Question: I heard there are some new California laws that will affect employers in 2027. What are the new laws, and when do they go into effect?
Answer: Yes, several new employment laws will become effective January 1. This year, there are some significant impacts relating to minimum wage, the use of artificial intelligence, discrimination and harassment, training requirements, arbitration agreements, and leaves of absence. Below is a summary of the new laws in these areas.
Minimum Wage
California’s minimum wage for non-exempt employees will increase to $17.40 per hour. The minimum salary for full-time exempt employees will increase to $72,384 per year. Employers should keep in mind that the minimum wage differs for certain employees and should check their city or county’s minimum wage to ensure they are paying their employees the correct minimum wage.
Artificial Intelligence and Automated Decision Systems
This new law prohibits employers from using Artificial Intelligence to avoid compliance with labor and employment laws, inquire about an employee’s protected status, or to discipline employees for exercising their legal rights. Additionally, employers who primarily rely on Automated Decision Systems to make disciplinary or termination decisions must have a human review and corroborate the output of the Automated Decision System. The employer must also provide the affected employee with a written notice that the employer used an Automated Decision System.
Immigration Status Discrimination
The new law prohibits employers from using an employee’s perceived immigration status to dissuade the employee from exercising their rights as an employee or to persuade the employee into doing something they can legally refuse or opt out of. The actual immigration status of the employee is irrelevant, and an employer will still be liable for violating the statute even if the employee faced no risk of deportation or other adverse immigration consequences. Employers who violate this law may face a $10,000 penalty per employee for each violation.
Harassment and Discrimination on the Basis of Sex
The legislature has expanded the definition of the term “sex” under the California Fair Employment and Housing Act. The new definition of “sex” will include several new categories including but not limited to: pregnancy, childbirth, breastfeeding, and related medical conditions; gender identity and expression; gender-affirming healthcare; and variations in sex characteristics, including intersex traits or differences in sex development. Employers should review their policies and practices to ensure they comply with the expanded employee protections.
Bereavement Leave
Under the new law, employees will be permitted to designate any individual as their “designated person” when the employee requests bereavement leave. Employers must allow employees to take 5 days of bereavement upon the death of any “family member,” which now includes the employee’s designated person. Employers may limit an employee to one designated person in a 12-month period. Employers should update their bereavement policy and notify their supervisors and human resources managers of the change of law.
Arbitration Agreements
Arbitration agreements governed by the California Arbitration Act are now subject to all protections and exemptions codified in the Federal Arbitration Act. Employers with arbitration agreements governed by the CAA should review the FAA to ensure their arbitration agreements are still enforceable and update them as necessary.
To reduce risk, employers are encouraged to conduct internal audits of their handbook policies, personnel procedures, posting compliance, and use of AI. This article discusses only some of the new laws that will go into effect on January 1. Employers should contact their labor counsel to ensure compliance with all new labor and employment laws.