Sacramento, CA. – Starting January 1, 2026, California manufacturers face several new laws that will reshape compliance, hiring, training, and investment decisions. The California Manufacturers & Technology Association (CMTA) highlights six major laws that manufacturers should be preparing for now:
1. Minimum Wage Increase to $16.90 (Effective January 1, 2026)
California’s minimum wage rises to $16.90/hour on January 1, 2026, based on annual CPI adjustments. That’s a 40-cent jump from 2025.
Impact on Manufacturers:
Raises labor costs across production, warehouse, and logistics roles. Manufacturers with large hourly workforces will experience the most significant cost increases.
2. Ban on Training Repayment / Quit Fees (Effective January 1, 2026)
AB 692 (Kalra) prohibits all training-repayment agreements, quit fees, and employment-linked cost-recovery clauses. Previously, these clauses allowed employers to recover costs if an employee left before the end of a training period.
Impact on Manufacturers:
Requires immediate removal of prohibited terms from all contracts; violations trigger a minimum penalty of $5,000 per employee. Forces manufacturers to redesign retention strategies and re-budget for technical training.
3. Pay Data Reporting Overhaul (Effective January 1, 2026)
SB 464 (Smallwood-Cuevas) requires demographic data to be stored separately from personnel files and mandates penalties of $100 per employee for the first failure and $200 for subsequent failures. Beginning in 2027, employers must report across an increased number of job categories.
Impact on Manufacturers:
Creates immediate compliance risk for employers with multiple sites or staffing agencies. To prepare, manufacturers should strengthen data-sharing agreements with labor contractors, implement internal compliance checks, and ensure that reporting teams and systems are ready for timely and accurate submissions.
4. AI Hiring & Workplace Liability (Effective January 1, 2026)
Applies Fair Employment and Housing Act (FEHA) anti-discrimination rules directly to AI hiring, screening, and evaluation tools, treating algorithmic decisions like supervisory decisions, even if the AI is vendor-provided.
Impact on Manufacturers:
Employers face liability if AI tools produce biased outcomes. Starting in 2026, manufacturers must conduct AI bias audits, update vendor contracts, train HR staff to understand and challenge AI outputs, and retain AI-related records for 4 years.
5. Workplace Know Your Rights Act (Effective February 1, 2026)
SB 294 (Reyes) requires annual standalone notices outlining employee rights, including rights related to immigration enforcement, interactions with law enforcement, and the right to organize. Mandates employers to notify an employee’s emergency contact if the employee is detained or arrested at work. Mandates penalties of $500 per employee, per day.
Impact on Manufacturers:
Employers must distribute the required notice by February 1, 2026, and collect/track new emergency-contact information by Mar 30, 2026.
6. Clean Energy Tax Credit Conformity (Effective January 1, 2026)
SB 302 (Padilla) aligns California’s tax treatment with federal clean-energy credits by eliminating the state tax on federal credit payments and transferred credits from 2026 to 2030.
Impact on Manufacturers:
Provides immediate state-level tax savings for manufacturers making clean-energy, advanced manufacturing, EV, hydrogen, or decarbonization investments. Improves manufacturers’ return on investment and makes California more competitive for new projects.
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About 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 total output from manufacturing in California is $300 billion per year, roughly 10 percent of the total economic output of the state. Manufacturers employ 1.3 million Californians paying wages more than $2,500 higher than other non-farm employers in the state.