and early feedback from the first companies using it has been extremely positive. More on that below.

For now, here are the five compliance priorities every employer should be focused on as we head into the new year:

1. PAGA Reform Only Helps Employers Who Can Prove Compliance

The 2024 PAGA reform allows employers to dramatically reduce potential penalties—down to 15% of what plaintiffs could otherwise seek. But this benefit is not automatic.

To qualify, employers must show they took meaningful “reasonable steps,” including:

  • Regular payroll and timekeeping audits
  • Updated policies and employee handbooks
  • Supervisor training
  • Prompt corrective action

Documentation is now everything.
If it’s not documented, it didn’t happen.

2. PAGA Filings Are Still at Record Levels

Many assumed PAGA lawsuits would drop after the reform. They didn’t.

In fact:

  • 2024 saw the highest number of PAGA filings in history
  • 2025 is tracking at nearly identical levels
  • A handful of plaintiff firms now file over 25% of all PAGA cases statewide

High-volume plaintiff firms are moving quickly, and state enforcement remains aggressive.
Reform changed the rules—but it did not reduce the risk.

3. Routine Payroll & Timekeeping Audits Are Your Strongest Protection

Meal and rest periods, accurate timekeeping, paystub formatting, overtime calculations, split-shift rules, and off-the-clock issues continue to drive the majority of wage-and-hour claims.

The best defense entering 2026 is a recurring audit process, ideally quarterly. These audits should review:

  • Meal and rest break compliance
  • Paystub formatting (Labor Code § 226)
  • Overtime and double-time calculations
  • Local and state minimum wage updates
  • Timecard edits, patterns, and approvals

When a PAGA notice arrives proving compliance will be critical.

If you don’t have that documentation, you lose access to the 15% penalty cap.

We’ve created a simple model employers can use to set up their own audit process—a 5-step, 30-minute payroll audit. Download it here.

4. Supervisor Training Is Now Essential—Not Optional

To qualify for reduced PAGA penalties, employers must show that supervisors were trained on wage-and-hour compliance.

Effective training must cover:

  • Scheduling legally compliant meal and rest periods
  • How to handle late, short, or missed breaks
  • Preventing off-the-clock work
  • Overtime rules
  • Documentation and communication requirements

Employers should maintain records of:

  • Attendance
  • Training length
  • Topics covered
  • Learning management system completions or signed acknowledgments

A well-trained supervisor can prevent more violations than any policy manual.

5. AI Will Transform Compliance in 2026—and We’re Building the Tools

One of the most important developments heading into 2026 is the arrival of AI-driven wage-and-hour compliance software.

Our firm has partnered with a developer to build a platform specifically for California employers that can:

  • Analyze thousands of time records in minutes
  • Detect missed, short, or late breaks
  • Identify missing premiums
  • Flag potential violations or patterns
  • Run automated payroll audits
  • Produce summaries employers can use as evidence of “reasonable steps”

Several employers are already using early versions of the software, and the feedback has been extremely encouraging. Many report that it provides compliance visibility they could never realistically achieve on their own.

If you’d like to join the waitlist for early access, sign up here.

Final Thoughts for 2026

California’s regulatory environment isn’t getting simpler—but employers have more tools than ever to protect themselves. Heading into 2026, success depends on:

  • Staying current on wage-and-hour requirements
  • Building consistent systems—not one-off fixes
  • Documenting every compliance effort
  • Training supervisors thoroughly
  • Leveraging technology and AI to stay ahead of violations

If you’d like help conducting a privileged wage-and-hour audit, strengthening your compliance systems, or training your managers before the new year, my team and I are here to support you.

As the holiday season approaches, it’s a perfect time for California employers to revisit their policies on holiday leave, scheduling, and pay practices. Last week, we covered key vacation considerations for the busy season. This week, we’re focusing on five important reminders to help ensure compliance and smooth operations as the year winds down.

1. Holiday Time Off Is Not Required Under California Law

California employers are not legally required to give employees time off for holidays, unless the request relates to a sincerely held religious belief (covered below). As the DLSE explains:

“Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. California law does not require employers to provide paid holidays, close their business on holidays, or give employees time off for specific holidays.”

