Intro to California Labor Laws

On October 8, 2025, the Pay Equity Enforcement Act was signed into law, significantly amending and expanding the state's Equal Pay Law and Pay Transparency Law. It amends job posting rules by requiring the pay scale to be the range the employer reasonably intends to pay "upon hire" and updates the definition of "wages" for equal pay claims to match federal law, covering all compensation, like salary, benefits, and bonuses. It also increased the statute of limitations for wage recovery civil actions to three years, allowing workers to sue for wage recovery after the last pay violation. Workers may be able to recover lost wages for the entire duration of the violation, up to a six-year maximum. Employers should review new definitions, update job postings with compliant pay scale information, and revise all employee handbooks and policies for compliance.

California has passed a new law that bans employers from requiring workers to repay costs or incur penalties when their employment ends. Specifically, the law prohibits agreements that require workers to pay back training costs or other debts, authorize debt collection upon termination, or impose fees such as retraining costs, replacement hire fees, immigration-related expenses, or liquidated damages tied to leaving employment. While these “stay-or-pay” arrangements are now banned, the law includes limited exceptions for tuition reimbursement and retention bonus agreements, provided employers follow strict new statutory conditions. The law applies to contracts entered on or after January 1, 2026, and workers can bring private lawsuits for violations. Employers should prepare by working with their legal counsel to make sure that any new contracts for tuition reimbursement or retention bonuses comply with the new law's requirements.

California will introduce new regulations for the use of artificial intelligence (AI) in employment decisions, such as hiring, promotions, and terminations. Under the California Fair Employment and Housing Act (FEHA), these rules will define automated decision-making systems (ADS) and prohibit their discriminatory use. Employers will be required to conduct anti-bias testing, keep specific records on their AI tools, and may be held accountable—along with AI developers—for any negative impacts resulting from these systems. Due to the technical nature of these rules and the significant potential liabilities, employers utilizing AI in their hiring or employment processes should prioritize a review with legal counsel.

Governor Gavin Newsom signed bill AB 406 on October 1, 2025, expanding the reasons employees can take leave under California’s Healthy Workplaces Healthy Families Act (HWHFA), the statewide paid sick and safe time law, and under California Government Code section 12945.8, which provides job-protected unpaid leave for various reasons. The new bill allows employees to use leave if they or a family member are a victim of certain crimes and is attending judicial proceedings related to that crime. This includes, but is not limited to, any delinquency proceeding, a post-arrest release decision, plea, sentencing, post-conviction release decision, or any proceeding where a right of that person is an issue. Employers should review and update their workplace policies, including their sick and safe time procedures, to ensure they comply with the new changes.

California has enacted legislation significantly expanding employer notice requirements under the California Worker Adjustment and Retraining Notification (Cal-WARN) Act. It will now require employers conducting mass layoffs, relocations, or terminations to disclose additional information in their notices to provide substantially more information to affected employees. These notices must now include details on whether the employer plans to coordinate services through the local workforce development board or another entity, as well as information regarding CalFresh, the statewide food assistance program. Employers who intend to coordinate services with the workforce board or another entity must finalize these arrangements within 30 days of providing the written notices. Employers should consult legal counsel to ensure compliance with new notice requirements and update their internal policies.

Los Angeles County has implemented a Fair Workweek Ordinance to provide greater stability and predictability to employees. The law primarily affects retail businesses, requiring them to provide employees with advance notice of their work schedules (14 days), offer additional hours to current employees before hiring new ones, and compensate employees for schedule changes. The ordinance aims to reduce the instability and challenges faced by workers with unpredictable schedules.

Employers should review the requirements and update their scheduling practices to ensure compliance to avoid potential penalties and legal issues.