California: Stay-or-Pay Agreements, Automated Decisions, Family Leave and Other Employment Law Changes for 2027 + Beyond

Takeaways

• Most of California’s new requirements take effect 01.01.27, but the automated decision law takes effect 07.01.28 and certain training, court-procedure and Paid Family Leave laws have later implementation dates.
• Technology is a central focus, and employers should inventory their automated decision systems and surveillance tools, identify vendors that access employee data and document when and how people review technology-generated recommendations.
• Employers should also review leave policies, arbitration agreements, repayment and bonus arrangements, Cal-WARN procedures, harassment-prevention training, pay data reporting controls and protocols for immigration-related complaints and workplace threats.

Related links

• California Workplace Law Blog 
• California Legislative Information: Bill Search

Article

California’s 2026 legislative session produced numerous significant changes affecting employers’ use of artificial intelligence (AI), employee monitoring, workforce reductions, leave administration, employment agreements, and other workplace practices.

Although most of the measures take effect in 2027, several provisions’ later implementation dates give employers more time to update policies, procedures, training, and technology controls.

“Stay-or-Pay” Related Agreements

Assembly Bill (AB) 1697 revises California’s limits on “stay-or-pay” provisions. The law generally prohibits employment-related terms that require a worker to repay a debt or pay a penalty, fee, or cost when the worker’s relationship with a particular employer ends. The prohibition applies to contracts entered into on or after Jan. 1, 2027. The urgency measure also bars liability under the prior version of the law for the period between Jan. 1, 2026, and the measure’s effective date.

AB 1697 applies not only to agreements presented at the start of employment, but also to certain agreements reached later in the employment relationship.

AB 1697 preserves exceptions for:

• Qualifying government loan-repayment and recruitment programs; 
• Transferable educational credentials; 
• Approved apprenticeships; 
• Residential property arrangements; and 
• Certain discretionary payments.

It also adds or clarifies exceptions for qualifying retention bonuses, specified arrangements in regulated financial and insurance professions, and repayment of up to 40 hours of paid time off advanced at an employee’s request when the employee voluntarily separates.

Each exception carries detailed conditions, including separate agreements, advance disclosure, an opportunity to consult counsel, proration, interest limits, or restrictions on when repayment may be required.

Arbitration

Effective Jan. 1, 2027, AB 2155 amends California Code of Civil Procedure section 1281. An arbitration agreement unenforceable under the Federal Arbitration Act will also be unenforceable under the California Arbitration Act.

Employers should review their arbitration programs for compliance with current federal requirements rather than rely on California law as an alternative basis for enforcement.

Pay Data Reporting

Senate Bill (SB) 1237 significantly increases the potential consequences of repeated failures to file California pay data reports. The maximum penalty for an initial failure remains $100 per employee, while the maximum for a subsequent failure increases from $200 to $1,000 per employee. The amendments take effect Jan. 1, 2027.

Covered employers should determine reporting responsibility well before the annual May deadline and establish controls to obtain required information from payroll systems, human resources information systems, and labor contractors.

California WARN

SB 951 separately addresses technology-related workforce reductions. Beginning Jan. 1, 2027, a Cal-WARN notice for a covered mass layoff, relocation, or termination caused wholly or substantially by AI or another automated technology must prominently state, “This notice is for a technology displacement.”

The notice must state the number, occupation or classification, and work location of positions affected by the technology displacement. It must also describe the functions to be automated and identify the category or type of technology substantially responsible.

The law does not create a Cal-WARN notice obligation merely because an employer adopts new technology or when automation results in a decision not to hire for future positions.

AI and Automated Workplace Decisions

Beginning July 1, 2027, SB 947, often referred to as the “No Robo Bosses Act,” regulates employers’ use of automated decision systems in disciplinary and termination decisions.

Employers may not rely solely on an automated decision system to discipline or terminate employees. If an employer relies primarily on the system’s output, a human decision-maker must review and corroborate the recommendation using the underlying information or other relevant material. An output that cannot be corroborated, or that is inaccurate, incomplete, or misleading, may not support the decision.

The employer must provide a separate written notice providing the following information:

• It relied on the automated system; 
• A human reviewed the output and corroborated the output; 
• A contact for additional information; and 
• The employee has the right to request a meaningful, objective description of the employee data the system used.

The law also bars automated systems from inferring an employee’s protected status or predicting and penalizing the exercise of legal rights.

New Limits on Workplace Surveillance

Two measures establish overlapping but distinct limits on workplace surveillance.

The first, AB 1883, prohibits employers from using AI-powered surveillance tools to recognize, infer, or predict a person’s emotional state or collect neural data and goes into effect Jan. 1, 2027. For instance, AB 1883’s restriction may cover technologies marketed as measuring whether an employee is experiencing or expressing particular emotions, although the statute fails to define emotions. As a result, employers will need to think carefully about the nature of such technologies’ output.

Narrow exceptions apply to certain employers developing aircraft or products and services for national security, military, space, or defense purposes, but the exceptions apply only when surveillance is reasonably necessary to comply with federal law, regulation, or a binding federal contract.