That said, consistent application of company policies is essential, especially in 24/7 operations like restaurants, hospitality, and healthcare.

2. No Requirement for Paid Holidays or Premium Pay for Holiday Work

Employers do not need to pay employees for holidays they do not work, nor is extra pay required for hours worked on a holiday. While employers may voluntarily offer “holiday pay” or premium pay, these benefits must be clearly defined in handbooks or written policies.

Legislative attempts such as the “Double Pay on the Holiday Act of 2016” have occasionally surfaced, but none have passed. Still, given California’s active legislative climate, employers should monitor for future proposals impacting holiday pay.

3. Religious Holiday Observances Require Reasonable Accommodation

Employers must provide reasonable accommodations to employees who cannot work on certain holidays due to religious observances. This may include schedule adjustments, shift swaps, or allowing use of accrued time off. As with all accommodation issues, the analysis is fact-specific and requires an individualized assessment.

For industries that regularly operate on holidays—restaurants, retail, hospitality—employers should clearly communicate scheduling expectations in advance and ensure managers understand the accommodation process.

4. Paid Holiday Benefits Do Not Accrue Like Vacation

If an employer offers paid holidays, employees do not accrue this benefit like vacation, and unused holiday pay does not need to be paid out at separation. Employers should be explicit that holiday pay is contingent on being employed on the holiday itself.

Many employers also implement eligibility rules—such as requiring employees to work their scheduled shift immediately before and after the holiday. These rules must be applied consistently and should be clearly stated to avoid claims of unfair treatment.

5. Payroll Timing May Shift When Holidays Fall on Payday

If a holiday falls on a regular payday and the business is closed, the employer may process wages on the next business day. Employers should confirm that payroll schedules comply with the DLSE’s requirements and review the list of holidays recognized under California Government Code Section 6700, including:

  • New Year’s Day
  • Martin Luther King Jr. Day
  • Memorial Day
  • Independence Day
  • Veterans Day
  • Christmas Day

Additional holidays—such as Admission Day (September 9) and Native American Day (fourth Friday in September)—are also included in the Code.

Employers should review their payroll vendor’s holiday schedule now to avoid surprises and ensure timely, compliant wage payments.

Wishing you a productive and successful holiday season! With clear policies and proactive communication, employers can reduce risk, maintain compliance, and support employees during one of the busiest times of the year.

2025 has delivered a series of powerful—and practical—employment law decisions. These five cases carry direct lessons for every California employer, especially in areas where minor missteps can lead to major liability.

1. Iloff v. Bridgeville Properties, Inc. – California Supreme Court (2025) – “Good Faith” Requires Real Effort

This case involved a handyman who performed maintenance work on a rural property owned by Bridgeville Properties. Under an informal arrangement, the worker lived rent-free in a house on the property but received no wages, no time records, and no benefits.

When he was terminated, he filed claims with the Labor Commissioner. Both the Commissioner and the trial court held he was an employee, not an independent contractor. The trial court denied liquidated damages, finding the owners acted in “good faith.”

The Supreme Court reversed, clarifying that:

  • A good-faith defense requires evidence the employer actually researched or attempted to comply with minimum wage obligations.
  • “Good intentions” or “ignorance of the law” are not enough.
  • Employers appealing Labor Commissioner decisions must expect employees to raise Paid Sick Leave claims as part of the appeal—even if the Commissioner declined to address them.

More Facts:

  • The employer never sought legal advice or reviewed wage requirements.
  • There was no written agreement regarding housing-for-work exchanges.
  • The Court found the arrangement “informal, undocumented, and unlawful.”

Employer Lesson:
You must be able to prove compliance efforts—policies, legal consultation, documentation. Good faith now requires a paper trail.

2. Kruitbosch v. Bakersfield Recovery Services – Cal. Ct. App., 5th Dist. (Sept. 2025) – HR’s Response Can Create Liability

This case underscores how an employer’s response to a harassment complaint can itself create a hostile work environment under FEHA—even when the underlying conduct occurs off-duty.

