California’s 2027 employment laws: what I’m telling small employers to do now

California’s legislative year ended on September 30, when the Governor acted on the last bills on his desk. I spent the day after reading what passed against the pages on this site, and I corrected several of them the same night. If you run a small business, here is what changed and the order I would handle it in. Unless I note otherwise, each law takes effect January 1, 2027, as summarized in CalChamber’s roundup of the new laws.

The stay-or-pay deadline just moved

This is the change most likely to catch an employer off guard, because it reverses something many businesses already acted on. Last year’s AB 692 banned most clauses that make a worker repay training costs, a sign-on bonus or other debt when the job ends, starting in 2026. On September 30, AB 1697 moved that start date to contracts entered on or after January 1, 2027. It took effect immediately as an urgency measure, treats claims based on 2026 agreements as moot, and adds exceptions, including qualifying retention bonuses and repayment of advanced paid time off after a voluntary separation (National Law Review).

My advice: do not treat the delay as a reason to go back to old templates. Use the next three months to rewrite offer letters and bonus agreements once, against the final rules, so every contract you sign in 2027 is clean. The details are in the noncompete and stay-or-pay guide.

AI now has rules in discipline, monitoring and layoffs

Three new laws reach any employer that uses software to watch or judge its people:

• SB 947, the “No Robo Bosses Act,” bars relying solely on an automated decision system to discipline or fire, starting July 1, 2027. If a decision rests primarily on one, a person must corroborate it and the employee gets a notice.
• AB 1883 and AB 1331 ban workplace surveillance tools that read emotions or collect neural data, and bar monitoring in workplace bathrooms. Workers can leave a wearable or other tracking device behind when they go in.
• SB 951 adds required information to a Cal-WARN notice when AI or automation causes a mass layoff. The rest of the Cal-WARN layoffs rules are in my Cal-WARN guide.

For a small business, the practical step is an inventory: list every tool that scores, ranks, monitors or flags employees, including the ones inside your scheduling, timekeeping and hiring software. You can’t comply with rules about tools you don’t know you have.

Leave, training and pay data change too

• Bereavement leave now covers the death of a “designated person,” someone related by blood or whose bond is the equivalent of family. An employer may limit it to one designated person per 12 months (SB 1149).
• Harassment prevention training in California gains a required topic on recognizing, reporting and confronting hate speech based on protected traits, starting January 1, 2028 (AB 1803). Any training you schedule for 2027 follows the current topics.
• The California pay data report grows from 10 job categories to 23 for employers with 100 or more employees (SB 464), and the penalty for employers that fail to file again rises from $200 to $1,000 per employee (SB 1237).
• FEHA’s definition of sex now expressly covers gender category, gender-affirming care and decisions about pregnancy-related care (AB 2563), and immigration-related retaliation protections now cover applicants and former employees as well (AB 2495).

The minimum wage and the exempt salary floor

The California minimum wage for 2027 is $17.40 an hour, up from $16.90. Because the exempt salary floor is twice the state minimum wage for full-time work, it rises to $72,384 a year. Salaried employees who fall below that line must get a raise or start earning overtime on January 1. A new agricultural minimum wage of $19.75 an hour also arrives for covered farmworkers (AB 2646).

Local rates are the next wave. Oakland, San Jose and other January cities post their 2027 numbers this fall (San Jose’s minimum wage is $18.45 until then, while Berkeley’s minimum wage next adjusts July 1), and Oakland’s current $17.34 will fall below the new state rate unless the city raises it. I update the Bay Area minimum wage table when each city posts.

What I would do before December 31

1. Rewrite offer letters and bonus agreements for the new stay-or-pay rules.
2. Inventory every tool that monitors or scores employees.
3. Run payroll for 2027 at $17.40 or your city’s rate, and check every exempt salary against $72,384.
4. Update your California employee handbook for bereavement leave and the expanded definition of sex.
5. If you have 100 or more employees, plan for the new pay data categories now.

If you would rather have someone check all of it at once, that is what my HR compliance audit is for. And starting January 14, 2027, I walk through each quarter’s changes in a free California law update, open to anyone.

McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.