5 Game-Changing California Laws Every Employer Must Know for 2026

Alex Papazis (00:00)

In addition to that, notice that all employers have to be providing out to these employees, there's an additional action step that employers in California have to take now as well. Every employer needs to touch base with every single employee in their company by March 30th of next year and ensure that they have their employees’ emergency contact updated in the system. And here's why. This law requires for employers to have updated emergency contact information for employ and ask employees at the time of updating that contact information if the employee would like for their employer to contact their emergency contact in the event that they're arrested or detained while working on the job. So it's another unique thing that California is throwing in there.

Announcer (00:52)

Welcome to THRIVE, a Paychex Business Podcast, your blueprint for navigating everything from people to policies to profits. And now your host, Gene Marks.

Gene Marks (01:02)

Hey everybody, it's Gene Marks. And welcome back to another episode of the Paychex THRIVE podcast. Thank you so much for joining us this time. I am with Alex Papazis. Alex is an HR risk and response partner at Paychex, because this conversation is going to be about what he knows about California laws that are impacting businesses in California and maybe even outside of California as well. So, if you are a company that is doing business inside of California or potentially doing business inside of California, even if you're outside of California, you want to pay close attention to this episode. This is what's going to affect you in 2026. So first of all, Alex, hey, thank you so much for joining. We really appreciate your time.

Alex Papazis (01:46)

Yeah, of course. More than happy to be here. Thank you so much for having me.

Gene Marks (01:50)

You got it. And you know your title is, I have to ask you, your HR risk and response partner, what does that mean exactly?

Alex Papazis (01:58)

Yeah. So, within Paychex, all of our clients who are on our HR services platform for additional HR support, they're assigned HR business partners to their teams. My job and what my team's job to do is we support the hundreds and hundreds of HR business partners in our company that support the hundreds of thousands of clients in our company with high-level risk or escalation cases. So, employee terminations, investigations, harassment complaints, you name it, anything that's deemed high risk or intricate, those things get escalated to us to make sure we give our clients the best results possible.

Gene Marks (02:31)

Got it. And are you like an expert in the California stuff? Like, is that where you've been kind of pushed because California, obviously the nation and employment laws, you know.

Alex Papazis (02:41)

Yeah, absolutely. California is always changing things, always evolving. My areas that I'm assigned to specifically California and other west coast states. So, I wouldn't say 100% expert, but you know, we deal with these things on a day-to-day basis. So I'd like to think I'm pretty good at handling them as they come through for California.

Gene Marks (03:00)

All right, that's good. And you know, before we get into some of the issue, I gotta ask you, like, what California kind of leads the country in a lot of these things, right? Like sometimes, you know, I have clients or readers that are like, well, it's going on in California, you know, I live in, you know, my business in Illinois or Pennsylvania or whatever. I don't have to really worry about that. But have you found over the years you've been doing this, that California, what California does gets, you know, looked at and in a lot of cases emulated by other states around the country?

Alex Papazis (03:27)

Yeah, absolutely. California, we find leads the way in most type of employment law legislation that's passed. So they're one of the first states to kind of get behind AI as an example, regulations regarding that and many other things that come up. So while it is a very intricate state state to work as an HR professional, in the cases that we work, it actually is beneficial to us because if there's a situation to be accounted for and there should be a law for it, California usually has something to reference for us. So even though it is difficult to operate in that state, you will know there's always some sort of guidance or framework for pretty much every situation California has it covered.

Gene Marks (04:05)

Yeah, that kind of makes sense. All right, so we're going to talk about a number of topics in this, in this conversation. I've got minimum wages. We're going to, about the Workplace Know Your Rights Act. We're going to talk about personnel file updates, you know, rules that have changed around that, pay transparency updates, stay or pay requirements and employment provisions as well. So big issues that are affecting employers in 2026. So let's dig into it. Give us an update. What can employers expect regarding minimum wages and exempt salaries in 2026, Alex?

