California Employers Face New AI Regulations, Minimum Wage Increase, and Key Legal Changes

California Employers Face New AI Regulations, Wage Increases, and Legal Updates

This September brings key legal changes that HR professionals, legal teams, and compliance officers in California must address. From wage hikes to AI regulations and evolving employment law, these developments have practical implications for workplace policies and risk management.

Paid Sick Leave Calculation Clarified for Commissioned Sales Staff

A recent California Court of Appeal ruling in Hirdman v. Charter Communications clarified how to calculate paid sick leave for commissioned outside sales employees. Employers can base paid sick leave on the employee’s hourly base pay, excluding commissions, as long as this method applies consistently to other types of paid leave.

This decision provides a reliable framework, reducing ambiguity and helping employers manage leave benefits fairly for commission-based roles.

Minimum Wage Increase to $16.90 per Hour Effective January 1

California’s statewide minimum wage will rise to $16.90 per hour starting January 1. This adjustment is part of the annual inflation-based update and applies to all employers regardless of size.

Businesses with large hourly workforces should prepare for the impact on payroll budgets and wage structures to ensure compliance and avoid penalties.

New AI Employment Rules Under Fair Employment and Housing Act

In June, the California Civil Rights Council approved new regulations extending the Fair Employment and Housing Act (FEHA) to cover the use of artificial intelligence in employment decisions.

Starting this October, employers using automated decision systems (ADS) or AI-powered tools for hiring and other employment actions must meet stricter compliance requirements. These rules aim to prevent bias and protect candidates from discriminatory practices enabled by AI technologies.

Given the growing use of AI in recruitment and HR, legal teams should review their AI systems and policies to align with these new standards.

Workplace Safety Enforcement Faces Scrutiny

A July report by the California State Auditor’s Office revealed significant shortcomings within the California Division of Occupational Safety and Health. The audit highlighted weaknesses in enforcement processes and understaffing, raising concerns about the agency’s ability to protect the state’s nearly 20 million workers.

Employers should expect increased regulatory attention and potential reforms aimed at strengthening workplace safety enforcement. Staying ahead with rigorous safety programs will be essential to mitigate risk.

Legal Challenge to UC’s Policy on Undocumented Student Employment

The University of California is facing legal challenges over its policy prohibiting employment of undocumented students without federal work authorization. Petitioners argue this policy violates FEHA and related laws by unlawfully discriminating based on immigration status in the absence of explicit federal requirements.

This case underscores the risk of state anti-discrimination claims arising from policies that, while intended to manage legal risk, may disproportionately affect protected groups. Employers should carefully evaluate their hiring policies to ensure compliance with state anti-discrimination laws.

Key Takeaways for Legal and Compliance Professionals

• Review and update paid leave policies for commissioned employees to reflect the recent court ruling.
• Adjust payroll systems and budgets to accommodate the $16.90 minimum wage increase effective January 1.
• Assess AI and automated decision tools used in hiring to ensure adherence to new FEHA regulations starting October.
• Prepare for heightened workplace safety enforcement and potential regulatory changes.
• Reexamine employment policies related to immigration status to avoid discriminatory practices under FEHA.

Staying informed and proactive is critical as California’s employment laws continue to evolve. For those interested in how AI intersects with employment compliance, exploring specialized training can be valuable. Visit Complete AI Training’s latest AI courses to deepen your understanding of AI tools and regulations.