The plaintiff, a male employee, was harassed off-duty by a female coworker, Sanders, who allegedly sent him nude photos, propositioned him for sex, offered him drugs, and even showed up at his home uninvited.

Critical Additional Facts:

  • The plaintiff immediately reported Sanders’s behavior to acting program director Stephanie Carroll.
  • HR representative Kimberly Giles was also informed that Sanders had sent nude photos, made sexual propositions, offered drugs, and appeared at the plaintiff’s residence.
  • Carroll told the plaintiff there was “not much she could do” about Sanders’s conduct.
  • That same day, Giles posted a social media video of whining dogs with the caption: “‘This is a work day at thr [sic] office … lmbo.’” This was widely understood by staff as mocking the plaintiff’s complaint.
  • Later that week, Giles sarcastically told the plaintiff: “‘I hope you don’t get no more pictures.’”
  • At no point did Carroll, Giles, or Bakersfield Recovery Services (BRS) attempt to separate the plaintiff from Sanders, investigate, or take corrective action.
  • No discipline was issued to Sanders.

The Court Held:

  • The employer’s mockery, dismissiveness, and inaction—not the off-duty conduct—created a hostile work environment.
  • FEHA liability arises when the employer’s response is itself harassing, belittling, or indifferent to an employee’s safety.
  • Other claims (retaliation, constructive discharge) were dismissed only because there was no adverse employment action.

Employer Lesson:

An employer doesn’t get to hide behind the fact that harassment occurred off-duty. What also matters is how management responds when concerns are raised. Mockery, sarcasm, or inaction can transform an external problem into an internal FEHA violation.

3. Carranza v. City of Los Angeles –California Court of Appeal (2025) – Digital Harassment, Employer Inaction, and a Difficult Judgment Call

This case involved a LAPD Captain, one of the highest-ranking female officers in the department. She learned that a topless photo purporting to be her (but it was not) was circulating among officers on duty.

Key Additional Facts:

  • Officers were seen viewing the photo in police stations and making lewd remarks.
  • Multiple officers reported the image was being shared “everywhere” in the department.
  • Carranza repeatedly asked the Department to issue a message stating the photo was not her and ordering officers to stop circulating it.
  • LAPD leadership discussed issuing the statement but ultimately declined.

Why the Employer’s Position Was Complicated:
The City argued—and the evidence confirmed—that leadership faced a genuine dilemma:

  • Issuing a department-wide notice might amplify the issue, causing 13,000 employees who had never seen the photo to now seek it out.
  • Leadership feared that a public statement might increase curiosity and worsen the situation.
  • They believed an ongoing investigation could be compromised by an all-hands notice.

Nevertheless, the Court held the employer liable because:

  • The City took no visible action to stop or condemn the conduct.
  • Carranza’s knowledge of widespread circulation alone was enough to establish a hostile work environment.
  • The environment became “severe or pervasive” when the employer refused to repudiate the conduct.

Outcome:

  • Jury awarded $4 million in noneconomic damages.
  • Court of Appeal affirmed the verdict and the attorney fee award.

Employer Lesson:
Digital harassment—including doctored images, rumors, and misinformation—creates new challenges. Even when an employer’s instinct is to avoid “drawing attention,” FEHA requires affirmative action when harassment is known.

4. Hohenshelt v. Sup. Ct. (Golden State Foods Corp.) – California Supreme Court (2025) – Arbitration Fee Deadlines Clarified

This case addressed whether late payment of arbitration fees automatically forfeits the employer’s right to arbitrate under CCP §1281.98.

More Facts:

  • The employer’s payment was slightly late due to internal administrative error.
  • The employee attempted to escape arbitration by arguing the employer forfeited its rights.
  • The trial court found forfeiture; the employer petitioned the Supreme Court.

The Supreme Court Held:

  • The FAA does not preempt California’s statute—but the statute must be read consistent with traditional contract principles.
  • There is no automatic forfeiture for late payment caused by mistake, excusable neglect, inadvertence, or non-willful delay.
  • Courts must consider the specific circumstances.

