Hunton Employment & Labor Perspectives

In 2025, California legislators passed new employment laws that will bring changes to employment contracts, pay data reporting, paid family leave, and other employment-related topics. Employers in California should understand the impacts of the new requirements, new prohibitions, and expanded definitions to current laws. The following list highlights five new California employment laws for employers to be aware of in the year ahead.

Changes to Annual Pay Data Reporting (SB 464)

Senate Bill (SB) 464 brings changes to annual pay data reporting for 2026 and 2027. Current pay data reporting requirements require private employers with 100 or more employees, including certain contractors, to submit annual pay data reports to the California Civil Rights Department (CRD) for a “snapshot” period. The reports cover employee counts by race, ethnicity, and sex across 10 job categories; employee earnings by pay bands (including hours worked); and the mean and median hourly pay rates by race, ethnicity, and sex. Noncompliance carried discretionary penalties of $100 per employee, with an increase to $200 per employee for repeat violations.

Starting in 2026, penalties for noncompliance will become mandatory upon CRD request. Therefore, an employer with 500 employees that fails to file could face $50,000 to $100,000 in fines. If a violation is due to a labor contractor failing to provide the required data, courts may shift part of the penalty to the contractor. Additionally, employers will be required to store demographic data separately from personnel records. For 2026, reports to the CRD are due by May 12 (the second Wednesday in May).

Starting January 1, 2027, the job categories for employers to report employee counts by race, ethnicity, and sex expands from 10 to 23. The new 23 job categories correlate with Standard Occupation Classification (SOC) groups instead of the 10 EEO-1 categories. Some groups can be directly mapped from EEO-1 categories, but not all.

Overall, the changes SB 464 implements increase compliance complexity and enforcement risk. Employers should begin to remap roles to the new 23 categories for the 2027 reporting cycle.  It will be important for employers to coordinate with labor contractors to ensure timely and accurate data submission. Additionally, employers should seek to implement systems to segregate demographic data from personnel files.

Prohibition on Repayment Requirements in Employment Contracts (AB 692)

Assembly Bill (AB) 692 prohibits repayment requirements in employment contracts as an unlawful restraint on employment in violation of public policy. For employment contracts entered into on or after January 1, 2026, employers may not require a worker—as a condition of employment or a work relationship­—to execute a contract that contains a repayment requirement. An employer may not require a worker to execute a contract that requires the worker to pay a debt (employment-related or education-related costs) if the worker’s employment or work relationship ends. An employer may not require a worker to execute a contract that authorizes debt collection or ending forbearance on a debt upon termination. Lastly, an employer may not require a worker to execute a contract that imposes any penalty, fee, or cost (including training costs, immigration expenses, lost profits, lost goodwill, replacement hire fees) on the worker if their employment ends. Contracts with repayment requirements will be considered void and against public policy. Workers, or their representatives, may sue for the either actual damages or $5,000 per worker (whichever amount is greater), plus injunctive relief and attorney’s fees.

The added section to the Business and Professions Code has two notable exceptions for tuition repayment and upfront discretionary bonuses. The tuition repayment exception allows for the repayment of the tuition cost for a transferable credential, provided the contract: (a) is separate from the employment contract, (b) does not make obtaining the transferrable credential a condition of employment, (c) specifies a repayment amount not exceeding the cost of the credential to the employer, (d) provides for prorated repayment without acceleration; and (e) does not require repayment if the worker is terminated (unless the worker is terminated for misconduct). The upfront discretionary bonus exception allows for contracts to include a discretionary or unearned sign-on bonus that is not tied to specific job performance, provided that: (a) terms of repayment are separate from the employment contract; (b) the employee is notified of their right to consult an attorney and provided not less than five business days to do so; (c) repayment is prorated based on remaining term of any retention period not to exceed two years, without interest accrual; (d) the employee is permitted to defer the payment to the end of a retention period; and (e) separation prior to the end of the retention period was at the employee’s sole discretion or due to employee misconduct.

Expanded Eligibility For Paid Family Leave (SB 590)

Senate Bill (SB) 590 expands the definition of “family member” to include “designated person.” Starting July 1, 2028, California’s Paid Family Leave program will allow employees to take paid leave to care for a “designated person.” A “designated person” is defined as any care recipient related by blood or whose association with the individual is the equivalent of a family relationship. When requesting leave for a “designated person,” the employee must (1) identify the designated person and (2) attest under penalty of perjury how the care recipient meets the definition of designated person. Employers may limit employees to one designated person per 12-month period.

Expanded Personnel Record Requirements (SB 513)

Senate Bill (SB) 513 expands personnel record requirements for employers. This bill amends current requirements and expands the scope of personnel documents an employee may inspect to include education and training records. Such records must include the employee’s name, the name of the training provider, the duration and date of the training, core competencies of the training (including skills in equipment or software), and any resulting certification or qualification from the education or training. Employers must maintain a copy of each employee’s personnel records for at least three years after termination of employment.

The Workplace Know Your Rights Act (SB 294)

Senate Bill (SB) 294 imposes a new annual notice requirement for employers to notify their employees of their rights as workers. On or before February 1, 2026, and annually thereafter, employers are required to provide a stand-alone written notice to each of their current employees (and provide to new employees upon hire).

The notice to employees must include a description of workers’ rights to:

• workers’ compensation (including disability pay and medical care for work-related injuries),
• notice of inspections by immigration agencies,
• protection against unfair immigration-related practices,
• organize, join a union, or engage in concerted activity, and
• constitutional rights when interacting with law enforcement at the workplace (Fourth and Fifth Amendment rights).

Additionally, the notice must include updates on new legal developments regarding laws the Labor and Workforce Development Agency enforces and a list of relevant enforcement agencies. A template notice, developed by the Labor Commissioner for employers to comply with requirements, will be available to employers on or before January 1, 2026.