Aunt Ann’s labor attorney, Lisa Weinberger filled us in on the most recent updates regarding employment law in California. Below you’ll find updated information pertaining to minimum wage, mileage rates, and more.

 

INCREASED MINIMUM WAGE, SALARY BASIS THRESHHOLD, AND IRS MILEAGE REIMBURSEMENT RATES

As of January 1, 2026, please be aware of the following increases:

Minimum Wage

In California, the minimum wage for all employers will be $16.90 per hour.

Please keep in mind that many cities and counties throughout California have local minimum wages that are higher than what the state of California requires. Some relevant local minimum wage ordinance increases that impact my clients include the following cities (not an exhaustive list): Berkeley ($19.18), Burlingame ($17.86), Los Altos ($18.70), City of Los Angeles ($17.87), Menlo Park ($17.55), Oakland ($17.34), Palo Alto ($18.70), Redwood City ($18.65), City of San Diego ($17.75), San Francisco ($19.18), City of San Mateo ($18.60), County of San Mateo (unincorporated areas) ($17.95), Santa Monica ($17.81), City of Sonoma for employers with less than 26 employers ($17.38), South San Francisco ($18.15), and West Hollywood ($20.25).

As a reminder, employees are entitled to be paid the minimum wage in every jurisdiction where they work. If an employee works remotely from a home office (or elsewhere), the minimum wage in that jurisdiction (which may be higher than the minimum wage at their regular place of employment) would apply to services provided in that location.

Salary Basis for Exempt Employees

In order for California employees to be properly classified as exempt (which means that they are not entitled to overtime pay), they must be paid on a salary basis that is at least two times the state minimum wage for full-time work. As such, each time the state minimum wage increases, the salary basis increases, as well. With this in mind, in order for a California employee to be classified as an exempt employee in 2026, he or she must be paid a salary of at least $70,304 per year.

*Please note: in order for an employee to be properly classified as an exempt employee, in addition to meeting the salary basis threshold, the employee must also meet the other criteria for the relevant exemption. These are fact-specific inquiries and should often be made with the advice of counsel.

Mileage Reimbursement Rate

The IRS has set the business mileage reimbursement rate for 2026 at 72.5 cents per mile.

 

NEW REQUIRED EMPLOYEE NOTICE

In response to growing fears of workplace immigration raids, California employers will be required to provide a new notice to all employees that aims to (a) ensure workers know their rights during immigration or law enforcement encounters, and (b) create protocols for employer notification of arrests.

Employers will be required to provide this notice to current employees by February 1, 2026 and then on an annual basis thereafter (employees hired after February 1, 2026 should receive the notice with their other onboarding documents and then annually along with the rest of the workforce). The Labor Commissioner has released a template notice, which you can find here in English and in Spanish. It should be available in other languages soon, and will be updated each year.

In addition, by March 30, 2026, employers must allow current employees to designate an emergency contact and to collect this information from new hires going forward. Should an employee be arrested or detained at work (or offsite during work hours or while performing job duties), employers are required to notify the designated contact.

 

NEW PROHIBITION ON EMPLOYMENT REPAYMENT CLAUSES

California has long been known for its prohibition on non-competition agreements and other restraints on trade. In furtherance of this policy in favor of employee mobility, the Legislature has passed a new law prohibiting employers from entering into an agreement on or after January 1, 2026 that requires repayment of any debt or bonus paid to an employee if they leave their employment within a specified period of time.

This law will most commonly impact signing bonuses, relocation expense reimbursements, or maternity/disability leave payments, which employers often pay to employees with the understanding that such payments will be reimbursed to the employer if the employee leaves their job within a certain period of time. The new law provides for some narrow exceptions, but even those will now require a separate, stand-alone agreement in order to be in compliance with the new law.

