California employers face another busy year of compliance changes. Higher wage thresholds, new limits on AI in discipline and termination decisions, and expanded pay data reporting are among the highlights. PLG employment partner Sweta Patel has summarized the key developments below. Unless otherwise noted, the new laws take effect January 1, 2027.
- Statewide minimum wage and exempt threshold: The statewide minimum wage increases to $17.40 per hour on January 1, 2027, for all employers regardless of size. The minimum salary for exempt executive, administrative, and professional employees rises to $72,384 per year ($6,032 per month). Employees must also continue to meet the applicable duties tests. We recommend confirming any higher local city/county minimums, including new rates that take effect July 1, 2027.
- "Stay-or-pay" agreements delayed and revised (AB 1697): This amendment took effect immediately on September 30, 2026, and limits the stay-or-pay ban to contracts entered into on or after January 1, 2027. AB 1697 adds additional exceptions for qualifying retention bonuses, certain arrangements in regulated financial services and insurance occupations, and repayment of up to 40 hours of PTO advanced at the employee’s request. Each exception carries strict conditions, and noncompliant contracts entered into on or after January 1, 2027 are void. We recommend auditing employment contracts, bonus agreements, and related policies before year-end.
- Bereavement leave for a "designated person" (SB 1149): Employers with five or more employees must allow bereavement leave for the death of a "designated person." This is someone related to the employee by blood, or whose relationship with the employee is the equivalent of family. Employers may limit employees to one designated person per 12-month period. Please update bereavement policies and leave request forms before January 1.
- Immigration-related retaliation (AB 2495): Labor Code §1019 now prohibits conduct based on a person's perceived immigration status that would reasonably tend to discourage protected activity. It covers applicants and current or former employees. A violation within 90 days of protected activity creates a rebuttable presumption of retaliation. Penalties are $10,000 per employee or other aggrieved person for each violation. We recommend manager training and updated anti-retaliation policy language.
- AI in discipline and termination – "No Robo Bosses Act" (SB 947): Effective July 1, 2027, employers may not rely solely on an automated decision system (ADS) to discipline or terminate employees. If an employer primarily relies on ADS output, a human must corroborate the decision using the underlying data or other relevant information. If the output cannot be corroborated, or the reviewer finds it inaccurate, incomplete, or misleading, it may not be used. Affected employees may request a meaningful, objective description of their own data used by the ADS, with others’ personal information anonymized. Employers also may not use an ADS to violate or prevent compliance with labor, workplace safety, employment, or civil rights laws; to infer FEHA-protected status; or to predict and take adverse action against employees for exercising their legal rights.
SB 947 post-use notice: When an employer “primarily relies” on an ADS for a discipline or termination decision, it must give the employee a written notice regarding such use when it communicates the decision. The notice must be a stand-alone, plain-language communication, in the language the employer normally uses with employees, delivered by a simple method such as an email or a hyperlink. It must state that (1) the employer primarily relied on an ADS; (2) a human reviewed the decision and corroborated the ADS output; (3) whom the employee can contact for more information, including about the right to request their ADS data; and (4) retaliation for exercising these rights is prohibited. When reliance becomes “primary” is not yet clear, so we recommend treating any decision meaningfully driven by ADS output as covered. We also recommend inventorying any software that scores or flags employees and preparing a template notice before July 1, 2027.
- AI-driven layoffs and Cal-WARN (SB 951): When a covered mass layoff, relocation, or termination results from AI or automation, the Cal-WARN notice must begin with the statement “This notice is for a technology displacement” and identify (1) the number, job classification or occupation, and work location of affected employees; (2) the job functions to be automated; and (3) the category or type of AI or automated technology that substantially caused the displacement. The 60-day notice period is unchanged.
- Sex discrimination definition (AB 2563): AB 2563 creates a uniform definition of sex discrimination across California codes that covers, among other things, discrimination based on specified actual or perceived characteristics or actions, including degree of conformity to sex or gender stereotypes. We recommend reviewing dress and grooming rules that differ by gender.
- Pay data reporting (SB 1237): Private employers with 100 or more employees must file a payroll employee report, and those with 100 or more workers hired through labor contractors must file a separate labor contractor employee report; each threshold applies independently. Reports group employees by establishment, job category, race/ethnicity, and sex, showing headcount by pay band and mean and median hourly rates. Job categories move from the 10 EEO-1 categories to the 23 major groups of the federal Standard Occupational Classification (SOC) system, so each position must be mapped to an SOC group (SB 464). The penalty for a first failure to file remains up to $100 per employee, but the penalty for a repeat failure increases from $200 to up to $1,000 per employee. We recommend confirming job-code mapping well ahead of the May 2027 filing.
- Misclassification and Labor Commissioner hearings (SB 1444 and SB 1316): SB 1444 amends Labor Code §226.8 so that civil penalties for willful independent contractor misclassification ($5,000 to $15,000 per violation, or $10,000 to $25,000 for a pattern or practice) may be recovered as damages by the affected employee, not just the Labor Commissioner or a public prosecutor. Under SB 1316, records an employer fails to produce in response to a timely Labor Commissioner request may be excluded from the administrative or writ proceeding for any purpose, including impeachment. The Labor Commissioner will typically allow at least 15 days to produce records but may set a shorter deadline when needed to complete an investigation. Represented parties must also provide counsel’s email address, accept electronic service, and keep that address current while a claim is pending (SB 1444). We recommend calendaring records requests promptly and keeping counsel’s contact information current for every pending matter.
- Workplace violence restraining orders (AB 1961): Employers may seek an order protecting all employees at a location from workplace violence without naming each employee.
- Looking ahead – harassment training (AB 1803): Beginning January 1, 2028, mandatory harassment prevention training must include anti-hate speech training.
These updates are for informational purposes only and are not intended as legal advice. If you have any questions or need specific guidance on how these changes may impact your organization, please email Sweta Patel directly (spatel@potomaclaw.com) to discuss further.
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This article is for informational purposes only and is not intended as legal advice.