Employer Lesson:
Employers should still implement tracking systems for arbitration invoices—but this case gives relief from “gotcha” attempts to weaponize minor payment delays.

5. Noland v. Land of the Free, L.P. – California Court of Appeal, Second District (2025) – AI “Hallucinations” Lead to $10,000 Sanction

This case has drawn attention as one of the first California appellate decisions sanctioning an attorney for unverified generative AI work product.

More Facts:

  • Plaintiff’s counsel used AI to generate appellate arguments, including fake cases, fake quotations, and misstatements of law.
  • The offending attorney admitted he had not read or verified the authorities and had used AI to generate the brief.
  • The Court referred the attorney to the State Bar.

The Court’s Warning:

“[N]o brief, pleading, motion, or any other paper filed in any court should contain any citations…that the attorney responsible for submitting the pleading has not personally read and verified.”

Final Outcome:

  • Judgment for the employer was affirmed.
  • The attorney was sanctioned $10,000.

Employer Lesson:
AI-generated content is increasingly making its way into legal disputes, employee complaints, and internal reports. While it can be a good starting point Employers and counsel must verify accuracy—not assume AI outputs are reliable.

Final Thoughts

Across these decisions, a few themes stand out for California employers in 2025:

  • Documentation = defense. Courts want to see real compliance efforts.
  • Employer response matters. HR missteps often create more liability than the underlying misconduct.
  • Silence is rarely safe. Especially in digital harassment cases.
  • When in arbitration – ensure all fees are paid promptly to avoid losing ability to keep a case in arbitration.
  • AI must be supervised. Verification is mandatory.

California’s employment laws never stay still—and 2025 and 2026 are shaping up to bring even more compliance challenges for employers. One of the biggest new laws on the horizon is Senate Bill 294, better known as the Workplace Know Your Rights Act.

This new law adds major notice, training, and recordkeeping requirements for all California employers and aims to ensure workers clearly understand their rights on the job. Here are five key takeaways every California employer needs to know to stay compliant.

1. Annual Written Notice to Employees (Effective February 1, 2026)

Starting February 1, 2026, employers will be required to give employees a standalone written “Know Your Rights” notice every year.

  • The notice must go to all current employees each year and to new hires upon hire.
  • Employers can deliver the notice by email, text message, or personal delivery—whatever communication method is normally used with employees.
  • If employees are represented by a union, the authorized representative must receive a copy as well.

This new rule is designed to make sure every worker in California receives clear, accessible information about their workplace rights—directly from their employer.

2. What Must Be Included in the Notice

The annual Know Your Rights notice must cover a range of critical employment protections, including:

  • Workers’ compensation rights and contact details for the Division of Workers’ Compensation
  • Employee rights during immigration inspections, including notice requirements under Labor Code section 90.2
  • Protections against unfair immigration-related practices
  • The right to organize, form, or join a union, or to engage in concerted activity
  • Constitutional rights in the workplace during law enforcement actions, including:
    • Fourth Amendment protection against unreasonable searches and seizures
    • Fifth Amendment protection against self-incrimination and right to due process

The Labor Commissioner will issue an official notice template by January 1, 2026, and translations must be provided in the languages normally used with employees (if available on the Commissioner’s website).

Tip for Employers: Keep a record of your notice distribution in your HR system or onboarding software. Tracking delivery electronically will make annual compliance much easier.

3. Recordkeeping Requirements: Keep Proof for Three Years

Employers must keep proof of notice delivery for at least three years. This proof can include:

  • Signed acknowledgment forms
  • Digital read receipts or confirmation emails
  • HR system logs

Strong documentation will be key if the Labor Commissioner or another enforcement agency requests verification.

For California HR teams, this is a good time to audit your employee recordkeeping process and ensure that all required workplace postings and notices are organized in one place.

4. New Educational Videos and Employer Resources

The Labor Commissioner’s Office will also release two educational videos by July 1, 2026:

  1. A video for employees explaining their workplace rights.
  2. A video for employers outlining compliance requirements and constitutional protections.

Employers should plan to include these videos in onboarding, annual training, or even all-hands compliance refreshers to demonstrate good-faith efforts at compliance.

