2027 California Employment Laws: What to Update Before January

Most years, the employment laws that arrive on January 1 get a quick read in December and a handbook update sometime in spring. This year, that timeline may be harder to keep. Governor Newsom signed a long list of employment bills this fall, and most of them take effect January 1, 2027.

For a business without a dedicated HR team, the harder part is usually sorting out which changes actually reach your workplace, and which documents, pay practices, and conversations need to change before the new year.

This article walks through the changes most likely to affect small and mid-sized employers, and where each one tends to show up day to day. It's general information rather than legal advice, so the details of any specific situation are worth confirming with an HR professional or employment attorney.

Why the 2027 California employment laws deserve an early look

Most of the work comes from documents and habits that were accurate last year: an offer letter template, a bonus agreement, a bereavement policy, a manager's sense of what's allowed. Updating them takes time, especially when several people need to review the changes. Some updates also affect budgets that are being set right now.

Starting in October or November leaves room to make those changes thoughtfully, rather than in the last week of December.

Pay: the new minimum wage and exempt salary threshold

On January 1, 2027, California's statewide minimum wage rises to $17.40 an hour. The salary floor for most exempt employees is tied to the state minimum wage, so it rises too, to $72,384 a year for a full-time exempt employee.

The salary piece is the one most often missed. An employee classified as exempt and paid just above this year's threshold could fall below next year's without anyone noticing. It helps to review exempt salaries now, while budgets are still open. It's also worth checking whether a city or county minimum wage applies where your employees work, since some local rates are higher than the state's.

Bonus and training repayment agreements

Last year, California restricted "stay-or-pay" agreements, which require workers to repay money, such as training costs or a bonus, if they leave. A bill signed this fall, AB 1697, took effect immediately and moved the start date: the restrictions now apply to contracts entered into on or after January 1, 2027.

It also adds new exceptions, including for certain government-funded recruitment and retention bonuses and for advanced paid time off repaid after a voluntary resignation.

The conditions attached to these exceptions are detailed. For a discretionary bonus with a repayment requirement, the terms need to sit in an agreement separate from the main employment contract. The employee must also be told they can consult an attorney and given at least five business days to do so. Any repayment must be prorated, interest-free, and tied to a retention period of no more than two years.

Consider a hypothetical employer that offers new hires a sign-on bonus with a one-year clawback. The offer letter it uses in January may need to look quite different from the one it used in December. A practical first step is gathering every agreement that asks for money back at separation, from sign-on and retention bonuses to tuition reimbursement and relocation support, so they can be reviewed together.

Bereavement leave now covers a designated person

California already requires employers with five or more employees to provide up to five days of bereavement leave after the death of a family member, for employees who have worked there at least 30 days.

Starting January 1, SB 1149 expands "family member" to include a designated person: someone related to the employee by blood, or whose relationship with the employee is the equivalent of family. Employers may limit employees to one designated person per 12-month period.

In practice, this means updating the handbook policy and the leave request process. Managers will also want to know that an employee may name this person at the time they request the leave, rather than in advance.

Workplace monitoring and AI tools

Three new laws address technology that observes or evaluates employees.

• AB 1331, effective January 1, bars employers from using workplace surveillance tools to monitor employees in workplace bathrooms, with limited exceptions. Employees may also leave tracking devices behind when entering one.

• AB 1883, effective January 1, prohibits using AI-powered workplace surveillance tools for certain purposes, including collecting neural data or recognizing an employee's emotional state. Violations carry a civil penalty of up to $500 each.

• SB 947, operative July 1, 2027, bars employers from relying solely on an automated decision system to discipline or terminate an employee. When the system's output is the primary basis for that decision, a person must corroborate it.

Many small businesses use more monitoring technology than they realize: badge systems, GPS on company vehicles, productivity software, or HR platforms with built-in scoring. An inventory of what's in use, what it collects, and who reviews its output makes each of these laws much easier to assess.

It also gives the business something clear to share with employees, who often hear about laws like these on their own.

What managers should know about immigration-related comments

AB 2495 expands California's prohibition on unfair immigration-related practices. Starting January 1, it covers conduct related to a person's actual or perceived immigration status that would reasonably tend to discourage an employee from exercising a legal workplace right.

This change mostly shows up in how supervisors talk with employees. A passing remark about someone's status during a pay dispute or safety complaint can carry real legal risk. A short conversation with supervisors, built into existing anti-retaliation training, is often the most practical update.

A few questions worth asking

• When were the handbook, offer letter templates, and bonus agreements last reviewed, and who owns that review?

• Does anyone classified as exempt earn less than $72,384 a year?

• Which monitoring or AI-enabled tools does the business use, and could someone describe what each one collects?

• Would supervisors know how to respond if an employee raised a concern connected to immigration status?

Most of these updates come down to a few documents and some clear conversations with managers, and both go more smoothly with a few weeks of lead time.

If your business could use experienced support reviewing policies and documentation before the new year, learn more about how MCDA CCG, Inc. supports growing businesses through its Human Resources services.