Alex Papazis (04:40)

Yeah, definitely, Gene. And you listed, you know, five or six main things that we'll be talking about. California has slated for 2026, way more than that that they're updating. But these are just the most pertinent things that we find applied to pretty much all of our clients. So minimum wage, people usually think about minimum wage to think about only an hourly pay rate. And that is the case when we talk about minimum wage for California, but it can mean a lot more than that. So this new minimum wage update will take effect January 1st of 2026. Current hourly minimum wage for the state, $16.50 an hour. So that's going to be bumped up to $16.90 an hour for state minimum wage. And the state uses the Consumer Price Index to set that wage rate. So everybody's thinking, okay, that's the minimum hourly rate. I'm good to go. Not so fast. And here's why. California also has additional provisions in their minimum wage law that if you are salaried, exempt from overtime employee, you also have a minimum salary threshold you must hit in California to be considered exempt from overtime. And that now bumps up to $70,304 for the year. So even though it's just the hourly minimum wage we think is adjusted, that's not quite it. The minimum salary threshold for all salaried exempt from overtime workers in California has to meet that $70,304 threshold as well to be eligible for that exemption.

Gene Marks (06:06)

You know, it's, I speak about this a lot and sometimes I speak to, you know, oftentimes I speak to national audiences and I talk about how, you know, you know, under this administration, there's likely going to be less legislation coming out of Washington because more is being pushed down to the states. And California is such a perfect example of that. I mean, even though the federal minimum wage, Alex, is still at $7.25 an hour, you know, more, you know, I think more than 30 states have higher minimum wages. California's is one of the highest in the country, approaching $17 an hour. And even though federal overtime rules, like you said, unless you're exempt from overtime, you're entitled to overtime up to a certain number. The Biden administration tried to change that. That did not happen. It got held up in the courts. But California's overtime rules are more stringent or more expansive than the federal overtime limit as well. So, like you said, if you're a California employer and you have salaried employees that are making up to $70,304 and meet other requirements, they may also be, you know, entitled to overtime pay as well. So, I guess the message is pay attention to California more so than what the federal rules are. Is that, is that a fair take?

Alex Papazis (07:23)

Yes, absolutely. Anytime we work with any clients or businesses of ours, when they're evaluating, you know, how to pay their employees accurately if they're eligible for overtime, we know federal law is going to apply. We always look to California law immediately right after. Because there's almost always additional provisions that California applies on top of the federal laws, and that's what we see here. And that's not even just talking about California as a state. On top of California as a state, you know, we're talking about state minimum wage here. There are additional localities and cities within California that have higher minimum wages than what the state is. So, you know, Los Angeles, San Francisco, they have higher minimum wages than even the state does of California. So we are looking at a federal basis, a state basis, and then we help with clients we're looking at, even down to a locality or a city basis to make sure we cover all of our bases there.

Gene Marks (08:12)

So I have a business in Pennsylvania, but if I were running a business in California, first of all, I'd be budgeting for this stuff for next year. Secondly, I'd be sitting down with an HR expert. Maybe that's Paychex, or maybe you have a labor attorney or whatever. But you got to go through each of your employees, see who's going to be impacted by the minimum wage increase and also see from your salaried employees perspective who would be eligible for overtime pay. Not just on that, that pay limit, but also some of the other factors that go into that decision. There are supervisory responsibilities and things like that. You know, you and I are recording this right now. It's early November, so there's still some time for businesses to do this. It's something that they need to do right now. Good. Okay, let's go to next. There is the Workplace Know Your Rights Act. Explain to me what that is and when it becomes effective.

Alex Papazis (09:02)

Yeah, definitely. And this is a big one because it requires some sort of action from every single employer in the state. From everything I've read on this legislation, there's no employee threshold that you have to hit before it applies to you. It's applying to pretty much every single employer. And what this Workplace Know Your Rights Act is, it's going to be... There's two main components of it. The first main component is anytime you hire a new employee at your company and every single year thereafter for all of your existing employees at your company, you're now required to provide an additional Know Your Rights Notice to all of these employees. So that can be sent, this notice can be sent via email or provided in a physical printed format. But every single employee in your company, every single year, annually must be provided with this notice. And this notice basically informs employees of specific workers' rights in the state of California and different legal rights that they may have when engaging with law enforcement as well. So it's a very unique law for the state of California to pass this. And that will be, you know, quote unquote, effective January 1st. But employers are required to have these notices provided on or before February 1st of next year. So you have like the month of January in 2026 to make sure you have your notices provided to your employees.

