New California Employment Laws 2027 and What Employers Should Do Now

The new California employment laws for 2027 mostly take effect on January 1, 2027, though a few start later. The biggest changes raise the minimum wage to $17.40 an hour, limit how employers use AI in discipline and termination decisions, widen bereavement leave, and tighten the rules on stay-or-pay and arbitration agreements. California's legal definition of sex discrimination also expands, and harassment training picks up a new topic in 2028.

None of this calls for panic, but it does call for a plan. This guide walks through each change in plain terms, what it means for your workforce, and the practical steps California employers can take before each effective date arrives.

What New California Employment Laws Take Effect in 2027?

California's 2026 legislative session produced a set of employer-facing laws that take effect between January 1, 2027, and January 1, 2028. Here is the short version, with the details in the sections that follow.

Most of these laws touch documents you already have, such as your handbook, offer letters, training materials, and payroll setup. For most employers, 2027 is a policy-update year, and the updates cost far less to make now than to defend later.

How Does the 2027 Minimum Wage Increase Affect Your Payroll?

California's statewide minimum wage rises to $17.40 per hour on January 1, 2027. The Department of Finance certified the inflation adjustment in July 2026, and the new rate applies to employers of every size.

The change reaches salaried staff too. Most exempt employees must earn at least twice the state minimum wage for full-time work, which sets the 2027 salary floor at $72,384 per year, or $6,032 per month.

A salary bump alone does not settle exempt status. Job duties matter just as much, and our guide to exempt vs. non-exempt classification rules explains the tests California applies.

Several cities, including San Diego, set their own higher minimum wage, and the higher local rate controls. If your crews work across city lines, the rate depends on where the work happens, not where your office sits. Our breakdown of California minimum wage rules covers how state and local rates interact.

AB 2646 also creates a separate $19.75 hourly floor for certain agricultural workers, including H-2A workers and others doing the same work, starting in 2027 and adjusting each year after that.

Payroll checks to complete before January 1:

• Raise hourly rates to $17.40, or the higher local rate where it applies
• Confirm every exempt salary meets the $72,384 floor
• Update pay scales in job postings and offer letters
• Recheck overtime and break premium math tied to the regular rate

Missed rate increases rarely stay small. One payroll error can lead to unpaid wages, wage statement penalties under Labor Code Section 226, and waiting time penalties for former employees.

It can also show up in a PAGA notice. PAGA, the Private Attorneys General Act, lets a single employee seek statutory penalties on behalf of every affected coworker, so one error can turn into workforce-wide exposure.

How Do the New AI and Surveillance Laws Change Discipline and Termination?

The No Robo Bosses Act (SB 947) bars California employers from relying solely on an automated decision system, or ADS, to discipline or fire an employee. An ADS is software, including AI tools, that scores, ranks, or flags workers and produces output that managers use to make decisions.

The law takes effect July 1, 2027. When an employer primarily relies on ADS output, a person must independently corroborate the decision using the underlying data and other information, such as supervisor evaluations, personnel files, or witness interviews.

The employer must also give the employee a written notice that explains the ADS use, confirms the human review, and describes how to request the data behind the decision. SB 947 also bars using an ADS to infer a protected trait or to predict and punish a worker for exercising legal rights.

A San Diego distribution company that uses scanner data to flag slow pickers is a good example. If that flag becomes the basis for a final warning after July 1, 2027, a manager needs to check the underlying data, look at context such as equipment problems or approved leave, and document the review.

That documented review mirrors the habits that protect any termination. Our guide on how to terminate an employee in California walks through the documentation steps that hold up later.

AI Layoffs and Cal-WARN Notices

SB 951 adds a layer for layoffs. Cal-WARN is California's mass layoff notice law, and it generally covers establishments with 75 or more employees and requires 60 days' notice.

Starting January 1, 2027, if a mass layoff, relocation, or termination happens wholly or substantially because of AI or other automated technology, the notice must state that it is for a technology displacement. It must also describe the affected positions and the job functions being automated. Adopting new technology alone does not trigger the notice.

Workplace Surveillance Limits

Two surveillance laws also start January 1, 2027. AB 1331 generally bars monitoring employees in workplace bathrooms and limits monitoring during off-duty time such as meal and rest breaks, while AB 1883 bars AI surveillance tools that infer an employee's emotional state or collect neural data.

What Changes for Harassment, Discrimination, and Retaliation Risk?

AB 2563 expands how FEHA defines sex starting January 1, 2027. FEHA, the California Fair Employment and Housing Act, is the state anti-discrimination law enforced by the Civil Rights Department (CRD, formerly DFEH), and it already covers more protected traits than federal law.

The updated definition expressly covers actual or perceived sex characteristics, conformity to sex or gender stereotypes, access to gender-affirming care, decisions about pregnancy-related care, and intersex traits. Most employers will not need new practices, but policies, investigation templates, and manager training should use the updated language.

