California manufacturers are preparing for several new laws that will take effect in 2026, impacting areas such as wages, hiring practices, compliance reporting, and investment decisions. The California Manufacturers & Technology Association (CMTA) has outlined six key legislative changes that companies should address before the new year.
Starting January 1, 2026, the state minimum wage will increase to $16.90 per hour due to annual cost-of-living adjustments. This represents a $0.40 increase from the previous year and is expected to raise labor costs across various roles within manufacturing operations, particularly affecting businesses with large hourly workforces.
Another significant change comes from AB 692 (Kalra), which bans all training-repayment agreements and quit fees beginning January 1, 2026. Employers can no longer require workers to pay back training costs if they leave before a specified period ends. The law imposes a minimum penalty of $5,000 per employee for violations. As a result, manufacturers must revise employment contracts and consider alternative retention strategies.
Pay data reporting requirements are also being updated under SB 464 (Smallwood-Cuevas). From January 1, 2026, demographic data must be stored separately from personnel files. Penalties for non-compliance start at $100 per employee for the first offense and double for subsequent failures. In addition, employers will need to report on more job categories starting in 2027. Companies are advised to review their data-sharing agreements with staffing agencies and enhance internal compliance procedures.
AI-based hiring tools fall under new scrutiny as well. Beginning in 2026, anti-discrimination rules from the Fair Employment and Housing Act (FEHA) will apply directly to algorithmic hiring systems—even those provided by third-party vendors. Employers may be held liable if these tools result in biased outcomes. Manufacturers are required to conduct bias audits of AI systems, update vendor contracts accordingly, train human resources staff on evaluating AI decisions, and retain relevant records for four years.
The Workplace Know Your Rights Act (SB 294 – Reyes) introduces further obligations starting February 1, 2026. Employers must issue annual notices outlining worker rights related to immigration enforcement and law enforcement interactions while also notifying emergency contacts if an employee is detained or arrested at work. Failure to comply can result in penalties of $500 per employee each day.
Lastly, SB 302 (Padilla) brings state tax policy into alignment with federal clean energy credits by eliminating state taxes on federal credit payments from January 1, 2026 through 2030. This move offers immediate tax savings for manufacturers investing in clean energy projects or advanced technologies such as electric vehicles or hydrogen infrastructure.
According to CMTA: “The California Manufacturers & Technology Association (CMTA) has advocated for pro-growth laws and regulations before the California legislature and administrative agencies since 1918.” The association notes that manufacturing accounts for about $300 billion annually—roughly ten percent of California’s total economic output—and employs approximately 1.3 million people statewide with wages higher than other non-farm sectors.