For updates on when these materials become available, make sure you are subscribed to receive updates at California Employment Law Report.

5. New Employee Protections and Deadlines

By March 30, 2026, employers must allow employees to designate an emergency contact who should be notified if they are arrested or detained at work.

The law also contains anti-retaliation protections, meaning employers may not retaliate against employees who exercise or assert any of these rights.

In addition, the Labor Commissioner will specify future updates that must be included in the annual notice—so staying current will be essential for ongoing compliance.

Final Thoughts: Get Ready Now for the Workplace Know Your Rights Act

The Workplace Know Your Rights Act (SB 294) is part of California’s broader trend toward greater workplace transparency and employee education.

Employers should start preparing now by:

  • Reviewing HR communication systems to ensure notices can be distributed electronically.
  • Creating a calendar reminder for February 1, 2026 to deliver the first annual notice.
  • Checking the Labor Commissioner’s website in early 2026 for the official templates and translated versions.
  • Consulting with employment counsel to ensure all language and formatting meet legal requirements.

This article continues our Friday’s Five series highlighting the major new California employment laws taking effect in 2026. In recent weeks, we’ve covered several significant bills impacting employers — from expanded employee rights and new recordkeeping requirements to pay transparency updates and workplace enforcement changes.

This week, we turn to Assembly Bill 692 (Kalra) — California’s latest move to strengthen worker mobility and curb restrictive employment practices. Effective January 1, 2026, AB 692 targets so-called “stay-or-pay” or training repayment agreement provisions (TRAPs) — a growing trend among employers seeking to discourage workers from leaving early by requiring repayment of training or relocation costs.California’s legislature continues its trend of expanding employee mobility protections. With AB 692, effective January 1, 2026, employers can no longer rely on “stay-or-pay” or training repayment agreement provisions (TRAPs) to discourage employees from leaving their jobs early.

Here are five key takeaways for employers:

1. AB 692 Closes the Loophole Around Non-Compete Alternatives

While California has long banned non-compete agreements under Business & Professions Code section 16600, some employers turned to “stay-or-pay” agreements — clauses requiring employees to repay training or relocation costs if they leave before a certain time. These TRAPs operated in a legal gray area, sometimes enforced, sometimes struck down as unconscionable. AB 692 eliminates that uncertainty by expressly prohibiting them altogether

2. New Code Sections Make Repayment Clauses Unlawful

The bill adds Business & Professions Code section 16608 and Labor Code section 926, making it illegal for an employer to require repayment of training expenses, relocation costs, or other hiring-related fees if an employee quits or is terminated. This prohibition applies broadly — even if the agreement was signed voluntarily

3. Limited Exceptions Exist

AB 692 allows only narrow exceptions:

  • Government-sponsored loan forgiveness or tuition programs
  • Agreements for transferable educational credentials, such as degrees or professional certifications, if strict criteria are met
  • State-approved apprenticeship programs
    These exceptions ensure legitimate educational arrangements remain valid while eliminating coercive repayment schemes

For example, the transferable-credential tuition programs exemption is likely one that most employers could utilize — but only if every one of the following five conditions is met:

  1. Separate contract
    The tuition-repayment agreement must be offered separately from the employment contract — it can’t be bundled with an offer letter or onboarding paperwork.
  2. Not a condition of employment
    The employee cannot be required to obtain the credential as a condition of getting or keeping their job.
  3. Clear, capped cost disclosure
    The contract must state the total repayment amount up front, and that amount cannot exceed the employer’s actual cost of the credential.
  4. Prorated repayment schedule
    If the employer requires a minimum service period, any repayment obligation must be prorated — proportionate to the time already served — and cannot include an accelerated payment schedule if the worker resigns.
  5. No repayment if terminated without misconduct
    The worker cannot be required to repay the tuition amount if they are terminated, except when the termination is for legally defined misconduct under Unemployment Insurance Code §1256.