Additionally, beginning Jan. 1, 2027, AB 1331 regulates workplace surveillance more broadly. Under AB 1331, a “workplace surveillance tool” generally includes any system, application, instrument, or device that collects or facilitates collection of employee data, activities, communications, actions, biometrics, or behavior other than through direct human observation. Examples include video and audio systems, GPS tracking, time- and pace-tracking technology, and biometric tools.

Employers generally may not conduct surveillance in bathrooms located in the workplace. Covered tools must be disabled during off-duty periods, including meal and rest breaks, regardless of location.

Narrow exceptions cover:

• Certain voluntarily used tools; 
• Nonrecording safety or identification badges; 
• Personal alarms; 
• One-time bathroom entry or exit checks; and 
• Surveillance required by law or regulation.

Employers should conduct a coordinated audit of monitoring technologies, including tools embedded in productivity, security, fleet-management, communications, scheduling, and wearable-device platforms. They should also review vendor contracts to determine what information each system collects and what inferences it generates.

Employee Leaves and Benefits

Beginning Jan. 1, 2027, SB 1149 expands California’s bereavement-leave law. Covered employees may take bereavement leave after the death of a “designated person,” which is someone related by blood or whose relationship with the employee is equivalent to a family relationship.

An employee may name the designated person when requesting leave, and an employer may limit the employee to one designated person in 12 months. The entitlement is to five days of generally unpaid leave, although employees may use available accrued leave.

AB 2054 broadens the circumstances in which employees may qualify for state Paid Family Leave benefits for a military-related qualifying exigency. “Covered active duty” will extend beyond foreign deployments to include specified deployments, training, and calls or orders to federal or state active duty involving members of the regular Armed Forces, reserve components, and National Guard.

The change will take effect when the Employment Development Department can incorporate it into its claims-management system or on July 1, 2028, whichever occurs first. Paid Family Leave provides state wage-replacement benefits but does not independently create job-protected leave.

Anti-Harassment Training and Workplace Retaliation

Beginning Jan. 1, 2028, AB 1803 expands California’s required harassment-prevention training. Employers with at least five employees must include practical guidance on recognizing, reporting, and confronting workplace speech that vilifies, humiliates, or incites hatred against people based on characteristics protected by the state Fair Employment and Housing Act (FEHA).

The measure does not increase the existing one-hour requirement for nonsupervisory employees or two-hour requirement for supervisors, and it does not require a separate course. Employers should review training materials to ensure they cover the full range of protected characteristics and clearly distinguish inappropriate conduct, policy violations, abusive conduct, and unlawful harassment.

Beginning Jan. 1, 2027, AB 2495 expands protections against immigration-related workplace retaliation. Existing law prohibits certain unfair immigration-related practices, including misuse of E-Verify, demands for unnecessary employment-verification documents, and threats to contact immigration authorities.

The amendments protect individuals who exercise or attempt to exercise rights under any local, state, or federal law or regulation applicable to employees. Protected conduct includes:

• Making good-faith complaints; 
• Requesting compliance information; 
• Informing others of potential rights; and 
• Helping them assert those rights.

The law also prohibits conduct based on perceived immigration status that would reasonably discourage someone from exercising a legal right or pressure that person to do something they may lawfully decline. “Employee” expressly includes applicants, current employees, and former employees and actual immigration status does not affect liability.

Workplace Violence Restraining Orders

Beginning Jan. 1, 2027, AB 1961 expands employers’ ability to seek workplace violence restraining orders. An employer may petition on behalf of all employees at a workplace (or another location where a group primarily performs its duties) when harassment, unlawful violence, or credible threat targets that location. The employer need not identify an individual employee as the target.

Beginning Jan. 1, 2028, AB 2179 modernizes related court procedures. Parties and witnesses may appear remotely without paying a remote-appearance fee, and courts must accept workplace violence restraining-order petitions and related filings electronically. Unless the petitioner requests paper documents, courts must also return hearing information, service copies, and any granted temporary restraining order electronically.

Vetoed: AB 1940

Not every employment bill passed by the legislature became law. Gov. Gavin Newsom vetoed AB 1940, which would have amended FEHA’s definition of “sex” to expressly include perimenopause, menopause, postmenopause, and related medical conditions. It also would have required covered employers to provide reasonable accommodation for those conditions and distribute specified notices.

The veto does not place menopause-related workplace issues outside FEHA’s reach. Employers should continue handling requests involving menopause or related medical conditions through existing disability-accommodation, interactive-process, leave, and nondiscrimination procedures.

Preparing for the New Requirements

Among other compliance measures, employers should:

• Inventory their AI and surveillance systems; 
• Review contracts and repayment provisions; 
• Update leave and anti-retaliation policies and training materials; 
• Revise Cal-WARN procedures; and 
• Assess pay data reporting processes.

For a comprehensive review of California employment law developments and their practical implications for employers, register for “2026 California Workplace Law Update.”

If you have questions regarding any of these developments or want confidential, forward-looking guidance for your particular business, please contact a Jackson Lewis attorney to discuss.