During its 2025 legislative session, California enacted several new employment laws, most of which take effect on January 1, 2026 (unless otherwise indicated). Below is a summary of these laws.

Minimum wage increase

In the new year, the statewide minimum wage will increase by 40 cents – to $16.90 per hour – for all employers, regardless of size. The minimum annual salary for exempt employees (which must be at least twice the state minimum wage) will also increase from $68,640 to $70,304, regardless of whether the employee in question works a part-time or full-time schedule. Employers should note that many cities and counties have local minimum wage rates that may be higher than the state minimum.

Changes to bonus or debt repayment obligations

AB 692 follows a recent trend in restricting so-called training repayment agreement provisions (TRAPs) or “stay or pay” provisions. Applying to contracts entered into on or after January 1, 2026, AB 692 prohibits provisions that require an employe to repay a “debt”[1] to their employer if their employee terminates or otherwise impose a penalty, fee or cost on a worker if the worker’s employment or work relationship terminates.

Two key exceptions to this prohibition include:

• Transferable credential tuition costs: Contracts to repay the cost of tuition for a transferable credential are permitted, if the contract meets all of the following conditions:
  1. The contract is separate from the employment contract.
  2. Obtaining the transferable...

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