As a San Diego business owner, staying ahead of California's ever-changing employment laws is not just good practice. It is essential to avoiding costly penalties and litigation. In 2026, the California Legislature enacted a sweeping set of new workplace regulations that expand employee rights, increase compliance obligations, and raise the stakes for noncompliance. Here is what you need to know to protect your business.
The "Stay-or-Pay" Ban: AB 692
One of the most significant changes for San Diego employers is Assembly Bill 692, which took effect on January 1, 2026. This law prohibits most "stay-or-pay" clauses in employment agreements, including provisions that require employees to repay sign-on bonuses, relocation expenses, or training costs if they leave before a specified date. For decades, these clauses were a common retention tool. Now, agreements executed on or after January 1, 2026 that include prohibited repayment obligations are void and unenforceable.
The consequences for noncompliance are steep. Employees can seek injunctive relief, recover the greater of actual damages or $5,000 per employee, plus attorneys' fees and costs. There are narrow exceptions, such as certain tuition repayment plans and upfront discretionary bonuses, but employers should not assume their existing agreements qualify. If your business uses offer letters or employment contracts that include any form of repayment obligation, a legal review is essential.
Workplace Know Your Rights Act: SB 294
Senate Bill 294 requires every California employer to issue a stand-alone written notice to each current employee outlining their workplace rights. The first notice was due by February 1, 2026, and must be provided annually thereafter. The notice covers workers' compensation rights, protections against unfair immigration-related practices, the right to organize, and constitutional protections when interacting with law enforcement at the workplace.
Failure to distribute this notice can result in penalties of $500 per employee per day, up to $10,000 per employee. The Labor Commissioner has published a template notice that employers may use, but the obligation to distribute it rests squarely on the employer.
Minimum Wage Increase
California's statewide minimum wage increased to $16.90 per hour as of January 1, 2026. San Diego employers should ensure that all wage rates, salary thresholds, and exempt employee classifications are updated to reflect this change. Failure to pay at least the minimum wage exposes employers to wage claims, penalties, and potential class action litigation.
What San Diego Employers Should Do Now
The time to act is now. Business owners should conduct a thorough audit of all employment agreements, offer letters, and onboarding documents to remove prohibited stay-or-pay clauses. Employers should also confirm that the SB 294 workplace rights notice has been distributed to all current employees and update payroll systems to reflect the new minimum wage.
At Bayside Counsel, we regularly advise San Diego businesses on employment law compliance, from reviewing and drafting employment agreements to conducting full HR audits. If you are unsure whether your business is compliant with these new laws, contact us today for a consultation.