It’s Probably Time to Update Your Employee Handbook and Policies

 

Employee handbooks and employment policies must be regularly updated.  At a minimum, a review is needed at least annually.  But in today’s quickly changing employment law environment, quarterly reviews can help your company minimize risk and capitalize on California’s dynamic labor and employment law changes. Reasons to conduct regular handbook and policy reviews include new legislation, changes in guidance from local, state, and federal regulatory agencies, and important decisions from appellate courts.

The following topics will reshape employment law and workplace compliance for California employers in 2026 and beyond.

New and Proposed Legislation

Increase in Minimum Wage: California’s minimum wage will increase for all employers to $16.90 on January 1, 2026. This means exempt employee minimum salary thresholds will also increase, as they are tied to the minimum wage. Premium pay calculations for split shifts, reporting time, and meal/rest period violations must reflect the new hourly baseline. As always, local ordinances may still impose higher minimum wage rates.

Artificial Intelligence: With AI becoming more common in hiring, performance reviews, and scheduling, California regulators unanimously approved a sweeping set of regulations that will impact how employers use automation to make employment decisions. Regulations will likely address fairness, transparency, and accountability for employers using AI tools to assist with employment decisions. With the increased prevalence and utilization of AI, handbooks and policies should be updated to reflect what the acceptable and ethical use of AI looks like within your company, and to prevent any misunderstandings or potential liability exposure.

Updated Guidance from Regulatory Agencies

Survivors of Qualifying Acts of Violence: The California Civil Rights Department has published new guidance and a model notice for business to give to employees to help them understand employment protections under California law for survivors of qualifying acts of violence, as well as people with a family member who has survived a qualifying act of violence. Handbooks should be updated to reflect the new guidance and model notice.

DEI and Avoiding Potential Issues with Department of Justice Directives: On March 19, 2025, the U.S. Equal Employment Opportunity Commission (EEOC) and the Department of Justice (DOJ) issued guidance clarifying how diversity, equity, and inclusion (DEI) initiatives intersect with Title VII of the Civil Rights Act of 1964. The guidance provides critical direction for employers seeking to implement inclusive workplace policies while ensuring compliance with federal antidiscrimination laws under the Trump administration. While these practices are not required, employers may want to consider incorporating the new guidance into their employee handbooks. Here are some key takeaways from the guidance:

• Title VII protects all employees equally. The law applies universally, protecting individuals of all backgrounds. DEI programs must be structured to promote inclusion without resulting in differential treatment based on protected characteristics.
• There are no exemptions for business necessity or diversity goals. Employers can’t justify employment decisions that consider race, gender, or other protected characteristics by citing business necessity or general diversity objectives.
• Client or customer preferences don’t justify discrimination. Employment decisions influenced by external preferences, such as those of clients, customers, or business partners, aren’t valid defenses under Title VII. Organizations must ensure hiring, promotions, and other employment actions remain neutral and legally compliant.
• Broad applicability of Title VII. Title VII applies to employers with 15 or more employees, covering applicants, employees, interns, and trainees.

Reinstatement of P.A.I.D. Program

The Department of Labor just revived a program that rewards employers that self-report and resolve certain violations under the Fair Labor Standards Act and the Family and Medical Leave Act. Employers that qualify for the program should consider conducting a self-audit with the assistance of experienced legal counsel.

Final Takeaway

A well-drafted and up-to-date employee handbook communicates company expectations to employees, ensures compliance with federal, state, and local employment laws, and provides essential documentation of your standards in the event of a legal claim.  It is also the logical vehicle for communication of an arbitration agreement – a key risk management tool for California employers.  If it has been more than a year since your last employee handbook update, now is the time to refresh it and to review your overall employment law risk management strategy.

 

Dunn DeSantis Walt & Kendrick provides a broad spectrum of legal services to businesses of all sizes, from small, local start-ups and non-profits to large, national companies. DDWK’s real estate development and construction practice includes representing all segments of the development and construction industries on both private and public projects. 

You can find additional information and resources related to helping business owners and their businesses on the DDWK website.