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.