4. Severe Penalties for Violations

Employers that violate AB 692 can face statutory damages of at least $5,000 per employee, plus attorney’s fees, costs, and injunctive relief. In short — a single improper agreement could become a costly class or PAGA-style lawsuit

5. Action Steps for Employers

  • Audit offer letters and training agreements for any repayment or “clawback” provisions.
  • Update relocation and reimbursement policies to ensure they don’t condition repayment on continued employment.
  • Train HR and management teams about the new restrictions before 2026.
  • Consult counsel before implementing tuition-assistance or credential-based programs to ensure compliance with the law’s narrow exceptions.

Bottom line:
AB 692 is another reminder that California strongly protects employee freedom to change jobs. Employers should remove any “stay-or-pay” provisions from their onboarding materials and agreements before January 1, 2026.

Governor Newsom just signed Senate Bill 617 into law on October 1, 2025, expanding California’s Worker Adjustment and Retraining Notification (Cal-WARN) Act.  As a reminder, the WARN Act requires employers to give 60-days’ notice before a mass layoff, plant closure, or relocation. In addition, employers must notify employees and both state and local representatives. This helps workers prepare for job loss, find new jobs, or train for new opportunities.  
This new law adds important content and coordination requirements for employers conducting mass layoffs, relocations, or terminations in California.

Here are five key takeaways for employers:

1. New Required Disclosures in Cal-WARN Notices

Under SB 617, employers must now include specific information in their 60-day advance notices for any mass layoff, relocation, or termination.
The notice must state whether the employer plans to coordinate services for affected employees through:

  • The local workforce development board (LWDB),
  • Another entity, or
  • No entity at all.

Regardless of coordination, the notice must also include:

  • The email and phone number for the relevant LWDB, and
  • The following required statement:

“Local Workforce Development Boards and their partners help laid off workers find new jobs. Visit an America’s Job Center of California location near you. You can get help with your resume, practice interviewing, search for jobs, and more. You can also learn about training programs to help start a new career.”

2. CalFresh Information Must Be Included

Employers must now include a description of California’s statewide food assistance program (CalFresh) in every Cal-WARN notice.
This means providing:

  • A short description of CalFresh,
  • The CalFresh benefits helpline, and
  • A link to the CalFresh website.

This new requirement is intended to ensure that displaced employees are aware of public assistance resources during a transition.

3. Employers Must Provide Their Own Contact Information

Each notice must include a functioning employer email and telephone number for employees and agencies to contact.
This seems minor, but it’s a new explicit requirement — and a simple item that could create compliance risk if omitted.

4. Coordination of Services Must Happen Within 30 Days

If an employer chooses to coordinate services through a local workforce development board or another entity, those services must be arranged within 30 days from the date the notice is issued.
This means employers need to identify the LWDB and plan any “rapid response” sessions early in the process — not at the last minute.

5. Effective January 1, 2026

The new law takes effect on  January 1, 2026.  In addition to the new content, remember that Cal-WARN continues to apply to employers with a “covered establishment” that employs or has employed in the preceding 12 months, 75 or more full and part-time employees. Generally, Cal-WARN applies when:

  • Plant closure affecting any amount of employees.
  • Layoff of 50 or more employees within a 30-day period regardless of the percentage of workforce.
  • Relocation of at least 100 miles affecting any amount of employees.

Failure to comply can result in back-pay liability and civil penalties.

Final Thoughts

SB 617 doesn’t change when Cal-WARN applies, but it does change how employers must communicate with employees and agencies during a layoff or closure.

Join Us for Our Upcoming Masterclass

Zaller Law Group will be hosting a masterclass on October 30, 2025, covering the new employment laws facing California employers in 2026, including SB 642 and other key updates signed by Governor Newsom.
We’ll break down what these changes mean in practice and provide actionable steps to stay compliant heading into the new year. Registration for the masterclass is here.

Governor Newsom just signed SB 642 into law, making big changes to California’s pay transparency and equal pay requirements. The law goes into effect January 1, 2026, and employers need to start preparing now.

For a full overview of the other employment bills signed and vetoed by the Governor impacting employers in 2026, you can read my earlier post here: New 2026 Employment Law Requirements in California: Key Bills Signed, Vetoed, and What’s Next. Zaller Law Group will also be hosting a webinar on October 30, 2025, covering SB 642 and other new employment laws for 2026 — details and registration link are included at the end of this post.

