October 13, 2025, was the deadline for Governor Newsom to sign or veto bills passed by the Legislature, just in time for employers to update their policies and practices in preparation for the upcoming year.  Several of the newly enacted laws employers should consider are discussed below and will be effective as of January 1, 2026, unless otherwise noted.

Rest Periods – Petroleum Facility Safety Sensitive Positions

Assembly Bill (“AB”) 751 indefinitely extends the exemption from rest period requirements for those who hold safety-sensitive positions at a petroleum facility.  This exemption specifically applies to employees who hold a “safety-sensitive position” at a refinery that produces fuel through the processing of alternative feedstock. A “safety-sensitive position” means a job in which the employee’s job duties reasonably include responding to emergencies at a petroleum facility.  For example, where an employee is required to carry and monitor a communication device to respond to emergencies or is required to remain on the premises to monitor and respond to emergencies. The exemption was previously slated to sunset on January 1, 2026.

Enforcing Tip Theft

Senate Bill (“SB”) 648 authorizes the Labor Commissioner to investigate and issue a citation or file a civil action for any gratuities taken or withheld by an employer.  This bill amends Labor Code Section 351 which already prohibits employers from taking, receiving, deducting, or requiring an employee to credit his or her tip or gratuity.  A “gratuity” includes any tip, money, or part thereof that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due the business for services rendered or for goods, food, drink, or articles sold or served to the patron.

Exemption from Meal Period Requirements

SB 693 expands the categories of employees exempt from the state’s meal and rest period requirements to include employees of a “water corporation.” “Water corporation” is defined as “every corporation or person owning, controlling, operating, or managing any water system for compensation within this State.” This bill amends Labor Code Section 512 by add “water corporation” to the list of other occupations that already fall under meal and rest break exemptions.

Wage Equity 

Senate Bill 642 revises the definition of “pay scale” to provide employer more clarity on what must be included in job postings under the current law.  Current law defines “pay scale” as the salary or hourly wage range that an employer reasonably expects to pay for the posted position.  The definition now clarifies that “pay scale” is an estimate of the expected wage range an employer reasonably expects in good faith to pay for the position upon hire.

The law also extends the statute of limitations for Labor Code section 1197.5 claims, which prohibits paying employees wage rates less than those paid to employees of the opposite sex, another race, or ethnicity for substantially similar work, except under specified circumstances, from two (2) to three (3) years, and permits employees to recover wages for up to six (6) years.

Paid Family Leave – Designated Person

SB 590 expands eligibility for benefits beginning July 1, 2028, under the paid family leave program to include individuals who take time off work to care for a seriously ill designated person, which is defined as a person related by blood or whose association with the individual is the equivalent of a family relationship.

Extended Statute of Limitations for Sexual Assault / Harassment Claims

AB 250 extends the time for plaintiffs to file claims for sexual assault in instances where there are allegations the employer engaged in covering up the alleged assault.  Under the new law, claims already pending as of January 1, 2026, or filed between January 1, 2026 and December 31, 2027, may proceed against the alleged perpetrator and employer that purportedly engaged in covering up the assault.  The law does not revive claims litigated to finality or settled by January 1, 2026.

The bill was passed in response to superior court decisions suggesting previous legislation extending the time to bring sexual assault claims coupled with allegations of a cover up applied only to actions brought against employers and not the alleged perpetrator.

Employment Restraint of Trade Contracts

AB 692 makes it unlawful for employers to include “stay-or-pay” terms in employment contracts entered into on or after January 1, 2026, that require employees to assume or repay a debt when  employment relationships terminate, except in limited circumstances.

Under AB 692, employment contracts can no longer include terms that: (1) require employees to repay employers for debts after separation; (2) authorize or initiate collection of or end forbearance of debts if the employment relationship terminates; or (3) impose penalties, fees, or costs on employees if the employment relationship terminates.

Limited exceptions apply for repayment of loans, leasing and financing  of residential property, training costs, and sign-on advances.

For more information see our blog California Prohibits Stay-or-Pay Employment Contracts.

Labor Commissioner Penalties and Collections

SB 261 applies to circumstances where employers fail to timely pay judgments arising out of the nonpayment of wages, and introduces significant penalties. SB 261 does this by adding Sections 283.05 and 283.10 to the Labor Code.

