California Legislative Update for Employers

Employers in California face potential changes with the end of the year’s legislative session and multiple employment-related bills passed and sent to Governor Gavin Newsom’s desk for signature.

Two measures have already been signed into law by the governor:

• Gig worker organization. Effective Jan. 1, 2026, drivers for certain gig companies will have the right to form, join and participate in the activities of driver organizations, thanks to . The bill, signed by Gov. Newsom on Oct. 3, also allows covered drivers to bargain through representatives of their own choosing and engage in concerted activities for the purposes of bargaining or other mutual aid protection.
• amends the Fair Employment and Housing Act (FEHA) to state that “an employee’s assessment, testing, admission or acknowledgement of their own personal bias, when made in good faith and solicited or required as part of a bias mitigation training does not, by itself, constitute unlawful discrimination.” The law, set to take effect Jan. 1, 2026, is intended to encourage employers to conduct bias mitigation training and affirm that conducting such training does not, by itself, constitute unlawful discrimination.

Other bills remaining on the Governor’s desk include:

• , the , would prohibit an “automated decision-making system” (ADS) from making an employment decision, including hiring, termination, promotion or disciplinary action, without human oversight. Employers would be required to notify workers (defined to include job applicants and independent contractors, as well as employees) in writing when AI tools are being used in the decision-making process and maintain a list of all ADS currently in use. The bill also features an anti-retaliation provision. Enforcement authority would lie with the Labor Commissioner, who could issue citations and file civil actions against employers for violations.
• Enforcement of wage judgments. Pursuant to , employers could be subject to a civil penalty of not more than three times the amount of an outstanding judgment if a final judgment from the employer’s nonpayment of work performed remains unsatisfied after 180 days. An employer would be permitted to demonstrate by clear and convincing evidence that good cause exists to reduce the amount of the penalty.
• Judgment debtor employers. Within 60 days after a judgment is entered against an employer requiring payment to an employee or to the state, would require that the employer inform the Labor Commission that (1) the judgment is fully satisfied; (2) if applicable, the required bond has been posted; or (3) the judgment debtor has entered into an agreement for the judgment to be paid in installments. A civil penalty of $2,500 could be assessed for failure to comply.
• Vehicle business expenses. If signed into law, would clarify that mere ownership of a vehicle, including a personal vehicle or a commercial vehicle used by a person in providing labor or services for remuneration, does not make that person an independent contractor. In addition, the bill would provide that the duty of an employer to indemnify their employee for all necessary expenses or losses applies to the use of a vehicle owned by an employee and used by that employee in the discharge of their duties.
• Contracts in restraint of trade. For contracts entered into on or after Jan. 1, 2026, would make it unlawful to include in any employment contract—or to require a worker to execute as a condition of employment or a work relationship—a term that requires the worker to pay an employer, training provider or debt collector for a debt if the worker’s employment or work relationship with a specific employer terminates. Such contracts would be declared as a contract in restraint of trade and therefore void and contrary to public policy. A worker subjected to such a contract would be authorized to bring a civil action.
• Expanded definition of “designated person.” would expand eligibility for benefits under the paid family leave program to include individuals who take time off work to care for a seriously ill designated person. The measure would define a “designated person” to mean any care recipient related by blood or whose association with the individual is the equivalent of a family relationship. Employees that request family temporary disability insurance benefits would identify the designated person they are seeking to care for and, under penalty of perjury, attest to how the individuals is related by blood or how the individual’s association is the equivalent of a family relationship. If signed, the bill would take effect July 1, 2028.
• “Pay scale” definition tweaked. Existing law requires employers to share the pay scale for a position with an applicant or in a job posting, and the term “pay scale” is currently defined as the salary or hourly wage range that an employer reasonably expects to pay for the position. would revise the definition of “pay scale” to mean an estimate of the expected wage range that an employer reasonably expects to pay for the position upon hire and is made in good faith. The bill would also expand the statute of limitations to assert pay equity claims from two years up to three years and provide that employees can recover lost wages for the entire time during which the violation occurred, up to six years. The term “wages” as defined in the legislation would include “all forms of pay, including but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.”
• Extension for “cover up” of certain claims. would extend the eligibility period for revival of claims seeking to recover damages suffered as a result of an alleged sexual assault that would otherwise be barred prior to Jan. 1, 2026 because the applicable statute of limitations has or had expired. To revive sexual assault claims—including derivative claims for wrongful termination and sexual harassment—an employee must demonstrate that one or more entities legally responsible for damages engaged in a “cover up,” defined as a “concerted effort to hide evidence relating to a sexual assault that incentivizes individuals to remain silent.”
• Workplace Know Your Rights. The “Workplace Know Your Rights Act” would require an employer, on or before Feb. 1, 2026, to provide a stand-alone written notice to each current employee of specified workers’ rights including the constitutional rights of an employee when interacting with law enforcement at the workplace, workers’ compensation and notice requirements related to inspections conducted by an immigration agency, among others. would also require an employer to provide the written notice to each new employee upon hire and on an annual basis. The Labor Commissioner would be tasked to develop a template notice (updated annually) for employers.

Why it matters: While Gov. Newsom has already signed some employment-related bills into law, he has until Oct. 13 to act on any of the other legislation.