If you own a shop in California, you already know the drill. Every January feels like a frantic game of regulatory whack-a-mole. Just when you think you’ve finally mastered the art of the 2025 payroll, 2026 rolls around with a fresh stack of mandates that could make even a seasoned CPA’s head spin. Honestly, it's a lot.
California small business regulation news isn't just a dry headline this year; it’s a series of massive shifts in how you pay people, how you hire freelancers, and even how you handle a simple phone call if an employee gets into trouble.
The $70,000 Threshold: The New Math of Middle Management
Let’s talk about the elephant in the room: the minimum wage. On January 1, 2026, the statewide minimum hit $16.90 per hour.
It sounds like a small bump from last year, right? Just 40 cents. But for small businesses, the real "gotcha" isn't the hourly rate. It’s the exempt salary threshold.
In California, to keep a manager or professional on a fixed salary without paying overtime, you have to pay them at least twice the state minimum wage for full-time work. With the new rate, that magic number is now $70,304 a year.
If you have a "manager" making $68,000, you are officially in the danger zone. You either give them a raise to cross that $70,304 line, or you start tracking their hours and paying time-and-a-half. There’s no middle ground. If they check emails on a Saturday and you aren't paying OT, you're basically handing a plaintiff's attorney a winning lottery ticket.
The "Stay-or-Pay" Ban (AB 692)
Ever paid for a specialized certification for a new hire? You probably had a clause saying, "Hey, if you quit in six months, you owe us for that $2,000 training course."
Well, as of 2026, those days are mostly over. AB 692 has effectively banned "stay-or-pay" provisions. Unless the training is a very specific government-mandated apprenticeship or legal requirement, you can’t force an employee to pay you back if they walk. It’s a huge shift in how businesses handle professional development. Basically, you’re investing in people at your own risk now.
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Freelancers Aren't "Set It and Forget It" Anymore
If you use independent contractors—graphic designers, copywriters, or delivery drivers—your world just got a lot more formal.
SB 988, also known as the Freelance Worker Protection Act, is now in full swing. If you’re hiring a freelancer for a job worth $250 or more, you must have a written contract. No more handshake deals over coffee. This contract needs to explicitly state:
- What they are doing.
- The exact value of the services.
- The specific date you’re going to pay them.
And here’s the kicker: you generally have to pay them within 30 days of the work being completed unless you agree otherwise in the contract. If you miss that deadline? The penalties are stiff. We’re talking double damages and attorney fees if it goes to court.
Also, keep an eye on SB 809. This law clarifies that just because someone owns their own truck or car doesn't automatically make them a contractor. If you’re a construction firm or a delivery outfit, you need to be extremely careful about how you’re classifying anyone behind a wheel. The "ABC Test" is still the law of the land, and the state is looking for any reason to say those drivers are actually employees who deserve benefits and mileage reimbursement.
The New "Know Your Rights" Mandate
Starting February 1, 2026, there is a new piece of paper you have to hand out. SB 294 requires you to give every single employee a "Know Your Rights" notice.
It’s not just for new hires anymore. You have to do this annually.
But there is a weirder, more specific part of this law that caught a lot of people off guard. You now have to collect emergency contacts for every employee. If an employee is arrested or detained while they’re on the clock, you are legally obligated to notify their emergency contact.
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It sounds like something out of a movie, but it's a real compliance requirement. If you don't have those contacts on file or fail to make that call, you could be looking at fines up to $10,000 per violation. It’s one of those "small" administrative tasks that can ruin your month if you ignore it.
Pay Transparency: The "Good Faith" Trap
You’ve probably seen the law that says you have to put pay ranges in job ads. For 2026, SB 642 has tightened the screws on this.
You can’t just put a wild range like "$50,000 to $150,000" and hope for the best. The law now says the range must be what you reasonably expect to pay on day one.
They also expanded the definition of "wages." Now, if your pay structure includes:
- Bonuses
- Commissions
- Equity or stock options
...you might have to be much more transparent about those figures in your reporting. The state wants to see the total compensation, not just the base hourly rate. They’re looking for pay gaps, and with the statute of limitations for pay discrimination now extended to three years, the paper trail you leave today could haunt you in 2029.
Workplace Violence: The Deadline is Looming
Remember SB 553? That’s the law requiring almost every business to have a written Workplace Violence Prevention Plan.
While the basic requirement started a while ago, 2026 is the big year for enforcement. Cal/OSHA is required to adopt a permanent, formal standard by December 31, 2026.
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If you just downloaded a template and stuck it in a drawer, you’re doing it wrong. You need a violent incident log. You need to hold interactive training sessions where employees can actually ask questions. If a delivery driver gets yelled at by a customer and feels threatened, that might need to go in the log. If you haven't reviewed your plan in the last 12 months, do it now.
What You Should Actually Do Next
Look, nobody starts a business because they love reading the California Labor Code. But ignoring this stuff is how "profitable" businesses go under due to a single class-action suit.
First, audit your salaries. Check anyone making between $65,000 and $72,000. If they are exempt, they likely need a raise to hit that $70,304 mark.
Second, refresh your onboarding packet. You need that new "Know Your Rights" notice ready for February. Make sure you have a spot for emergency contacts and actually explain why you’re asking for them so your team doesn't think you're being intrusive.
Third, look at your freelancer list. If you’ve got someone on a "recurring" verbal agreement, get a basic contract signed this week. It protects you just as much as it protects them.
Finally, check your job postings. If you haven't updated the pay ranges to reflect the 2026 reality, take them down and fix them. It takes ten minutes but saves you a massive headache with the Labor Commissioner.
California remains a "litigation-heavy" environment. The 2024 PAGA reforms did give us a bit of a "cure" period to fix mistakes before getting sued, but that only helps if you're proactive. If you wait for the letter from a lawyer to arrive, you’ve already lost. Stay on top of the paperwork, keep your logs updated, and pay the extra few cents an hour. It’s cheaper than the alternative.