New Year’s Roundup: California Employment Law Changes for 2026
What Small Business Owners Need to Know Before January 1
As we approach 2026, California employers face a new wave of employment law updates, many of which apply to businesses of all sizes. Staying compliant isn’t just about avoiding fines; it’s about ensuring your policies, practices, and documentation reflect the latest employee protections and regulatory expectations.
Below is a clear, business-friendly overview of the major changes taking effect January 1, 2026, along with practical action steps you can take now.
Crime Victim Leave Expansion
California’s crime victim leave law has been broadened to allow employees to take unpaid leave to attend any judicial proceeding related to qualifying crimes. This leave is also extended to employees whose family members are victims.
The definition of “family member” has now expanded to include:
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- Grandparents
- Grandchildren
- Domestic partners
- Any designated person (an individual the employee identifies)
Sick Leave Also Expands
Because sick leave can be used for crime-victim-related absences, the paid sick leave law will also cover these expanded circumstances.
Action Item:
Review and update your leave and sick time policies. If you use a smart or automated employee handbook, ensure the updates are accepted and published to staff.
Pay Equity: Broader Definitions and Clearer Obligations
California’s pay equity law is expanding in two important ways:
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- Sex now explicitly includes gender identity and gender expression, ensuring protections for all employees.
- Pay disparities between any sexes are prohibited—not just opposite sexes.
The law also clarifies that “wages” and “wage rates” include all forms of compensation:
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- Stock options, bonuses, profit-sharing, life insurance, housing or hotel accommodations, and other benefits.
Action Item:
When reviewing pay equity, consider the full scope of compensation—not just hourly wages or salary.
Pay Transparency: A More Specific Posting Requirement
For employers with 15+ employees, job postings must now include a good-faith estimate of the pay rate or range you actually expect to offer upon hire.
This clarifies prior law, which required a range for “the position” but did not specify whether it should reflect the starting offer.
Action Item:
Audit job postings and recruitment templates to ensure pay bands reflect real, intended starting compensation.
Personnel Records: More Documents Must Be Accessible
Employees (current and former) have long been entitled to access their performance-related personnel files. Starting in 2026, this right expands to include employer-kept education and training records.
Action Item:
Notify HR or administrators responsible for file requests that these new records fall under access requirements.
Pay Data Reporting: New Recordkeeping Rules
Employers with 100+ employees must now store demographic information gathered for pay data reporting separately from employees’ main personnel files.
This ensures confidentiality and prevents demographic data from influencing employment decisions.
Action Item:
Create a system—digital or physical—that isolates pay data and demographic information from regular personnel records.
Cal/WARN Act: More Detailed Notice Requirements
Employers issuing WARN notices must now include:
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- Coordination details with a workforce development board
- Additional contact information
- Arranged workforce development services within a specific timeframe, if such services are provided
Action Item:
If layoffs or closures may occur in 2026, consult legal counsel early to ensure notices meet new requirements.
“Stay or Pay” Agreements Prohibited
Beginning January 1, 2026, employers may no longer require employees to repay a fee or debt upon voluntary termination of employment. These “stay or pay” provisions will be illegal in any contract dated on or after the new year.
Action Item:
If you currently use retention agreements or training repayment agreements, consult an attorney to determine whether any changes or discontinuations are required.
Statewide Minimum Wage & Exempt Salary Increase
California’s minimum wage rises to:
$16.90 per hour statewide
This change also increases the minimum salary threshold for exempt employees to:
$70,304 per year
Remember: if a local or industry-specific minimum wage is higher, you must follow the higher rate.
Local Minimum Wage Updates for 2026
Several California cities are increasing their local minimum wage on January 1. Here are the confirmed 2026 rates:
- Belmont: $18.95
- Burlingame: $17.86
- Cupertino: $18.70
- Daly City: $17.50
- East Palo Alto: $17.90
- El Cerrito: $18.82
- Foster City: $17.85
- Half Moon Bay: $17.91
- Hayward: $16.90 (25 or fewer employees) / $17.79 (26+)
- Los Altos: $18.70
- Menlo Park: $17.55
- Mountain View: $19.70
- Novato: $16.90 (≤25) / $17.46 (26–99) / $17.73 (100+)
- Oakland: TBD
- Palo Alto: $18.70
- Petaluma: $18.31
- Redwood City: $18.65
- Richmond: $17.68 (with benefits) / $19.18 (without)
- San Carlos: $17.75
- San Diego: $17.75
- San Jose: $18.45
- San Mateo City: $18.60
- San Mateo County (uninc.): $17.95
- Santa Clara City: $18.70
- Santa Rosa: $18.21
- Sonoma City: $17.38 (≤25) / $18.47 (26+)
- South San Francisco: $18.15
- Sunnyvale: $19.50
- West Hollywood: $20.25 (non-hotel employees)
- Cities with TBD rates will release updated numbers in the coming months.
Final Thoughts for California Small Business Owners
The start of a new year is the perfect moment to review your policies, update documentation, and ensure your payroll, handbook, and HR practices comply with state and local law. With so many changes taking effect at once, even well-organized businesses can feel overwhelmed.
If you’re handling compliance without a dedicated HR team, consider:
- Updating your employee handbook now
- Reviewing all job postings for pay transparency compliance
- Auditing compensation structures under the new pay equity definitions
- Confirming minimum wages for every work location
- Ensuring personnel files and pay data reporting records are stored correctly for 2026
Staying compliant not only protects your business but also strengthens trust, transparency, and stability within your team.
Need Help Staying Ahead of the Changes? Zumifi is Here to Support You
From payroll adjustments to policy updates, Zumifi’s cloud-based bookkeeping and accounting services are designed to help small businesses stay compliant, organized, and ready for growth.
Whether you need assistance updating wage rates, reviewing employee classifications, or preparing your 2026 payroll systems, Zumifi is here to help you navigate California’s evolving regulatory landscape with confidence.
Reach out to our team to make sure you’re fully prepared for January 1, 2026.
Contact us today or call 415.550.3070 to learn more about our experience and expertise and how you can benefit from customized bookkeeping services to meet your business needs.
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