California Employers Association Prepares California Businesses for New Laws in 2026

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SACRAMENTO, Calif.--(BUSINESS WIRE)--Dec 19, 2025--

As 2026 approaches, California Employers Association has released an important advisory on new state and federal laws affecting everything from minimum wage and taxes on overtime and tips to artificial intelligence and immigration enforcement.

Most of these measures present new compliance requirements for employers, effective January 1, 2026, with some requirements in effect now.

Wage and Salary Increases (SB 3) Employers across the State must adjust to increasing wages. Under SB 3, the California state minimum wage will rise to $16.90 per hour to account for inflation. Consequently, the minimum salary threshold for exempt employees (professional, administrative, and executive exemptions) will increase to $70,304 per year. Local minimum wages, as well as wages in the fast food and healthcare industries, are higher.

Federal Tax Relief on Overtime and Tips (H.R. 1 - OBBBA) In a landmark change for tax years 2025-2028, the federal OBBBA introduces major deductions for the workforce.

• Overtime Pay: Workers can now deduct the "half" portion of their FLSA-required time-and-a-half pay for hours worked over 40 in a workweek, capped at $12,500 annually for individuals.
• Tips: Employees in customarily tipped occupations may deduct up to $25,000 in qualified tips annually.
• Employer Note: For Tax Year 2025, employers must continue standard withholdings on these amounts; the IRS will update withholding tables for 2026.

New Employee Notices and Emergency Contact Mandates (SB 294) By February 1, 2026, and annually thereafter, employers must provide a standalone written notice of worker rights (for example, on immigration, workers' compensation and Constitutional rights) to all employees. California’s Labor Commissioner will provide a sample notice.

Additionally, protocols regarding employee arrests will change. By March 30, 2026, employers must allow employees to designate an emergency contact. If an employee is arrested or detained at the worksite—or offsite during work hours—the employer is legally required to notify that contact.

Violations carry heavy penalties. For example, failure to notify an emergency contact when required can result in a $500 penalty per employee for each day the violation continues, up to a maximum of $10,000 per employee.

AI in Employment: New regulations from the California Civil Rights Department, effective October 2025, hold employers liable for discrimination caused by Automated Decision-Making Systems (ADS), including the use of Artificial Intelligence. ADS-related records must be retained for four years.

Immigration Audits: With H.R. 1 increasing funding for immigration enforcement, increased Form I-9 audits and workplace raids are expected. Under AB 450, California employers are reminded that they cannot provide voluntary consent for immigration agents to enter non-public areas or review records without a valid judicial warrant.

To see the full list of new laws and practical guidance for employer compliance, visit https://employers.org/2026-employment-law-guide/ for a free guide download.

About California Employers Association

California Employers Association (CEA) is a not-for-profit employers association founded in 1937, serving more than 20,000 businesses in a wide variety of industries throughout California. Our mission is to provide employers peace of mind with human resources compliance solutions, virtual and on-site trainings and recruiting services.

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CONTACT: Karen Olson

Vice President

800-399-5331

[email protected]

[email protected]

KEYWORD: CALIFORNIA UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: PUBLIC POLICY/GOVERNMENT HUMAN RESOURCES STATE/LOCAL IMMIGRATION ARTIFICIAL INTELLIGENCE LABOR PROFESSIONAL SERVICES TECHNOLOGY

SOURCE: California Employers Association

Copyright Business Wire 2025.

PUB: 12/19/2025 03:00 AM/DISC: 12/19/2025 03:00 AM

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