Under these new provisions:

• If a final judgment arising from nonpayment of wages for work performed in California is not satisfied within 180 days, a court may enforce the judgment and impose a civil penalty of up to three times the outstanding judgment amount (including post judgment interest then due), plus interest and reasonable costs and attorney’s fees for the party seeking to enforce the judgment. (Lab. Code § 238.05(a))
• Under this section, courts shall assess the judgment debtor the entire amount of the requested penalty except to the extent that it finds the judgment debtor has demonstrated “clear and convincing evidence good cause to reduce the amount of the penalty.” (Lab. Code § 238.05(b))
• Penalties assessed under this section shall be distributed so that fifty percent goes to the employee in whose favor judgment was entered, and fifty percent goes to the Division of Labor Standards Enforcement for enforcement of labor laws. (Lab. Code § 238.05(c))

Independent Contractors and Employee Vehicle Business Expense

SB 809 allows for eligible construction contractors to avoid penalties for previously misclassifying drivers as independent contractors. It does this by adding Sections 2750.9, 2775.5, and 2802.2 to the Labor Code. SB 809 clarifies that these new statutory provisions are “declarative of existing law,” which means they identify existing legal obligations (rather than creating new obligations).

These new provisions will accomplish the following:

• Labor Code Section 2750.9 establishes a “Construction Trucking Employer Amnesty Program” (the “Program”).  The Program allows eligible construction contractors to avoid civil or statutory penalties arising from misclassification of drivers as independent contractors, so long as they execute a settlement agreement with the Labor Commissioner that contains certain driver classification provisions, explicitly set forth in Section 2750.9(f)(1)-(7), before January 1, 2029.
• Labor Code Section 2775.5 provides that simply owning a vehicle and using it to provide labor or services for remuneration does not automatically make someone an independent contractor. Whether that person is an employee or independent contractor is determined based on the conditions in Labor Code section 2775(b)(1). If these conditions are not met, the person is an employee, and if they use a vehicle that they own to provide labor or services for remuneration then the employer must reimburse them in accordance with Labor Code sections 2802 and 2802.2.
• Labor Code Section 2802.2 provides that employers must reimburse employees who drive a commercial motor vehicle to perform their employment duties. Such employees are entitled to reimbursement for “the use, upkeep, and depreciation” of the commercial vehicle. The amount to be reimbursed is to be negotiated between the driver and employer, or by a labor union representing the driver, and it shall be either (1) a flat rate reimbursement that is no less than the actual amount expended by the driver, or (2) a per-mile reimbursement that is no less than the standard mileage reimbursement rate set by the IRS for the time the services were provided.

Rehiring and Retention of Displaced Workers

Current law, set forth in Labor Code section 2810.8, requires certain employers in hospitality-related industries to offer information about available jobs to employees who were laid off for COVID-related reasons. Section 2810.8 also requires employers to offer positions to those laid-off employees based on a “preference system” in accordance with timelines and procedures specified by the statute.

AB 858 extends the operation of the protections in Labor Code section 2810.8 to January 1, 2027, beyond the prior sunset date of December 31, 2025.

Employer Pay Data Reporting

SB 464 adds two major changes to existing pay data reporting requirements.  First, it requires employers to collect and store demographic information separately from the rest of employees’ personnel records.  Second, beginning January 1, 2027, it increases the number of job categories for which employers must report various statistics.  At present, Government Code section 12999 requires certain private employers to report various statistics as to 10 different job categories, but those categories will be increased to 23 starting in 2027.

The original bill was more expansive than that which was ultimately passed.  As introduced, this senate bill sought to include sexual orientation statistics as part of the reporting, and sought to extend mandatory reporting to public employers, but both of those provisions were removed.  Additionally, the original text of the amendments would have mandated that the Civil Rights Department publish private employer reports (if individual employee identity could reasonably remain private), but that language was also stricken.

The Workplace Know Your Rights Act

SB 294, also known as “The Workplace Know Your Rights Act,” is a direct result of recent immigration enforcement activity at the federal level.  The Act requires a new annual written notice to employees – starting on February 1, 2026 – that informs workers of various rights, including those around immigration and law enforcement.  The notice must be provided in a manner that ensures delivery within 24 hours – for example, overnight mail, electronic mail (text or email), or hand-delivery.  The notice must be provided to new hires and provided annually to all employees every 1st of February.