 

NEW UPDATES TO EXISTING LAWS

1. Paid Sick Leave. California employees may now use available paid sick leave if they or a family member are a victim of certain crimes and are attending judicial proceedings related to that crime. Please note that the allowable reasons that employees may use paid sick leave expanded last year, as well, to include jury duty, bereavement leave, and reproductive loss leave.
2. Personnel Files. To the extent an employee participates in any employment-related trainings, such records must be included in the employee’s personnel file. The records should include (a) the names of the employee and the training provider, (b) the duration and date of the training, (c) the core competencies of the training, and (d) the resulting certification or qualification.
3. Job Postings. A few years ago, we reported that employers with 15+ employees who are advertising for open jobs in California must include the “pay scale” of the position. A new law revises the definition of “pay scale” to mean a “good faith” estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.
4. Updated Paid Family Leave Pamphlet. The EDD’s Paid Family Leave Brochure informs employees about wage replacement benefits for missing work due to a family member’s health condition, bonding with a new child, or qualifying military-related exigencies. Employers are supposed to provide this pamphlet to employees at the time of hire and when they qualify for an applicable leave of absence. A mandatory update has been made to the California Paid Family Leave document, which will require replacement of any old brochures. Updated brochures can be downloaded here.

 

REMINDERS

1. Retirement Benefits. Several years ago, California implemented a retirement savings program called CalSavers, which is available to California workers whose employers do not offer a workplace retirement plan. Such individuals have the opportunity, through this program, to contribute to an IRA. The state has required employers of different sizes to register for this program over time. As of December 31, 2025, all California employers were required to register for CalSavers, either to facilitate their employees’ access to the CalSavers program, or to certify as exempt if they already offer their own retirement plan. Information on how to register can be found here.
2. Workplace Trainings. As a reminder, the following workplace trainings are required, as noted below:

• Sexual Harassment & Abusive Conduct Prevention Training: As previously discussed, Employers with 5+ employees must provide this training every two years.
• Workplace Violence Prevention Training: As noted last year, in connection with the preparation of a Workplace Violence Prevention Plan, employers are required to provide a training on the Plan on an annual basis. If this applies to you and you have not yet done it, consider this your reminder! Additional information about this requirement can be found here.
• Injury and Illness Prevention Program (IIPP) Training: All California employers are required to have a written and implemented IIPP Plan. Training on the IIPP Plan should be provided to new hires and as needed to maintain a safe workplace.

 

FEDERAL TAX UPDATES

Federal Overtime Pay Reporting

In July 2025, the federal government enacted new tax legislation, which, among other things, creates a temporary tax deduction for non-exempt employees that is tied to overtime pay.

For tax years 2025 through 2028, non-exempt employees may claim a tax deduction for “qualified overtime compensation,” which is narrowly defined to include only the premium portion of overtime pay required by the federal Fair Labor Standards Act (“FLSA”) – in other words, the additional “half” in time-and-a-half compensation required under federal law.

Overtime pay remains fully taxable and subject to withholding. The deduction is claimed by employees on their individual tax returns. Although the tax benefit belongs to employees, it is expressly dependent on employer reporting. For wages earned in the 2026 calendar year, deductible overtime compensation must be reported to applicable employees on their Form W-2.

Unfortunately, this federal requirement has practical compliance implications for California and New York employers, since those states provide for overtime under federal and state law, which is in excess of federal requirements. As a result, employers must be able to identify the portion of overtime premiums that are attributable to FLSA requirements, as opposed to state law or employer policy.

Only the FLSA-required overtime premium portion is eligible for the federal tax deduction. Overtime or premium pay required solely by California or New York law does not qualify, even though it must still be paid and reported as wages.

As such, beginning in 2026, employers will have to:

• Track and distinguish FLSA overtime premiums from state-law overtime premiums (such as daily overtime, double time, and overtime paid for working a certain number of days in a row);
• Ensure payroll systems can separately identify the FLSA “half-time” premium portion where state and federal overtime overlap; and
• Coordinate with payroll vendors to confirm that reporting structures can support this distinction for Forms W-2 and related statements.

 

ACTION ITEMS

In order to remain in compliance with all legal updates, please consult with counsel to take the following actions:

• Ensure that all employees are earning at least the current minimum wage;
• Ensure that all exempt employees are earning at least the increased salary basis threshold (and otherwise meet the requirements of the exemption);
• Prepare the new California “Know Your Rights” Notice for employees;
• Update employee handbooks, employment agreements, and policies, as applicable, to revise or prepare policies relating to: sick leave, employee repayment plans, and personnel files;
• Review any job postings to ensure that the wage rate is a good faith estimate of the actual wages that will be offered;
• Ensure that state-mandated retirement benefit registrations have been completed, as applicable;
• Confirm that all workplace trainings are being held in a timely fashion;
• Post updated workplace notices and obtain updated Paid Family Leave brochures; and
• Make a plan to ensure compliance with the recordkeeping requirements of the new federal overtime tax deduction.