Gene Marks (10:22)

Where do they get this notice?

Alex Papazis (10:23)

Yes, great question. So, the California Division of Labor Standards Enforcement, we also call them the DLSE. They are going to be working on creating this notice. This notice will be posted on their website for the state of California prior to January 1st. So, employers prior to January 1st will be able to go on, pull this notice, print it out, email it to employees. And again, the thing is, every single year around the same time, employers should usually set a date. So say February 1st every year is the notification date. They should pull the most updated notice every single year thereafter and provide that notice to employees to be compliant.

Gene Marks (11:01)

How do we communicate this to our employees, Alex?

Alex Papazis (11:04)

Yeah, so usually smaller businesses will do a physical printed copy and give it to employees, but the law also allows for employers to send it via electronic methods as well. So if they wanted to send it via an email or if they wanted to send it, even if they have like document share platforms or softwares that employers use, employers can do that as well as long as it's verified that the employee is receiving the notice. So, you just need to make sure you have a clear communication to your employees to inform them of their rights under this law.

Gene Marks (11:35)

So, just hanging that notice in, like the employee lunchroom, wouldn't be good enough?

Alex Papazis (11:39)

Nope. Not going to cut it for this one. Usually we think about that for labor posters, this is very unique and a lot different than that. And there's other components that we'll touch base on as well with that.

Gene Marks (11:50)

One final question. This would also apply if I have a remote worker in California? Even though my business is based in Pennsylvania, am I still subject to this law?

Alex Papazis (11:58)

Yes, absolutely. If your employee is living and operating in California, you should look to it here with the standard as well.

Gene Marks (12:05)

Okay, that's great. You know, before we get on some of the other, the other items in California, I just want to tell all of you guys you're hearing what Alex is telling you. We've already been through just a couple of regulations for California businesses. We're going to talk about a few more. These regulations, I mean, there are regulations like this in all states. It is getting tougher and tougher for a Business, particularly a small business, to keep up with these regulations, manage them, do the communications, all that kind of stuff, which is why you really need an HR expert to help you do this kind of stuff. So you should outsource that. Paychex is a company that does exactly that. They help you with these HR needs. They not only just do payroll, but they will make sure that you are in compliance with these rules and regulations, regardless of the state that you are in. This kind of thing costs employers tens of thousands of dollars to do and manage on their own if they were going to do it internally. And that's not even including if they're in violation of anything, because they're not doing it the right way. So you do need to outsource this stuff to an HR expert. And Paychex is an amazing resource for you. If you want more information on this, go to paychex.com/MeetPaychex. That's P-A-Y-C-H-E-X.com/M-E-E-T-P-A-Y-C-H-E-X. That way you can get the help you need to make sure that you are in compliance with these rules and regulations, regardless of what state that you are in. All right, Alex, let's get back to business here. Personnel file updates. If you're a California employer, tell us what that is.

Alex Papazis (13:36)

Yeah, definitely. And Gene, if you don't mind, can we circle back to the Workplace Rights Act? There's another component on there that I want to cover, and it's really unique as well. So, in addition to that notice that all employers have to be providing out to these employees, there's an additional action step that employers in California have to take now as well. Every employer needs to touch base with every single employee in their company by March 30th of next year and ensure that they have their employees' emergency contact updated in the system. And here's why. This law requires for employers to have updated emergency contact information for employees and ask employees at the time of updating that contact information if the employee would like for their employer to contact their emergency contact in the event that they're arrested or detained while working on the job. So it's another unique thing that California is throwing in there. It's another step all of our clients and employers in California have to take is to update those contacts and then ask the employees point blank, essentially, hey, if you get arrested or you get pulled off the job site, are we okay to contact your emergency contact? And then if that does happen, they have to call them for the, for the employee, too.

Gene Marks (14:54)

Yeah. If I could just say. I mean, listen, I'm like, I'm, I am for as little rules and regulations as possible as a business owner. But, I mean, come on, this makes sense, right? I mean, you should have that information and you should have that conversation with your employees anyway. So I think that's a good practice to follow. So, okay, good. Thank you.

