As 2025 comes to a close, many California employers are juggling holiday schedules, performance reviews, and planning for 2026. Just as importantly, now is the time to evaluate whether your workplace practices are keeping up with California’s fast-changing labor and employment laws. A structured year-end compliance review can help you identify and resolve issues before they become costly demands, audits, or litigation. The following checklist highlights key areas California employers should review now as we enter the new year.
Required Policy and Handbook Updates
Your employee handbook is a critical compliance tool. There are several new laws effective in the coming year(s) that will require policy updates, and below are a few:
- Paid Sick Leave (LC 230.2): Policies must be updated to include an employee’s right to use paid sick leave and take protected unpaid leave if they or a family member are a victim of certain crimes and need to attend related judicial proceedings. This includes proceedings such as a delinquency hearing, post-arrest release decision, plea, sentencing, or any proceeding where the victim's rights are at issue. The definition of a "victim" for this purpose is broad, covering individuals who suffer harm from various felonies.
- Court/Jury Duty (LC 230): The requirement for employees to provide "reasonable notice" prior to taking time off for jury duty has been removed. However, if an employee uses paid sick leave or other protected leave for this purpose, the standard notice requirements for that leave still apply.
- Paid Family Leave (Effective July 1, 2028): While not immediate, employers should begin planning for a significant expansion of the Paid Family Leave (PFL) program. Commencing July 1, 2028, employees will be able to take PFL to care for a "designated person," defined as an individual related by blood or whose association is the equivalent of a family relationship.
Required Postings and Employee Notices
California has introduced new notice obligations for employers. As a result of the Workplace Know Your Rights Act (SB 294), employers will be required to provide a stand-alone written notice to all current employees, and to new hires, outlining specific workers’ rights. These rights pertain to workers’ compensation, immigration agency inspections, and law enforcement actions at the workplace. The Labor Commissioner is tasked with developing a template notice, which is expected to be available on or before January 1, 2026.
Recordkeeping and Retention Reminders
Proper record maintenance is a cornerstone of compliance. A new California law, Senate Bill (SB) 513, expands the scope of Labor Code Section 1198.5, by expanding the scope of records that must be retained. Employers must now include specific training records within the personnel files they are required to maintain. These records should detail the employee’s name, the training provider, the duration and date of the training, the core competencies covered, and any resulting certification or qualification.
Reviewing How you Pay Your Workers
Wage and hour compliance remains a high-risk area for California employers. Annual year-end reviews are essential.
- Minimum Wage Increase: On January 1, 2026, California’s statewide minimum wage is set to increase to $16.90 per hour. This change also raises the minimum annual salary for exempt employees to $70,304 (or $5,858.67 per month). A number of California cities have implemented their own minimum wage requirements that are higher than the State’s minimum wage requirements. Please check your local jurisdiction’s minimum wage laws.
- Regular Rate of Pay: Ensure you are correctly calculating the regular rate of pay for overtime purposes, paid sick leave, and any required meal and rest period premiums, including all required forms of compensation (including but not limited to shift differentials and non-discretionary bonuses, as examples).
- Worker Classification: Review your workforce to confirm that all workers are correctly classified, i.e. employees vs. independent contractors, and exempt from overtime vs. non-exempt from overtime laws. Misclassification continues to be a source of significant liability.
- Stay or Pay / Clawback Clauses: On January 1, 2026, California's AB 692 takes effect, which bans most provisions that make employees repay benefits if they leave. While there are narrow exceptions for things like tuition assistance or sign-on bonuses, these will require separate, compliant agreements with specific legal conditions to be enforceable. Employers in California must promptly review and amend employment agreements, offer letters, and bonus structures to remove any such prohibited clauses.
- Pay Equity: California's pay equity laws require employers to pay equally for "substantially similar work" regardless of sex, race, or ethnicity. Employers cannot pay less based on sex, race, or ethnicity for work requiring similar skill, effort, responsibility, and working conditions. Conduct internal pay equity reviews to prepare for compliance obligations.
Required Employee Trainings
Employers must schedule and meet all California mandated training deadlines. The following are requirements for most all employers:
- Sexual Harassment & Abusive Conduct Prevention Training: Employers with five or more employees must provide this training every two years.
- Workplace Violence Prevention Training (SB 553): In conjunction with having a Workplace Violence Prevention Plan, employers must also provide this training annually and whenever changes are made to their Plan.
- Injury and Illness Prevention Program (IIPP) Training: California’s IIPP requires all employers to have a written and implemented IIPP plan to ensure safe workplaces. Employers must also provide training on their IIPP plan which might include information on how to communicate hazards, conduct hazard assessments, investigate incidents, correct issues, and ensure employee compliance. Training should be provided to new hires and as needed to maintain a safe workplace.
Steps California Employers Should Take
A year-end compliance checklist is only valuable if it leads to action. Employers should take concrete steps to prepare for 2026.
- Update your employee handbook and policies to reflect all legal changes required for your industry.
- Ensure you have scheduled training for your employees as required, and are maintaining proper records of that training in accordance with new 2026 requirements.
- Update Human Resource onboarding and offboarding systems to include all required notices for 2026.
- Review and, if necessary, amend employment agreements to remove prohibited "stay-or-pay" clauses, which are banned by AB 692 as of January 1, 2026.
- Conduct internal pay equity (and pay data reporting) reviews to prepare for compliance obligations.
For employers looking for a deeper dive into new 2026 California employment laws and recent court decisions, CDF’s attorneys regularly publish updates on our California Labor & Employment Law Blog. If you have questions about how these issues apply to your organization—or would like assistance conducting a year-end compliance review—please contact your CDF attorney.
