Starting January 1, 2026, manufacturers in California will need to comply with a series of new laws affecting wages, hiring practices, reporting requirements, and tax treatment. The California Manufacturers & Technology Association (CMTA) has outlined six significant legislative changes that will impact manufacturing businesses across the state.
The first change is an increase in the minimum wage to $16.90 per hour, up by 40 cents from the previous year due to annual adjustments based on the Consumer Price Index. This adjustment is expected to raise labor costs for manufacturers, especially those employing large hourly workforces.
A second law prohibits training repayment agreements and quit fees under AB 692 (Kalra). Employers must remove any such clauses from contracts or face a minimum penalty of $5,000 per employee. Manufacturers will need to revise retention strategies and adjust budgets for technical training as a result.
Under SB 464 (Smallwood-Cuevas), pay data reporting rules have been revised. Demographic data must be stored separately from personnel files starting January 1, 2026. Employers who fail to comply face penalties of $100 per employee for initial violations and $200 for subsequent failures. In addition, beginning in 2027, companies will need to report across more job categories. Manufacturers are encouraged to review their internal compliance systems and data-sharing agreements with staffing agencies.
AI-driven hiring practices are also subject to new oversight. Effective January 1, 2026, Fair Employment and Housing Act anti-discrimination provisions apply directly to AI tools used in hiring and evaluation processes—even when those tools come from third-party vendors. Manufacturers are required to conduct audits for AI bias, update vendor contracts accordingly, train HR staff on evaluating AI outputs, and retain related records for four years.
The Workplace Know Your Rights Act (SB 294 by Reyes), effective February 1, 2026, mandates that employers provide annual standalone notices detailing employee rights related to immigration enforcement and law enforcement interactions. Employers must also notify an employee’s emergency contact if they are detained or arrested at work; non-compliance results in daily penalties of $500 per affected employee.
Lastly, SB 302 (Padilla) aligns California’s clean energy tax credit policies with federal standards by eliminating state taxes on federal credit payments and transferred credits between 2026 and 2030. This measure is intended to offer immediate tax savings for manufacturers investing in clean energy projects or technologies such as electric vehicles or hydrogen production.
The CMTA continues its advocacy efforts on behalf of manufacturers statewide: “The total output from manufacturing in California is $300 billion per year, roughly 10 percent of the total economic output of the state,” according to the association’s statement. “Manufacturers employ 1.3 million Californians paying wages more than $2,500 higher than other non-farm employers in the state.”