Alex Papazis (15:10)

Sí.

Gene Marks (15:11)

All right, let's move on. Personnel file updates. What is the state requiring businesses to do regarding that?

Alex Papazis (15:16)

Yeah, definitely. So, currently in California, personnel files must be obtained for every single employee for the duration of their employment and then up to three years after they're terminated. So, after they leave the company. Currently, the personnel files you might have on file for your employees could have performance reviews, written warnings, those types of documentations you would save in an employee's file. What California has now done is they've expanded what's required to be in an employee's personnel file. So in addition to all those other things you are already required to have in the personnel file, California now requires employers to keep records in each employee file about trainings or certifications that they've taken related to their employment. So if I have an employee who's taken a specific safety training at work, or whatever the topic or certification may be related to the job, all employers now are required to have on file the date the training that took place, what the training was about, if they attended it or not. So there's additional components now to that. And here's the big kicker. We always say, like, okay, well, if I don't comply with this or I forget to do that, what's going to happen to me as an employer In California, you can have up to a $750 penalty for each violation of this law. So, it's another additional component that's layered on for California employers.

Gene Marks (16:36)

All right, fair enough. I mean, again, not an uncommon or a bad ask for employers to do. I mean, again, I know you hate to have the government telling you to do this stuff, but I think keeping records of training and training history is very important, and most of my clients do that anyway, so. Okay, fair enough. Pay transparency is something that many states, more than a dozen states have rules and regulations, and I think something like almost a dozen more, And this is me talking, not Paychex, I want you to know, have pending legislation or they're, you know, up for discussion and debate in the state legislatures about pay transparency. Yeah, the federal government isn't going to be doing much about this. First of all, can you explain what is meant by pay transparency. And tell us what California is requiring employers in 2026.

Alex Papazis (17:24)

Yeah, absolutely. So, pay transparency as it currently stands in California, you know, if you have an employee in a current position, they have the right to request what the pay scale is for their position. An employer has to provide that to them. So, the pay range is, okay, it's $75,000 to $125,000 is the pay range. That's for current employees. If you're interviewing an applicant for a position and they ask you for that information, employers are obligated to provide that. And then for all companies that have 15 or more employees in the state of California, when you're posting jobs online, you have to put that pay scale information in the job posting. So that's what the law currently stands at for California.

Gene Marks (18:03)

Which, by the way, if I can interrupt you and say, like that's, It's a little bit silly that the employer has to provide it when an employee can just google that information on their own. But fair enough. That's just my...

Alex Papazis (18:13)

Yeah, yeah. I mean, there's so many different resources out there that they could try to find that info. So this is just directly from the business to the employer, the applicant. So what's going to happen now starting in 2026 is the state has narrowed down what the definition means of a pay scale. So pay scale now means a good faith estimate of wages or the wage range that the company is going to pay to the employee upon hire. So what was happening is you would have a company post a job and the range would be so vast, it'd be...

Gene Marks (18:46)

$10,000 to $5 million a year.

Alex Papazis (18:49)

Exactly. I think one I saw was $70,000 to like $350,000.

Gene Marks (18:54)

Yeah, yeah.

Alex Papazis (18:55)

And it wasn't a sales job with commission or anything. It was just like a wide range.

Gene Marks (18:59)

So you mean, just tell me the state is saying it actually has to be like a reasonable range of salary?

Alex Papazis (19:04)

Yeah, yeah. A quote unquote good faith estimate, as we're saying with the law. So, what this does is it basically means that you have to provide what that reasonable good faith estimate is of what you would pay the employee at the time of hire. So you shouldn't be providing an applicant, you know, the widest end of the pay scale if that widest end of the pay scale represents somebody with a master's degree and 10 years of experience in the role, if you're not looking for that in hiring for the position. So, it just narrows that down and gives more transparency for people who are wanting to know the range of the pay for the job.

Gene Marks (19:38)

Yeah. You know, what's driven this whole trend towards pay transparency, Alex, is just the disparity in pay between men and women, you know, in the workplace. Right. I mean, women themselves have historically made less than men, so, you know, they would apply for jobs and they didn't know what the pay was and they could be taken advantage of. And now, you know, because of this pay transparency rules, a lot of states jumping onto it because it equals the playing field. So it's a good thing, right?

