Navigating California’s New Laws for Small Businesses: 2026 Compliance Update
California’s legislative landscape continues to evolve, bringing significant new requirements for small businesses in 2026. Proactive planning is essential to ensure compliance, manage costs, and avoid potential penalties. Here are the key laws taking effect that will impact your operations:
Wage and Hour Updates
Minimum Wage and Exempt Salary Increase
-
New State Minimum Wage: The statewide minimum wage will increase to $16.90 per hour for all employers, regardless of size, effective January 1, 2026.
-
Exempt Salary Threshold: This increase also raises the minimum salary threshold for most exempt employees (Executive, Administrative, and Professional) to $70,304 annually (two times the minimum wage for full-time employment). Employers must ensure exempt workers meet both the salary and duties tests.
Ban on “Stay-or-Pay” Contracts
-
New law AB 692 prohibits employers from entering into or requiring employees to sign contracts that impose financial penalties, repayment obligations, or fees (like training repayment agreements or “quit fees”) tied to the termination of employment, effective January 1, 2026.
-
Action Item: Review all new and existing employment contracts, especially those related to training or educational reimbursement, to ensure they comply with this ban.
Employee Rights and Notices
“Workplace Know Your Rights Act”
-
SB 294 requires employers to provide all current employees with a stand-alone written notice summarizing key workplace rights by February 1, 2026, and to provide it annually thereafter.
-
The notice must cover, among other things: rights to workers’ compensation, protections against unfair immigration-related practices, and the right to organize.
-
Action Item: You must also provide employees the opportunity to designate an emergency contact by March 30, 2026, and specify if that contact should be notified in the event the employee is arrested or detained at work.
Pay Transparency and Equal Pay Expansion
-
SB 642 clarifies and strengthens pay equity laws, effective January 1, 2026:
-
“Pay Scale” Redefined: The definition of “pay scale” (required on job postings for employers with 15+ employees) is refined to mean a good-faith estimate of the expected salary or hourly wage range the employer reasonably expects to pay upon hire.
-
“Wages” Expanded: The definition of “wages” is broadened to include all forms of compensation, such as bonuses, stock options, and other benefits, for pay equity claims.
-
Personnel Records Expansion
-
SB 513 expands the definition of “personnel records” that employees have the right to inspect and copy to now include education and training records (e.g., training provider, duration, core competencies, and resulting certifications).
Business and Consumer Protections
Freelance Worker Protection Act (Review)
-
While the Freelance Worker Protection Act (SB 988) took effect in 2025, its requirements remain critical for 2026:
-
Written contracts are required for professional services totaling $250 or more.
-
The contract must include specific terms, such as itemized services, compensation, and payment due dates.
-
Payments must be made by the contractual due date, or no later than 30 days after the completion of services.
-
Increased Penalties for Unpaid Wage Judgments
-
SB 261 significantly raises the stakes for employers who fail to satisfy a final wage judgment (owed to an employee or the state). If the judgment remains unpaid for 180 days after the appeal period has lapsed, the employer may face civil penalties of up to three times the amount of the outstanding judgment.
Next Steps for Compliance
These new laws require not just minor updates, but often a comprehensive review of your payroll, HR, and contracting procedures.
Zumifi is your partner in California compliance.
Contact us today to schedule a focused review of your 2026 payroll configuration, exempt status classifications, and contract templates to ensure you are fully compliant and ready for the new year.
Follow us on LinkedIn – Zumifi.
Zumifi is how I manage my company efficiently, easily, and effortlessly (on my part), almost as if it were magic!”
– Gary Levenberg, KID Group, San Francisco, CA