Labor and Employment Updates
Minimum Wage Increase Effect January 1, 2026
California’s statewide general minimum wage increases by .40 to $16.90 per hour as of January 1, 2026. Note that fast food workers, and health care facility workers remain governed by separate wage orders, which remain unchanged from 2025. Note that certain cities and counties throughout the state, including the City of San Mateo, have their own minimum wage, which is higher than the state minimum.
CA Senate Bill 642: The Pay Equity Enforcement Act
Senate Bill 642 represents a significant update to the California Equal Pay Act, with three categories of changes that employers need to be aware of. These changes took effect on January 1, 2026.
First, for prospective employees, Section 432.3 of the Labor Code already required that employers with more than fifteen (15) employees publish or provide on request a pay scale for any position being hired for. Now, the Code specifies that these pay scales must represent a “good faith estimate” of the pay scale the employer expects to pay on hire. As reminder, violations of 432.3 can come with steep penalties: between $100-$10,000 per violation, although employers can avoid penalty for their first violation by updating all job postings with the required pay scale.
Second, the California Equal Pay Act originally provided that employers may not pay a current employee less than they would pay a similarly situated employee of the “opposite sex.” That language has been modernized to now read “another sex” instead of “opposite sex.” SB 642 also revises the definition of “wages” and “wage rates” to explicitly include “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.” Going forward employers must be particularly careful to ensure that employee compensation packages, including essentially any benefits, are equal unless a wage differential factor applies (See Labor Code 1197.5(a)(1)).
Finally, SB 642 expands the statute of limitations for violations of the Equal Pay Act, increasing the amount of time for an employee to bring an action to three years generally for violations. It also adds language which contemplates “continuing violations.” This could conceivably stretch liability back significantly further than prior incarnations of the Act, although the bill caps the amount of recovery available to the employee at six years.
CA Senate Bill 261: Department of Labor Standards and Enforcement updates
Also taking effect on January 1, 2026, was a major increase in the enforcement power for employees who prevail on unpaid wages claims. SB 261 amends the California Labor Code to add two new sections: 238.05 and 238.10.
Section 238.05 provides for up to treble penalties for employers who have a judgment on a non-payment of wages claim which goes un-satisfied for more than 180 days. This penalty is on top of “any other penalties or fines permitted by law.” Employers can avoid this penalty either by satisfying the entire amount of the judgment, or by entering into and adhering to the terms a payment agreement prior to the 180th day.
Section 230.10 provides for a mandatory award of attorney’s fees and costs for to an employee, Labor Commissioner, or public prosecutor who brings an action to enforce the judgment. Taken together, these new laws represent a substantial increase in liability for any employer who loses a claim by an employee for non-payment of wages.
To avoid escalating liability, it’s therefore important for employers who do find themselves in a situation where a judgment has been entered against them to resolve the judgment as quickly as possible, or, if appropriate, settle an employee’s claim to avoid judgment at all.
CA Senate Bill 7: AI/Automated Managers
Artificial intelligence remains a topic of significant interest in the labor industry, and California is one of the first states taking steps to regulate how it can be used in the workplace. SB 7 significantly restrains the way a managerial role can be delegated to artificial intelligence or automated systems, and also mandates notice to employees of an employer’s use of such systems in making employment decisions.
Any employee who could be affected by the use of an AI-powered or otherwise automated management system must be informed in writing of the system’s implementation at least 30 days prior. Employers that use AI or automated systems in making hiring decisions must notify all job applicants upon receipt of an application that they use such systems in making hiring decisions. Similarly, an employee that is disciplined or terminated by an AI or automated system must be given notice that such a system was used, and provide a human for the employee to contact about the matter.
Further, an employer may not depend exclusively on an AI or automated system when making a “discipline, termination, or deactivation decision.” When an AI or automated management system is relied upon, the employer must use a human reviewer to review the output and decision of that system, and compile and review “other information” (defined as including, but not limited to supervisory or managerial evaluations, personnel files, work product of workers, peer reviews, or witness interviews, that may include relevant online customer reviews) relevant to that employment decision.
CA Assembly Bill 250: Extending the Statute of Limitations for Some Sexual Assault Claims
AB 250 creates a new window for revival of sexual assault claims from January 1, 2026, to December 31, 2027, under certain circumstances. For sexual assault claims brought by adults, the statute of limitations is typically (10) ten years from the date of the act, or three years from the discovery of an injury or illness related to the act. AB 250 creates a new window for revival of claims in instances where an entity (including that entity’s officers, directors, employees, or agents) engaged in an attempt to “cover up” the assault. Cover up is defined broadly by the statute, and includes not just overt wrongdoing, but also the use of non-disclosure agreements, confidentiality agreements, or anything that “incentivizes individuals to remain silent or prevents information relating to a sexual assault from becoming public or being disclosed to the plaintiff.”
Note that claims which have reached final judgment, or claims that have been formally settled between the parties are not eligible to be revived, even if a cover up element is alleged.
If you have questions about how to navigate California’s labor and employment laws, contact our team of seasoned employment litigators and counselors , Amanda L. Riddle, Steven M. Berki, Sumble Manzoor or Tyler K. Larson.
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