Here are five key updates California employers should know about SB 642:

1. “Pay scale” now means a good faith estimate of pay at hire

Employers must provide or post a realistic, good faith pay range reflecting what they actually expect to pay a new hire — not a broad range.
If you have 15 or more employees, that range must appear in all job postings.

2. Expanded definition of “wages” and “sex”

The bill clarifies that for Equal Pay Act purposes, “wages” and “wage rates” include all forms of pay — bonuses, stock options, benefits, travel reimbursements, and allowances.
“Sex” now tracks the definition under the Government Code, explicitly including gender identity and gender expression.

This ensures broader protection under California’s Equal Pay Act and increases the scope of what must be analyzed for pay equity.

3. Longer statute of limitations — up to six years of exposure

The time to bring an Equal Pay Act claim is now three years from the last date of the violation, and employees can recover for up to six years of pay disparity.

4. Recordkeeping and enforcement just got tougher

Employers must keep job title and wage history records for the duration of employment plus three years after separation.
The Labor Commissioner can inspect these records to determine if a pattern of wage discrepancy exists.
Penalties for failing to comply with pay scale posting rules range from $100 to $10,000 per violation, though first-time violators can avoid penalties by correcting postings.

5. Reminder of existing obligations under Labor Code section 432.3

Since January 1, 2018, when Labor Code section 432.3 was first adopted, California employers have been prohibited from relying on an applicant’s salary history information when determining whether to make an offer or what pay to offer.

While employers cannot ask about prior wage history, employees may voluntarily disclose how much they were paid in previous positions — but employers cannot rely on that information to set pay rates.

Upon a reasonable request by an applicant for a position — and upon request by a current employee — employers must provide the pay scale for the position.

Remember, employers cannot prohibit employees from discussing or disclosing their wages, or from refusing to agree not to disclose their wages under Labor Code sections 232(a) and (b). Employers also cannot require employees to refrain from discussing working conditions, or require them to sign an agreement restricting such discussions, under Labor Code section 232.5.

The Labor Commissioner’s FAQs interpreting section 432.3 clarify that employees may ask what other employees are paid, but employers are not required to provide that information. Employers should review those FAQs in the coming months to see if they are updated in light of SB 642.

Join Us for Our Upcoming Webinar

Zaller Law Group will be hosting a masterclass on October 30, 2025, covering the new employment laws facing California employers in 2026, including SB 642 and other key updates signed by Governor Newsom.
We’ll break down what these changes mean in practice and provide actionable steps to stay compliant heading into the new year. Registration for the masterclass is here.

California’s 2025 legislative session has officially wrapped, and Governor Gavin Newsom has made his final decisions on hundreds of bills sent to his desk before the October 13 deadline. For California employers, this year’s legislative package delivers another wave of significant workplace changes—spanning wage equity, paid family leave, worker classification, and expanded employee rights across multiple industries.

Below, we’ve summarized the final outcomes of the major employment law bills Governor Newsom acted on this session, along with brief descriptions of what each bill does.

My firm will be hosting a California employment law Masterclass on October 30, 2025 at 10:00 a.m., where we’ll break down what these new laws mean for employers in 2026—and highlight other key compliance updates to prepare for the year ahead.

Register here: Zaller Law Group Masterclass – California Employer Legislative Update: What’s at Stake in 2026

