The new year brings new laws affecting workplaces and California employers. We have summarized below several key changes affecting labor and employment and construction practices, most of which will go into effect on January 1, 2026:
A. General Employment
Assembly Bill (“AB”) 692/ Business & Professions Code section 16607
This new law generally prohibits what have become known as “stay-or-pay” agreements, i.e. those that frontload certain employee payments but impose repayment obligations (or other penalties/costs) if the employee does not remain employed for a specified time. The law exempts certain signing or retention bonuses that are not tied to job performance, but only when the agreements and payments meet certain strict criteria are met. In light of this, employers should proceed with extreme caution.
Violation of AB 692 provides for employees to file a civil action and receive attorney fees for violations.
AB 692 is not retroactive. It only applies to agreements entered into after January 1, 2026. As such, repayment provisions in existing employment agreements are unaffected and may still be enforceable.
AB 774 / Code of Civil Procedure sections 684.130 and 703.570 et. seq.
This new law modernizes wage garnishment and bank levy procedures by requiring better address verification and more detailed employer/financial institution responses. It also allows judgment creditors to reinstate liens if funds were returned, adding penalties for false information. The law phases in in stages through 2026. Employers should carefully review wage garnishment notices or requests received to ensure appropriate processing, without assuming they contain or seek the same information as prior notices.
AB 1002 / Business and Professions Code section 7110.6
AB 1002 is a concerning new law which empowers the Attorney General to bring actions directly against licensed contractors who fail to pay the full amount of wages due or to fulfill a wage judgment. In the actions, the Court can order CSLB to suspend, permanently revoke, or deny renewal of, or application for the contractor’s license. This effectively skips over prior procedures that required direct involvement and oversight by CSLB.
AB 1109 / Evidence Code sections 912, 917, and 1048 et seq.
AB 1109 establishes a privilege for a represented current or former employee to refuse to disclose and prevent others from disclosing confidential communications with a union agent Page 2 of 5 made while acting in their representative capacity. The bill contains certain exemptions (including being inapplicable in criminal proceedings) and clarifies that the privilege may be waived in accordance with existing law.
Senate Bill (“SB”) 261/ Labor Code sections 98.1, 98.2, 238.05, and 238.10
This significant bill strengthens wage theft enforcement by adding triple penalties for employers that fail to pay wage theft judgments against them for six months or longer. It also provides mandatory attorneys’ fees and costs for any person or entity that takes judicial action to enforce or induce compliance with such judgments.
SB 294 / Labor Code sections 1550 et. seq.
This new “Workplace Know Your Rights Act” requires employers to provide a standalone written notice of California and federal workplace rights to each new employee when hired, and annually to all current employees. Notice topics include workers compensation benefits, union organizing and concerted activity, immigration protections, constitutional rights during interactions with law enforcement, new legal developments, and enforcement agency information. It also tasks the Labor Commissioner with developing and annually updating a template notice and related educational materials for California employees and employers. Employers have until February 1, 2026, to provide the notice to employees and thereafter provide it annually.
The new law also requires employers to allow employees to designate an emergency contact and thereafter to notify that contact if the employee is arrested or detained at work.
SB 513 / Labor Code Section 1198.5
This bill amends the definition of “personnel records” that current and former employees (or their authorized representatives) have the right to inspect and copy to include certain educational and training records. The bill also requires employers who maintain education and training records to ensure that they contain specified information, including training providers, topics, and other session details.
SB 617 / Labor Code 1401
This law expands the information that must be provided during mass layoffs to address available employee assistance.
SB 809 / Labor Code section 2750.9, 2775.5, and 2802.2
This new law primarily addresses the employment status and vehicle expense reimbursement for workers in the construction trucking industry. It clarifies existing law regarding independent contractors and establishes an amnesty program for misclassification based on an exemption that expired in 2025. The bill requires contractors to pay employees who utilize their personal vehicle, whether owned individually or by a corporate entity, in the discharge of their duties with separate checks for the use, upkeep, and depreciation of their vehicle.
B. Discrimination and Harassment
SB 464 / Government Code 12999
This law requires stricter pay data reporting requirements on California employers, increasing the number of job categories included in reports from just 10 different categories to 23. It also specifies that employers and labor contractors must store demographic data separately from personnel records. It also imposes mandatory penalties of $100 per employee for first failure and $200 per employee for subsequent failures, when requested by the California Civil Right Department.
