By Fred W. Alvarez, Hannah L. Jones, Daniel M. Bruggebrew, Allison Moser, Paige B. Pulley, Hannah Withers, and Stacey Zartler

California is once again at the forefront of workplace regulation, with a slate of 2026 bills that would significantly expand employee rights and increase employer compliance obligations. From limits on AI in employment decisions, to restrictions on stay-or-pay agreements, expanded pay data reporting, and new immigration-related protections, these measures highlight the state’s aggressive approach to reshaping the employer-employee relationship.

Governor Newsom has until October 12, 2025 to sign or veto these bills. Below is a table summarizing the most significant proposals currently on his desk as well as a deeper dive into each bill. We will provide follow-up guidance once final enactments are known to help employers prepare for compliance. Unless otherwise noted, any new laws signed will take effect on January 1, 2026.

Limits on AI in Employment Decisions (SB 7): Under California’s SB 7, employers may not rely exclusively on AI (referred to in the bill as automated decision systems, or ADS) to make key employment decisions such as hiring, promotion, discipline, or termination. ADS are defined as AI-driven or algorithmic tools that make, or materially assist in making, decisions that significantly affect employees. Examples include resume-screening software, video interview analysis tools, chatbot applicant pre-screening platforms, promotion recommendation systems, and certain types of employee monitoring programs.

Employers that use ADS to assist in employment-related decisions—but not as the sole basis—will be subject to new notice and disclosure obligations if this law takes effect. For applicants, employers must disclose the use of ADS and provide information about the underlying algorithms as part of the application process. For current employees, employers must give at least 30 days’ advance notice in a “standalone written communication” before adopting any new ADS for disciplinary or promotion purposes. In both contexts, employees and applicants must be given access to ADS-related data and the right to appeal any employment decision made with the assistance of ADS.

Importantly, SB 7 builds on the AI regulations adopted by the California Civil Rights Council (CRC) in October 2025, extending notice and disclosure obligations to both current and prospective employees. For additional background on the CRC regulations, see our prior client alert here.

Failure to comply with SB 7 may result in enforcement by the Labor Commissioner or private civil actions, with potential remedies including actual damages, civil penalties of up to $500 per violation, and recovery of attorneys’ fees.

Ban on Most Stay-or-Pay Agreements (AB 692): Employers have long relied on signing bonuses, retention bonuses, or repayment obligations for training, tuition, or immigration costs to encourage employees to stay in the job for a set period of time. These arrangements come with a price tag for employees who leave early: repayment.

Under AB 692, which would apply to contracts entered into on or after January 1, 2026, most of these “stay-or-pay” arrangements will be prohibited. The law not only renders such agreements unenforceable but also exposes employers to potential employee lawsuits seeking damages or other remedies, with penalties including the greater of actual damages or a $5,000 minimum per violation.

While broad in scope, AB 692 does carve out limited exceptions. For example, repayment provisions for tuition costs related to transferable educational credentials may still be enforceable if they meet detailed statutory requirements. Similarly, signing and retention bonus agreements remain permissible, but only if they are set out in a standalone agreement that complies with highly technical conditions.

Expanded Leave Rights for Immigration Proceedings (AB 1136): In response to heightened federal immigration enforcement activity, including ICE raids and the current administration’s restrictive stance on immigration, California has advanced new protections for employees facing immigration or deportation proceedings.

Under the proposed law, employers must place an employee on unpaid leave for up to 12 months if the employee is detained or incarcerated due to pending immigration or deportation proceedings. If the employee is released during that period and provides valid work authorization, the employer must reinstate the employee to their former position without loss of seniority.

The bill also requires employers to provide up to five unpaid days off within a 12-month period for employees to address matters related to immigration status, work authorization, or visa status. This includes attending appointments, interviews, adjudications, legal proceedings, detentions, or any other required meetings related to the employee’s immigration situation.

Broader Pay Data Reporting Requirements (SB 464): SB 464 expands California’s existing pay data reporting obligations for private employers with more than 100 employees. Employers must now collect and maintain demographic information used for reporting purposes separately from employees’ personnel records. The law also broadens the scope of required reporting. In addition to race, ethnicity, and sex, employers must now report on employees’ sexual orientation (if voluntarily disclosed).

Clearer Rules for Pay Scale in Job Postings (SB 642): California law already requires employers to include “pay scale” information in job postings, but the term has long been a source of confusion. SB 642 attempts to clarify the term by defining “pay scale” as a “good-faith estimate” of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire. The bill also extends the statute of limitations for violations, giving employees three years (instead of two) to bring a lawsuit for pay equity violations.

Paid Family Leave Expanded to Chosen Family (SB 590): Beginning July 1, 2028, if SB 590 is signed by the governor, California’s Paid Family Leave (PFL) program will expand to provide wage replacement benefits when employees take time off to care for a “designated person.” This change is intended to support Californians who rely on chosen family members for care. The California Family Rights Act (CFRA) already provides job-protected leave to care for a designated person. SB 590 aligns the PFL program with CFRA by extending wage replacement benefits to cover the same category of leave.

Personnel Records Must Include Training Data (SB 513): SB 513 expands the definition of personnel records relating to an employee’s performance to expressly include education and training records. Employers that maintain such records will be required to ensure they include specified information, such as the type of training, date(s) completed, and any certifications or credentials earned, as part of the employee’s personnel file.

Employee Right to Wear Face Masks (AB 1326): AB 1326 would prohibit employers from preventing employees from wearing face masks in the workplace, unless a mask would create a safety hazard. The bill also permits employers to require employees to briefly remove a face covering while at the worksite for identification purposes.

Know Your Rights Notice (SB 294): Employers are required to distribute a new “Know Your Rights” notice to all employees by February 1, 2026. Failure to comply may result in penalties of $500 per employee, per day, up to a maximum of $10,000.

The Coblentz Employment team is available to answer any questions you may have about the impact of these regulations. We will provide follow-up guidance once final enactments are known.