BillSummarySign or Veto?
SB 642Wage Equity: Would clarify the term “pay scale” to mean “the salary or hourly wage range that the employer reasonably expects to pay for the position up to hire.” It would also set the statute of limitations for Labor Code 1197.5 claims to three years and allow workers to recover wages for up to six years in pay equity claims, while extending the statute of limitations.  Signed
SB 261Labor Commissioner Penalties and Collections: Would require that the Labor Commissioner post on its website any unsatisfied awards against employers and would establish a civil penalty for employers that fail to pay a court judgment awarded for nonpayment of work performed.  Signed
SB 7No Robo Bosses Act: Would require employers using an “automated decision system” (ADS) in employment decisions to notify workers before and after use, would ban sole reliance on ADS for adverse actions, and would mandate human review in such cases. Would apply broadly and become enforceable in 2026, with civil penalties for violations.  Vetoed
SB 590Paid Family Leave – Designated Person: Would allow that, starting July 1, 2028, employees to take Paid Family Leave to care for a “designated person,” defined as someone related by blood or with a family-like relationship.Signed
AB 692Employment Restraint of Trade Contracts: Would ban many “stay-or-pay” contracts with workers, including training repayment agreements.Signed
AB 250Extended Statute of Limitations for Sexual Assault / Harassment Claims: Would allow certain sexual assault claims previously time-barred to be filed from Jan 1, 2026 to Dec 31, 2027 if a “cover-up” by an employer is alleged.Signed
SB 809Independent Contractors and Employee Vehicle Business Expense: Would clarify that owning a vehicle does not make a worker an independent contractor and would reiterate that employers must reimburse employees for using personal vehicles for work, and create a limited amnesty program for misclassified construction trucking employers.Signed
AB 858Rehiring and Retention of Displaced Workers: Would extend COVID-era right-to-rehire protections for hospitality workers to Jan 1, 2027, with DLSE enforcement extended beyond 2026 for prior violations.Signed
SB 703Ports: Truck Driver Independent Contractors: Would require trucking companies at the Ports of LA and Long Beach to certify compliance with tax and classification laws for employees and would mandate a reporting when 50% or more employees are replaced by independent contractors, with steep penalties for noncompliance or misrepresentation.Vetoed
SB 464Employer Pay Data Reporting: Would increase the number of job categories (from 10 to 23) required in employer pay data reports starting in 2027, would mandate separate storage of demographic data with penalties for non-filing, and would create a civil penalty for employers who fail to submit reports to the California Civil Rights Department.Signed
AB 1136Immigration and Work Authorization: Would require 5 days unpaid leave and reinstatement rights for employees involved in immigration proceedings or detention and would ban adverse actions based solely on immigration status or having been subject to immigration proceedings.Vetoed
SB 294The Workplace Know Your Rights Act: Would require a new annual written notice (starting February 1, 2026) informing workers of their rights, including around immigration and law enforcement, and would require that an employer notify an employee’s emergency contact if arrested or detained while at work.Signed
AB 1326Right to Wear A Mask: Would grant individuals the right to wear a medical-grade mask in public or at work for health-related reasons, with exceptions for safety, security, or emergency protocols.Vetoed
SB 513Personnel Records: Would expand the definition of personnel records to include training details (e.g. certifications, skills, provider, and duration) and would require employers to track and retain them.Signed
SB 355Judgment Debtor Employers: Would require, within 60 days of a final judgment being entered against an employer requiring payment to an employee or to the state, the judgment debtor employer to provide documentation to the Labor Commissioner that the judgment is fully satisfied, a certain bond has been posted, or the judgment debtor entered into an agreement for the judgment to be paid in installments and is in compliance with that agreement, with civil penalties for non-compliance.Vetoed
SB 764Chain Restaurants: Children’s Meals: Would require that chain restaurants (20+ locations under the same name) meet certain nutritional standards (calories, sodium, fruit/veg portions, etc.), and mark healthier options plainly.    Vetoed
SB 68Food Allergens Disclosures: Would require restaurants to have written labeling under or next to each item on the menu that contains any of the top 9 allergens.Signed
SB 648Tip Theft: Would authorize the Labor Commissioner to investigate and issue a citation or file a civil action for gratuities taken or withheld in violation of the Labor Code.Signed on July 30, 2025.

With these new laws taking effect over the coming months, California employers should begin reviewing their policies, training programs, and compliance systems now to stay ahead of the curve. Many of the changes—particularly those involving pay transparency, leave rights, and pay data reporting obligations—will require proactive planning and documentation. Our team at Zaller Law Group is here to help employers understand how these developments impact the workplace and to guide businesses through the steps needed to ensure compliance in 2026 and beyond.