AB 2495 widens California's ban on immigration-related retaliation under Labor Code Section 1019. Beginning January 1, 2027, employers may not use a person's actual or perceived immigration status in a way that would reasonably discourage that person from exercising a legal right, or pressure them into something they can lawfully refuse.

The protection covers applicants and former employees, not just current staff, and civil penalties can reach $10,000 per violation. Retaliation claims often follow a complaint the employer handled well on paper but poorly in practice, and these steps that lower the risk of a retaliation claim apply directly to the new immigration rules.

Harassment prevention training also changes, but not until January 1, 2028. AB 1803 adds anti-hate speech content to the training that employers with five or more employees already provide, with no change to the one-hour and two-hour requirements.

Are Your Stay-or-Pay and Arbitration Agreements Still Enforceable?

AB 1697 rewrote California's stay-or-pay law before most of it took hold. Stay-or-pay terms require a worker to repay training costs, bonuses, or other amounts if they leave before a set date.

The original law, AB 692, restricted these terms starting in 2026. AB 1697 took effect immediately as an urgency measure, applied the restrictions to contracts entered into on or after January 1, 2027, and added new exceptions.

The revised law permits repayment terms in limited situations, including:

• Retention and discretionary bonuses, even when offered after hiring
• Up to 40 hours of advanced paid time off, with no interest charged
• Transferable credentials and certain apprenticeship programs
• Certain securities and insurance affiliation agreements

Each exception carries conditions, such as a separate written agreement and proration. Violations expose employers to the greater of actual damages or $5,000 per worker, plus attorney fees.

AB 2155 amends Code of Civil Procedure Section 1281, so an arbitration agreement the Federal Arbitration Act would not enforce is also unenforceable under the California Arbitration Act. That closes a backup route some employers relied on for transportation workers and for sexual harassment claims covered by the federal Ending Forced Arbitration Act.

Agreements drafted years ago from a template carry the most exposure. Working with HR compliance counsel for California businesses before January lets you fix the language once, and Backstrom offers flat-fee options for defined reviews like this one.

What Do the Bereavement Leave and Pay Data Changes Require?

SB 1149 expands bereavement leave for employers with five or more employees. Starting January 1, 2027, employees may take up to five days of protected bereavement leave after the death of a designated person, meaning someone related by blood or whose relationship with the employee equals a family relationship.

Employees can name the designated person when they request leave, and employers may limit them to one designated person per 12-month period. The leave remains generally unpaid, though employees may use accrued paid time off.

Your bereavement policy, leave request forms, and manager scripts all need the new language. Our checklist of California employee handbook requirements shows where these updates fit.

Private employers with 100 or more employees, or 100 or more workers hired through labor contractors, file annual pay data reports with the CRD. Under SB 464, reports due in May 2027 must sort employees into 23 Standard Occupational Classification job categories instead of the 10 EEO-1 categories, and employers must store demographic data separately from personnel files.

SB 1237 raises the penalty for a repeat failure to file from up to $200 to up to $1,000 per employee. A first failure stays at up to $100 per employee.

One change works in your favor. Starting January 1, 2027, AB 1961 lets employers seek a workplace violence restraining order that protects all employees at a location, without naming a single targeted worker.

What Should California Employers Do Before January 1, 2027?

Use this checklist to plan the next few months:

1. Update payroll for $17.40 and any higher local rate, and confirm exempt salaries reach $72,384.
2. List every AI, scoring, or monitoring tool and note which ones touch discipline, termination, or surveillance.
3. Build a documented human-review step for ADS-supported decisions before July 1, 2027.
4. Revise handbook policies on bereavement leave, anti-discrimination, and workplace surveillance.
5. Review stay-or-pay, bonus repayment, and training repayment terms in the templates you plan to use in 2027.
6. Check arbitration agreements against Federal Arbitration Act requirements.
7. Map employees to the 23 SOC categories if you file pay data reports.
8. Plan your 2028 harassment training update for anti-hate speech content.

How Does Backstrom Labor Law Help Employers Prepare for 2027?

Compliance updates go faster when the attorney who drafts the policy also knows how it will look in front of a judge or the Labor Commissioner. Karin Backstrom has represented California employers exclusively for 26+ years, starting her career at Littler Mendelson and Sheppard Mullin and going on to litigate more than 500 employment cases. Every outcome depends on the facts of the matter.

She also teaches courses for the HR Certification Institute, the body behind the PHR and SPHR credentials, so HR directors get advice in the language they already use. You can read more about Karin Backstrom's background before you call.

Karin handles every matter personally, with no hand-off to a junior associate. On the first call, she gives you an honest read on your exposure, including when the fix is smaller than you feared.

Backstrom offers initial consultations within 48 hours, flat-fee options for defined projects such as handbook updates, and a 5-star client rating. As an employer-defense attorney in San Diego serving employers statewide, the firm represents employers only, so every recommendation is built around your business.

When you are ready, you can schedule a consultation and bring your current handbook and agreements to the first conversation.

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