Recent Updates in California State Law

Employers should be aware of several California laws that were recently enacted or went into effect. These laws expand the scope of care recipients that can trigger paid family leave obligations, extend the statute of limitation for survivors of sexual assault, strengthen protections for tipped workers’ wages, increase minimum wage statewide, provide collective bargaining and organization rights to rideshare workers, and prohibit “stay-or-pay” clauses in employment contracts. 

 AB 692: Prohibition on “stay-or-pay” agreements

Effective January 1, 2026, AB 692 prohibits employers from including contract terms that require workers to repay an employer for debts, such as training costs, upon termination of employment. Such provisions are rendered void, and employers can be held liable for violations, with potential penalties including the greater of either $5,000 per worker or the worker’s actual damages plus injunctive relief and reasonable attorney’s fees and costs. AB 692 includes limited exceptions for certain loan repayment or forgiveness programs, approved apprenticeship programs, and sign-on or retention bonuses, provided those arrangements satisfy the law’s express requirements. For example, employers can only require employee repayment of discretionary or unearned monetary payments if, inter alia, the repayment obligation is subject to a retention period no greater than two years, the employee either voluntarily resigned or was terminated for misconduct during that retention period, and the repayment terms are set forth in an agreement that is separate from the primary employment contract. Nationwide employers with employees in California must review contracts and programs to ensure that any education reimbursements, loan repayments, sign-on bonuses, and retention bonuses meet AB 692’s requirements. 

SB 590: Paid family leave will cover care for “designated persons”

Effective July 1, 2028, SB 590 amends California’s paid family leave program. Historically, this program provided up to eight weeks of benefits for workers to take time off to care for a family member, which was limited to a child, parent, grandparent, grandchild, sibling, spouse, or domestic partner. The new legislation expands eligibility for paid family leave benefits to include care for a "designated person," defined as an individual related by blood or whose association with the worker is the equivalent of a family relationship. To access benefits for caring for a designated person, an individual must identify the designated person and attest to the nature of their relationship under penalty of perjury. The bill maintains the current structure of up to eight weeks of wage replacement benefits within a 12-month period. Employers should review and update their leave policies, procedures, and employee communications to reflect the inclusion of designated persons.

Minimum wage increase 

Effective January 1, 2026, California’s state minimum wage increased from $16.50 to $16.90 per hour. Further, to qualify as an overtime-exempt employee, an individual must earn no less than twice the state minimum wage for full-time employment, which equates to $70,304 per year. As always, California employers should also be mindful of applicable local minimum wage ordinances and potential increases, which are often higher than the state minimum wage.

AB 250: Revives time-barred sexual assault claims for a two-year period

AB 250 revives civil claims by adult survivors of sexual assault that would otherwise be time-barred. The current statute of limitations for adult sexual assault claims is the later of either 10 years from the date of the last actionable conduct or three years from the discovery of a resulting injury. AB 250 establishes a new two-year window, from January 1, 2026, to December 31, 2027, for survivors to bring claims that fall outside the statute of limitations. Claims may be revived against individual perpetrators and private entities, but not public entities. Related claims arising out of the same sexual assault incident, including wrongful termination and sexual harassment, may also be revived. Any claims that have been settled or litigated to finality before January 1, 2026, may not be revived. Employers should review past records to assess exposure and update policies to ensure compliance with the new revival period.

SB 648: Labor Commissioner to enforce law requiring that service workers keep 100% of tips

Existing law mandates that gratuity for service workers is the sole property of the employee to whom it was given. Effective January 1, 2026, SB 648 strengthens this existing law by authorizing the California Labor Commissioner to investigate and issue citations or file civil action against employers that unlawfully take or withhold gratuities given to employees.  

AB 1340: Unionization of rideshare drivers

Effective January 1, 2026, AB 1340 (also known as the Transportation Network Company Drivers Labor Relations Act) grants rideshare drivers the right to organize, bargain collectively, and engage in concerted activities for mutual aid. AB 1340 establishes mandatory procedures for certifying driver organizations, requires Transportation Network Companies (TNC) to provide quarterly driver information to the Public Employment Relations Board, and sets forth mediation and arbitration procedures to reach sectoral agreements. Both TNCs and certified bargaining organizations must negotiate in good faith, with penalties for unfair labor practices including injunctive relief or civil fines.

LWDA’s proposed PAGA regulations

The California Labor and Workforce Development Agency (LWDA) issued a Notice of Proposed Rulemaking on February 6, 2026, to implement reforms passed in the 2024 amendments to the Private Attorneys General Act (PAGA). The written comment period closed on March 23, 2026, and a public hearing was held on April 9, 2026. The comments and feedback are still being reviewed by the LWDA. The proposed rules include labeling attorneys or law firms that file 200 or more PAGA notices per year as “high-frequency” or “vexatious” filers, eliminating boilerplate notices to facilitate the LWDA’s more thorough and effective assessment of filings, and formalizing the cure process.