By Arnold P. Peter, Managing Partner, Peter Law Group
If recent years were about expansion, 2026 will be about enforcement.
California has laid much of the statutory groundwork for a forward-thinking approach to employment law. The next phase is testing how those laws operate in real workplaces, with regulators and private litigants pressing employers to demonstrate that compliance is more than theoretical.
In 2026, the focus will be on how employment laws operate in practice, not simply whether policies exist.
Artificial Intelligence and Employment Decisions
The most visible pressure point is the use of artificial intelligence and data-driven tools in employment decisions.
California regulators have signaled skepticism toward opaque AI systems that influence hiring, advancement, or termination without meaningful human review. The legal risk is not limited to discriminatory outcomes.
In 2026, employers should expect discovery requests and agency inquiries that examine not only what decisions were made, but how technology influenced those decisions behind the scenes.
Employers may face exposure for failing to understand how AI tools work, failing to validate their impact, or failing to explain decisions to affected employees.
Regulatory and litigation scrutiny may focus on how technology shaped employment decisions, not just on the results of those decisions.
Pay Equity and Compensation Practices
California’s approach to pay equity continues to shape employer compliance obligations.
Pay transparency and reporting requirements have transformed compensation practices from internal business judgments into externally scrutinized data sets. In 2026, courts will not tolerate employers who rely on informal market rationales or legacy pay structures.
Regulators and plaintiffs’ counsel are expected to compare reported pay data against job titles, promotional paths, and demographic patterns, looking for anomalies that suggest systemic issues.
Proactively conducting pay equity audits with legal and compliance oversight is increasingly a practical necessity.
Worker Classification
Worker classification remains an area of sustained tension.
While the basic framework governing independent contractors and gig workers is well established, its practical application continues to evolve. Enforcement agencies have become more sophisticated in targeting misclassification, often coordinating across wage-and-hour, tax, and labor authorities.
For gig economy businesses and traditional employers alike, 2026 will require ongoing reassessment of roles that sit close to the employee-contractor line, particularly as job duties and business models change.
Classification decisions require ongoing review as roles and business practices evolve.
Day-to-Day Employment Compliance
Beyond headline issues, California continues to refine the day-to-day mechanics of employment compliance.
Expanded leave rights, including those related to family and reproductive events, require careful administration and manager training. Updated notice obligations demand attention to timing, language, and method of delivery. Personnel records rules impose strict deadlines and penalties for noncompliance.
These requirements are often underestimated because they appear administrative. However, they frequently form the basis of enforcement actions because they are easy to verify and difficult to excuse.
Administrative compliance requirements are frequently the foundation of enforcement actions.
Employee Privacy
Privacy is another undercurrent shaping employment law in 2026.
Increased employee awareness of data rights, combined with expanded state privacy protections, places limits on monitoring practices, background checks, and data retention.
Employers must balance operational needs with transparency and proportionality, particularly where technology enables continuous or invisible surveillance.
Expanded privacy protections place meaningful limits on workplace monitoring and data practices.
The Cumulative Effect of Compliance Obligations
What distinguishes 2026 from prior years is the cumulative effect of these obligations.
An employer responding to a single claim may find that regulators or plaintiffs uncover multiple, interconnected compliance issues. A pay equity review may reveal accommodation gaps, while a challenge to an AI tool may expose recordkeeping deficiencies.
Employment law issues in 2026 frequently arise together rather than in isolation.
Preparing for 2026
The strategic response to this environment is preparation, not panic.
Investing in a robust internal compliance infrastructure that treats employment law as an ongoing operational function is no longer optional.
California’s employment law environment has always been demanding, and 2026 will be no different. Enforcement will favor employers who can demonstrate intention, structure, and accountability. Employers who wait for the next lawsuit or agency audit may find themselves perpetually behind the curve.