SB 642 / Labor Code section 432.3 and 1197.5
This bill clarifies California’s pay scale disclosure law to specify that a “pay scale” includes the good faith estimate of the range the employer expects to pay for the position upon hire.
It also updates the Equal Pay Act to reflect modernized language and expands the statute of limitations from 2 years to 3 years “after the last date the cause of action occurs.” The bill also increases the compensation period for pay discrimination claims from three years to no more than six years.
C. CSLB
AB 1327 / Business & Professions Code section 7159 and 17511.5 and Civil Code section 1689.6, 1689.7, 1689.20, and 1689.21
AB 1327 makes some minor changes to the cancellation notification requirements for Home Improvement Contracts.
SB 291 / Business & Professions Code section 7017.3, 7099.2, 7125.4, and 7125.7
SB 291 imposes stricter requirements for sole owner licensed contractors who claim an exemption from workers compensation. It also provides good faith factors to reduce civil penalties by CSLB.
SB 517/ Business and Professions Code section 7159
The bill requires Home Improvement Contracts to include: notification of whether a subcontractor will be used, the name and contact information of any subcontractor performing over 50% of the project cost, and the prime contractor’s email address and phone number. The prime contractor is responsible for completing the project according to the contract, plans, and specifications, though subcontractors can still face disciplinary action for their own violations. One stated goal of this information is to help buyers with the “Notice of Cancellation” form, which is part of the existing right to cancel (three days, or five days for senior citizens). The bill allows CSLB to use administrative discipline for any contractor performing work under the HIC.
SB 779 / Business and Professions Code section 7028.7
This law increases the penalties for unlicensed contracting, raising the minimum civil penalty from $200 to $1,500. The CSLB can also adjust these minimum penalties for inflation every five years. The bill also expands the Board’s reserve fund limit.
D. Public Works Projects
AB 538 / Labor Code section 1776
This law significantly strengthens public access to certified payroll records for public works projects by requiring awarding bodies to obtain and provide these records upon public request making it easier to verify prevailing wage compliance. Enforcement penalties for noncompliant contractors start January 1, 2026.
AB 889 / Labor Code section 1773.1
This bill removes an existing exception for computing fringe benefit credits toward prevailing wages on an annualized basis.
The new law also permits employers to take full credit for hourly amounts contributed to defined contribution pension plans if the plans provide for both immediate participation and essentially immediate vesting (meaning that the benefits vest within the first 500 hours worked) even if the employer contributes at a lower rate or does not make contributions to private construction.
Finally, the new law provides that an employer has the burden of demonstrating it properly calculated employer payments and must provide supporting records for the calculation to the Labor Commissioner upon request.
E. Payment and Litigation
AB 325 / Business & Professions Code sections 16729 and 16756.1
The bill regulates algorithmic price-fixing, lowers pleading standards under the Cartwright Act, and creates enhanced penalties for violations. This makes it easier for parties to make a complaint for anti-trust violations, now only requiring “factual allegations” to be “plausible.” AB 325 also prohibits using common pricing algorithms to restrain trade or commerce or set pricing or commercial term recommendations.
SB 61 / Civil Code section 8811
This bill establishes a mandatory cap of 5% on retention payments for most private construction projects executed on or after January 1, 2026.
AB 931 / Business & Professions Code sections 6156 and 6250 et seq.
The bill prohibits the use of most non-certified lawyer referral services, effectively restricting the ability of plaintiffs’ attorneys to get referral fees on litigation funding lawsuits. It also limits attorneys’ from sharing legal fees with out-of-state entities that allow non-lawyers to participate in certain legal service activities.
SB 440/ Civil Code 8850
The new law, known as the “Private Works Change Order Fair Payment Act,” creates a new, mandatory process for handling change order disputes on private construction projects, effective January 1, 2026 through January 1, 2030, ensuring faster payment for contractors and subcontractors by requiring owners to resolve claims, pay undisputed amounts quickly, and use mediation for remaining issues, with penalties such as 2% monthly interest for delays and potential stop-work notices if rules are ignored.
Kyle D. Kring is Managing Partner of Kring & Associates. He can be reached at (949) 393-1400 or [email protected].