The Act requires the Labor Commissioner to provide a template notice for employers via a posting on its internet website no later than January 1, 2026.  By July 1, 2026, the Labor Commissioner also must develop two videos explaining the rights and duties established by the statute – one for employees, and one for employers.  The notice to be provided in template form by the Labor Commissioner must contain several items – a description of workers compensation rights, rights to notices of inspection by immigration agencies, rights against unfair immigration-related practices, rights to organize a union, and constitutional rights such as the right to remain silent and the right to be free from unreasonable searches and seizures.  The bill specifies that the Labor Commissioner must also include in the template notice a section regarding new legal developments and the government agencies charged with enforcing the underlying rights described.

The Act also requires that an employer notify an employee’s emergency contact if the employee is arrested or detained while at work.  The Labor Commissioner or a public prosecutor is charged with enforcing this bill and significant penalties result from violations.  Failing to notify employees of their rights will cost the employer $500 per employee;  failing to notify an employee’s emergency contact if that employee is detained or arrested at the workplace will carry a hefty $500 per day penalty, up to as much as a $10,000 penalty for failure to inform an emergency contact about an employee’s arrest or detention at the workplace.  The Act requires employers to keep for the records proving that it gave employees notice of these workplace rights for three years.

Personnel Records

SB 513 amends and adds additional requirements to section 1198.5 of the Labor Code, which requires employers to provide to employees upon request those portions of their personnel files that relate to the employee’s performance.  Now, if an employer maintains education and training files, those must also be provided upon employee request.

Education and training files, if kept by the employer, must ensure that the records include the name of the employee, name of the training provider, and the duration and date of the training.  In addition, the records should describe the core competencies of the training and any resulting certifications or qualifications given.

These personnel records must be maintained for three years post-termination.

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If you need assistance or have any questions about these new laws, including with respect to updating your policies and practices, please feel free to contact us.

The Equal Employment Opportunity Commission (“EEOC”) and the Department of Justice (“DOJ”) have issued communications alerting employers to the potential for unlawful discrimination arising from diversity, equity and inclusion (“DEI”) programs.

The EEOC and DOJ explain that DEI is a broad term that is not defined in Title VII of the Civil Rights of Employment Act §§42 U.S.C. 2000e-2, et seq. (the “Act”), which prohibits discrimination on the basis of an employee’s or applicant’s protected characteristics. In the press release, the agencies caution that DEI programs “may be unlawful if they involve an employer or other covered entity taking an employment action motivated – in whole or in part – by an employee’s or applicant’s race, sex, or another characteristic.”

EEOC Guidance

There are two documents (both are posted on the EEOC’s website) that are “focused on educating the public about unlawful discrimination related to ‘diversity, equity and inclusion (DEI)’ in the workplace.” The first is a one-page technical assistance document titled “What To Do If You Experience Discrimination Related to DEI at Work.” The second, a longer set of frequently asked questions is titled “What You Should Know About DEI-Related Discrimination at Work.”

In “What To Do If You Experience Discrimination Related to DEI at Work,” the EEOC offers guidance on what type of DEI initiatives are prohibited by the Act. In general terms, the EEOC states that DEI programs which include action taken on the basis of an employee’s or applicant’s protected status would run afoul of the Act. The EEOC provides a non-exhaustive list of examples that may constitute “DEI-related discrimination,” including, but not limited to, the following:

• Applying quotas or otherwise “balancing” a workforce by race, sex, or other protected characteristics;
• Excluding employees from certain benefits, training, mentorship or sponsorship programs, or fellowships based on their protected characteristics;
• Selecting interview candidates, including placement on candidate slates, based on their protected characteristics;
• Limiting membership in workplace groups, such as “Employee Resource Groups” or other employee affinity groups, to certain protected classes;
• Separating employees into groups based on their protected characteristics when “administering DEI or other trainings, or other privileges of employment, even if the separate groups receive the same programming content or amount of employer resources.”

The EEOC also warns that “DEI training may give rise to a colorable hostile work environment claim” under certain circumstances, and an employee’s “[r]easonable opposition to a DEI training may constitute protected activity if the employee provides a fact-specific basis for his or her belief that the training violates Title VII.”