Alex Papazis (20:04)

Yeah, yeah, definitely.

Gene Marks (20:06)

Okay. Finally, we have something called state or, I'm sorry, stay or pay requirements and employment provisions. What does that mean?

Alex Papazis (20:14)

Yeah, absolutely. So, a stay or pay requirement, when we hear that phrase, basically what it means is to break it down in the easiest way, a company hires an employee, and they pay for a specific training or certification for that employee. And what the business owner will do is they'll stipulate in the employment agreement or in the contract, hey, you know, you come on, we just paid for this training, but if you leave before a specific date, you're legally obligated now to pay us back money for a specific training or certification. So, we call it a stay or pay agreement. So, the new law, yeah, the new law, what it does is effective January 1st, and keep in mind, this only applies to agreements entered on or after January 1st, so, if you have an existing stay or pay arrangement in your employment contract, ideally you had that reviewed by an attorney or a trusted legal source, that should be fine if it was prior to January 1st, but for anything going forward, January 1, 2026, those provisions are no longer allowed except in extremely, extremely limited circumstances. And it's so narrow that it almost applies to almost no one. So, if you are looking to have a provision like that written up in an offer letter or an employment contract, we always recommend go to a proper legal source, go to your own employment law attorney to have that reviewed because you don't want to be out of compliance. The penalties are huge. I can list those off for you as well.

Gene Marks (21:44)

No, it's not necessary. But we get it. We get it. All right, Alex, this has been great stuff. Let me recap what we've learned. I've been taking some notes here. So, number one is California's minimum wage is all in 2026 is going up now to $16.90 an hour. And then their exempt salaries for overtime are also raised to $70,304. So, the takeaway there is get together with your HR expert and make sure that you are adjusting for that and budgeting for that. California employers are required to provide certain information to employees and they have to communicate with them directly. This will be by February 1st. That's called the Workplace Know Your Rights Act. So, you want to make sure that you are up to date. And that has not been, that information has not been made available yet, but will be soon by the state. And it's going to be our job as employers if we're in the state or have remote employees to make sure that they know what their rights are. Regarding personnel files, we are now required to have personnel files updated to including training records as well. So that is a part of the history and personnel files. Regarding pay transparency, employers now are required this with more than 15 employees to give a range of salaries, which they've been required to do that before in the past, but now the range that they give in job applications or job advertisements actually needs to be a reasonable range, not, you know, like within millions of dollars so that people can get an actual reasonable basis as to what that job will be paying. And finally, you mentioned stay or pay. Some employers offer compensation or reimbursement for certifications and other education with the stipulation that if you leave, you know, before the time is up, before your agreement is up, you're going to have to pay us back. That is no longer going to happen after January 1st. If you pay for somebody's education or certification, if they leave prematurely, that's still the employee won't owe you anything after that. Have I summed it up? Did I miss anything big in that summary?

Alex Papazis (23:47)

No, no, I think we got it down. And you know, I will always tell everybody, consult with your HR business partner, especially if it's with Paychex. These are things we handle every single day, especially for California. This is just, you know, the tip of the iceberg. There's so much more that California has going on to be aware of.

Gene Marks (24:04)

Yeah, I couldn't agree with you more. And Alex, this has just been great. Yes, California, Illinois, New York State you know, those are like, to me, like the big three where they sort of lead the country in employment laws and regulations, and a lot of it is for good reasons. And, but, you know, as an employer there, you just got to make sure you're in compliance. Alex Papazis is an HR risk and response partner at Paychex. He is on the know and in the know to advise Paychex clients of any potential issues that they might have from an HR standpoint, and he specializes in the western states, including California. We have been talking about some of the major things that employers need to know for 2026 in the State of California. Alex, you were awesome. Thank you really very, very much for all the great information you've shared and let's get back together soon.

Alex Papazis (24:51)

Thanks, Gene. Appreciate it.

Gene Marks (24:52)

Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/ThriveTopics and share your ideas or topics of interest with us. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/Worx. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host Gene Marks, and thanks for joining us. Till next time, take care.

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