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December 17, 2025
On January 1, 2026, several amendments impacting California employers become effective. They include:
Amendments to Section 1197.5 of the Labor Code
Existing California law prohibits an employer from paying differential wages to employees of opposite sexes, or of another race or ethnicity, for substantially similar work. The amendments to Section 1197.5 align the language regarding gender with the language concerning race and ethnicity. It provides that an employer may not pay differential wages to employees of another sex instead of the opposite sex.
The amendments also increase the time within which an employee may sue an employer to recover wages from two years after the cause of action occurs, or three years in the case of a willful violation, to three years after the last date the cause of action occurs. Moreover, as of January 1, an employee will be entitled to obtain relief for the entire period a violation occurred, not to exceed six years. The amendments also provide clarity as to what constitutes a cause of action. Beginning on January 1, a cause of action occurs when an unlawful compensation decision or practice is adopted; when an individual becomes subject to an unlawful compensation decision or practice; and when an individual is affected by the application of an unlawful compensation decision or practice.
Amendments to Section 98.2 of the Labor Code and Creation of Sections 238.05 and 238.10
The California Legislature amended Section 98.2 of California’s Labor Code and added two additional sections to address the failure of employers to timely pay workers, especially low-income workers, all the wages they are due. The Legislature also determined that existing penalties against employers who fail to pay wage judgments are insufficient.
To remedy this ongoing issue, the language of Section 98.2 will be amended to provide that, instead of simply being entitled to court costs and attorney’s fees, a judgment creditor, the Labor Commissioner, or a public prosecutor as assignee of the judgment creditor, shall be awarded court costs and attorney’s fees for enforcing a wage judgment. The new Sections also expand the penalties to which an employer/judgment debtor will be subject for non-payment. Specifically, if a final judgment for non-payment of wages remains unsatisfied for more than 180 days, the judgment debtor shall be subject to a civil penalty not to exceed three times the outstanding judgment amount, including post-judgment interest. The court also shall award a prevailing plaintiff all reasonable attorney’s fees and costs to enforce a final judgment arising from non-payment of wages. Moreover, penalties assessed shall be in addition to any other fines or penalties permitted by law.
Changes to Section 12999 of the Government Code
Currently, Section 12999 of the Government Code requires private employers with 100 or more employees to submit demographic information (race, ethnicity, and sex) and pay data for employees in 10 specified job categories to the California Civil Rights Department on an annual basis. On January 1, the Section will be amended to require any demographic information gathered by employers or labor contractors pursuant to the Section to be collected and stored separately from employees’ personnel records. It also will require a court to impose a civil penalty against any employer that fails to file a requested report.
Beginning on January 1, 2027, Section 12999 will be repealed and a revised Section 12999 will go into effect. The 2027 revisions will increase the number of job categories for which employers must gather data from 10 to 23.
Takeaways for California Employers
As always, California employers should review their policies to avoid running afoul of the new laws. Employers with 100 or more employees also should use this year to implement processes to gather the requisite demographic and pay data for the 13 additional categories of employees about whom they will have to provide information to the Civil Rights Department beginning in 2027. This expansion of the law will prove time-consuming and employers should not procrastinate.
The author of this article, Rachael Luken Carp, is a member of the Bars of New Jersey, New York, and Pennsylvania. This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice in New Jersey, New York, Pennsylvania, California or any other jurisdiction, nor does it establish an attorney-client relationship with any reader of the article where one does not exist. Always consult an attorney with specific legal issues.