In “What You Should Know About DEI-Related Discrimination at Work,” the EEOC presents information in a “frequently asked questions” format (hereafter, the “FAQs”). In addition to providing the above-stated examples of DEI-related conduct prohibited by the Act, the EEOC confirms the following in the FAQs:

• The Act protects all employees, applicants, and training or apprenticeship program participants, regardless of whether they are part of a minority group.
• The EEOC applies the same standard of proof to all race discrimination claims, regardless of the person’s race. The EEOC will not require a higher showing of proof for so-called “reverse discrimination” claims or claims that an employer has discriminated against a majority group.
• “Client or customer preference” is not a defense to race or color discrimination. The EEOC states that “[b]asing employment decisions on the racial preferences of clients, customers, or coworkers constitutes intentional race discrimination.”
• “[B]usiness interests or necessity” do not justify preference over one group of employees for another on the basis of their protected status. The EEOC states that “[n]o general business interests in diversity and equity (including perceived operational benefits or customer/client preference) have ever been found by the Supreme Court or the EEOC to be sufficient to allow race-motivated employment actions.”
• Employers can raise a bona fide occupational qualification as an affirmative defense where an individual’s religion, sex or national origin is a bona fide occupational qualification “reasonably necessary to the normal operation of that particular business or enterprise.” This defense cannot be used in cases alleging disparate treatment on the basis of race.
• Employer DEI training may constitute workplace harassment when it is “discriminatory in content, application, or context.” To the extent that such training is discriminatory in “design, content, or execution,” it may give rise to a hostile work environment claim. While the FAQs do not provide concrete examples of DEI training content that may violate Act, they state in a footnote that “unconscious bias training” may be problematic.

The FAQs further reiterate that “opposing unlawful employment discrimination related to an employer policy or practice labeled as ‘DEI’” may constitute protected activity that gives rise to a claim for retaliation.

DOJ GUIDANCE

Attorney General Pam Bondi also issued a memorandum to federal agencies entitled “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination” (DOJ Memo). The stated purpose of this DOJ guidance is to identify “‘Best Practices’ as non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls.” The memo goes on to clarify that “these are not mandatory requirements but rather practical recommendations to minimize the risk of violations.”

While the DOJ memo is directed at entities receiving federal funding, it is important for all employers to consider the examples of unlawful discrimination.

The memo lists the following examples of unlawful policies and practices:

1. “Granting Preferential Treatment Based on Protected Characteristics.” Any treatment that provides opportunities, benefits or advantages to individuals based on protected characteristics violates federal anti-discrimination laws unless they meet very narrow exceptions. Examples of prohibited practices include race-based scholarships or programs, preferential hiring or promotion practices, or access to facilities or resources based on race or ethnicity.
2. “Prohibited Use of Proxies for Protected Characteristics.”  Ostensibly neutral criteria that function as substitutes for explicit consideration of protected characteristics may become legally problematic if they are selected because they correlate with protected characteristics or are implemented with the intent to advantage individuals based on protected characteristics. Examples include the use of selection criteria that advantage candidates who have experiences associated with certain racial groups (e.g. asking faculty candidates to describe how their cultural background informs their teaching), targeting specific areas, institutions, or organizations because of their racial or ethnic composition in recruiting individuals, and requiring applicants to “describe obstacles they have overcome” or to submit a “diversity statement” in a manner that advantages those who discuss experiences intrinsically tied to protected characteristics.

“Segregation Based on Protected Characteristics.” When an entity organizes programs, activities or resources in a way that separates or restricts access based on protected characteristics, such conduct violates anti-discrimination law regardless of the stated goal with narrow exceptions such as correctional facilities where segregation has been recognized as a compelling institutional interest.  Note that this does not preclude segregation based on sex in the context of athletic competitions and intimate spaces; in fact, the DOJ states that failure to affirm “sex-based boundaries rooted in biological differences” risks violation of federal law.

1. “Unlawful Use of Protected Characteristics.” Use of race, sex, or other protected characteristics as a basis for selecting candidates for employment or other contracts or program participation, or policies that explicitly mandate representation of specific groups in candidate pools, such as “diverse slate” requirements, violate anti-discrimination law by creating unequal treatment, regardless of intent to advance diversity goals.
2. “Training Programs that Promote Discrimination or Hostile Environments.” DEI training programs may be in violation of antidiscrimination laws if they stereotype, exclude or disadvantage individuals based on protected characteristics or create a hostile environment. This includes using presentations, videos or other workplace training materials to single out, demean or stereotype individuals based on protected characteristics. DEI trainings must not “single out particular groups as inherently racist or sexist” such as references to white privilege or toxic masculinity, for example.

The memo further offers “Best Practices,” which include:

• Ensure inclusive access to all workplace programs, activities, trainings and resources for all qualified individuals regardless of protected characteristics; except “[s]ome sex separation is necessary where biological differences implicate privacy, safety, or athletic opportunity.”
• Focus on specific, measurable skills and qualifications directly related to job performance or program participation when selecting candidate pools, hiring panels, and final selections. Discontinue any program or policy designed to prioritize individuals based on racial, sex based, or protected characteristics. For example, scholarship programs must not target “underserved geographic areas” or “first-generation students.”
• Before implementing facially neutral criteria in hiring, promotions, or selecting contracts, evaluate whether they may be proxies for race, sex, or other protected characteristics. Document legitimate rationales (demonstrably related to legitimate, nondiscriminatory institutional objectives) for any criteria that might correlate with protected characteristics and ensure enforcement of the criteria aligns with the rationales.
• Include nondiscrimination clauses in third party contracts and monitor compliance requiring third parties to comply with federal law and specify that federal funds cannot be used for programs that discriminate based on protected characteristics.
• Establish clear anti-retaliation procedures and safe reporting mechanisms for employees.

Takeaways

While these are guidance documents that do not have the force of law, they illustrate that, under the current administration, the EEOC will closely scrutinize corporate DEI-related activities.  This represents a dramatic shift from the EEOC’s priorities under prior administrations.

To minimize exposure to unlawful discrimination claims, employers should carefully consider their current policies, trainings,  and programs, including a review of whether any facially neutral criteria could be viewed as proxies or correlate with protected characteristics.

The EEOC guidance does not prohibit DEI programs that work to encourage inclusivity of all employees in the workplace; such programs only risk violations if they prefer one group of employees in a protected class over another when offering trainings, employment or promotion opportunities, benefits, or anything else of value to employees.

For specific questions about how these changes may affect your organization, please contact us.

The U.S. Supreme Court ruled that a retired fighter with Parkinson’s disease is barred from bringing a claim under the Americans with Disabilities Act (“ADA”) over her post-employment health benefits because the ADA only covers employees who are “qualified individuals.” (Stanley v. City of Sanford (2025)145 S.Ct. 2058, 222 L.Ed.2d 331.)

Karyn Stanley, a former firefighter for the City of Sanford, Florida retired early when she developed Parkinson’s disease.  The City of Sanford offered health insurance until age sixty-five for employees with at least twenty-five years of service or for a limited period for employees who retired early due to disability.  In 2003, the City changed its policy for employees taking early disability retirement by providing health insurance coverage for only twenty-four months.  After receiving health insurance subsidies from the City for twenty-four  months, Stanley’s health insurance subsidies ended, prompting Stanley to file a lawsuit alleging that the City discriminated against disabled retirees in violation of Title 1 of the ADA.

The Supreme Court’s holding in Stanley focused on the definition of a “qualified individual” under Title 1 of the ADA.  Under the ADA, qualified individuals are individuals “who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individuals holds or desires.”  (42 U.S.C § 1211(8).)  Justice  Gorsuch held that the present-tense language of the ADA meant “that the statute does not reach retirees who neither hold nor desire a job at the time of an alleged act of discrimination.”   (Stanley, 145 S.Ct. 2058, at 2064.)  For example, the present-tense verbs such as “discriminate against,” “can perform,” “holds or desires” signal that the ADA only “protects individuals who, with or without reasonable accommodation, are able to do the job they hold or seek at the time they suffer discrimination.”  (Id.)  It does “not reach retirees who neither hold nor desire a job at the time of an alleged act of discrimination.”  (Id.)  The Supreme Court further concluded that a “qualified individual” is a person who is currently employed or seeking employment and able to perform the essential duties of the job.  And in this case, the ADA did not apply to Stanley since, at the time the City ceased her health insurance benefits, she no longer worked as a firefighter, did not desire reemployment, and could not perform the essential functions of a firefighter.

The Stanley decision narrows the scope of standing for retired employees when bringing claims under the ADA.  Now, in order to have standing under the ADA, the plaintiffs must have a job and disability at the time of the alleged disability discrimination, not when they have already retired.

In order to best mitigate against litigation risk, it is important for employers to understand what they can and cannot do with respect to  benefits involving health coverage, disability, and retirement. Please feel free to contact us if you have questions about these topics.

In 2024 the U. S. Department of Labor (the “DOL”) implemented a new rule under the Federal Labor Standards Act (“FLSA”) regulating the minimum wage for exempt employees. The new rule (the “2024 Rule”) increased the minimum salary level for exempt workers from $684 to $844 per week (or from $35,568 annually to $43,888 annually) starting July 1, 2024.(more…)