California
California: Executive Order Plans for AI Guardrails
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APPLIES TO All Employers with Employees in CA |
EFFECTIVE MAY 21, 2026 |
QUESTIONS? Contact HR On-Call |
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Discussion
Governor Newsom recently signed Executive Order (EO) N-6-26 to address AI’s impact within California. While acknowledging the benefits of the AI industry in the state, the EO also says that AI’s explosive growth presents real risks to workers, communities, and the broader economy. The EO seeks to find balance between the benefits of AI and protection of workers to ensure that AI is developed and used responsibly, and that its economic benefits are shared broadly. Although the EO is not binding on employers, it highlights a strategic shift in changes that may impact workers in the future.
A central concern driving this order is the potential for AI to displace workers across many industries. The Governor directs multiple state agencies to study how AI is already affecting California’s labor market, with special attention to which demographic groups may be hit hardest. Within 90 days, a dashboard will be launched to track AI’s impact on employment using unemployment insurance data. Within 180 days, the state will review and recommend updates to California’s Worker Adjustment and Retraining Notification (WARN) Act to make it more responsive to the fast-moving changes AI is bringing to the workforce.
The order also directs the state to review and strengthen its safety net programs for workers who lose their jobs due to technological change. This includes examining severance practices, expanding awareness of the Work Sharing program (which helps businesses avoid layoffs by temporarily reducing hours), and exploring service opportunities for those facing long-term unemployment. The state will also look at how other countries handle worker displacement and draw on those best practices. Additionally, agencies are directed to better connect unemployed workers to retraining and upskilling opportunities, including through community colleges and workforce development programs.
Recognizing that the private sector alone may not deploy AI in ways that serve the public good, the order directs the Government Operations Agency to develop recommendations for changing the incentive structures around AI development. This could include public-private partnerships, requiring AI companies to direct a portion of their revenues toward socially beneficial AI projects, or securing dedicated computing resources for public-interest AI research. The order also calls for exploring and expanding worker ownership models, such as employee-owned companies, so that productivity gains from AI can translate into wealth-building for everyday workers, not just shareholders and executives.
The order emphasizes the importance of preparing California’s workforce for an AI-driven economy through targeted education and training programs. Universities and community colleges are asked to expand on-the-job training, apprenticeships, and programs that connect graduates directly to employers. The state will also develop an “AI playbook” to help workers displaced by AI find new opportunities, and will work with small businesses to adopt AI tools responsibly and competitively. Higher education institutions are encouraged to ensure their programs align with growing industries so students graduate with skills that are actually in demand.
Finally, the order emphasizes the importance of public input. Governor Newsom launched a new round of California’s deliberative democracy platform, called Engaged California, specifically focused on AI’s economic and labor impacts, and all state agencies are directed to incorporate feedback from that process into their work. The state is also working to make it easier for Californians to navigate government services by building a single online platform that helps residents identify all the benefits and programs they may be eligible for.
The EO reflects a growing trend among some states to look for ways to responsibly manage AI impacts in the workplace. While the EO does not create any current changes for employers, it is a window into future changes that we may see. Although there is no immediate call to action, employers should consider ways to harness AI for employees’ benefit and minimize potential workforce disruptions through strategies like training and upskilling.
Action Items
- Monitor for ongoing updates related to the recommendations in the EO.
California: No Discrimination Where Employer Doesn’t Know About Disability
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APPLIES TO Employers with 5+ Employees in CA |
EFFECTIVE MAY 21, 2026 |
QUESTIONS? Contact HR On-Call |
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Discussion
In Husband v. Target Corp., the California Court of Appeals said that an employer could not have violated the California Fair Employment & Housing Act (FEHA) for discrimination and failure to accommodate where the employer had no knowledge of an employee’s disability condition. An employee simply behaving erratically does not automatically point to a disability as the cause.
Here, a Target employee had two serious incidents after working without incident for almost two years. First, the employee arrived for his shift appearing distressed, began hitting himself in the head, claimed that inventory orders were “laughing at him,” and yelled at a coworker. The next night, he told his supervisor he thought he had “killed” his stepmother by speaking a word and asked coworkers if he had killed anyone at the store. His supervisor found the behavior deeply disturbing, sent him home, and recommended he see a doctor or mental health professional. Target ultimately fired him shortly thereafter for violating its workplace violence policy. At no point before his termination had the employee ever told Target that he had been diagnosed with Bipolar I disorder.
The employee subsequently sued Target under FEHA claiming disability discrimination and failure to provide reasonable accommodation. However, to be liable, the employer must actually be aware of the disability before any of its obligations kick in. The employee claimed that even though he never told Target about his bipolar disorder, Target should have figured it out based on his erratic behavior and therefore should be held liable. Under California law, an employer can be deemed to “know” about an undisclosed mental disability, but only if the observed behavior has no other reasonable explanation and a mental disability is the only reasonable interpretation of the facts.
The court said that while the employee’s behavior was alarming and unusual, it could also reasonably be explained by other causes, such as the influence of drugs, a reaction to medication, or severe sleep deprivation. Because there were multiple plausible explanations for his conduct, a mental disability was not the only reasonable interpretation, and Target could not be legally presumed to have known about his bipolar disorder. The employee claimed that his supervisor’s comment that he “needed help” and should see a “psych professional” proved Target knew about a mental disability, but the court disagreed, stating that one supervisor’s untrained, personal opinion does not meet the legal standard, which requires an objective assessment of the facts. The court also firmly rejected the idea that any “unusual” or “bizarre” behavior automatically puts an employer on notice of a mental disability. Importantly, the court also noted that several Target employees indicated they would have accommodated the employee’s condition had they known about it, underscoring that the outcome might have been very different had he simply disclosed his disability. This case reinforces the concept that an employer’s obligations begin when it knows or has reason to know about an employee’s disability.
Action Items
- Implement processes to manage identification of disabilities and initiation of the interactive process.
- Have appropriate personnel trained on managing disability accommodations.
California: Employee Arbitration Failure May Mean Dismissal of PAGA Claims
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APPLIES TO All Employers with Employees in CA |
EFFECTIVE MAR 3, 2026 |
QUESTIONS? Contact HR On-Call |
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Discussion
In Sorokunov v. Netapp, Inc., the California Court of Appeals said that when an employee loses on claims brought in arbitration, they preclude the employee from being a representative under the California Private Attorneys General Act (PAGA) for those same claims.
Here, an employee filed a lawsuit claiming his employer had improperly withheld earned wages, and he also sought penalties under PAGA, which allows employees to sue on behalf of the state to enforce labor laws. The employer moved to send the employee’s individual (non-PAGA) claims to private arbitration based on a dispute resolution clause in his compensation plan. The arbitrator ultimately ruled in the employer’s favor on every individual claim. After the arbitrator ruled against the employee on his individual claims, the trial court dismissed his PAGA claim as well, finding that he lacked “standing,” meaning he no longer had the legal right to bring the case. Under PAGA, only an “aggrieved employee” (e.g., someone who personally suffered a Labor Code violation) can sue on behalf of the state. Because the arbitrator had already determined that the employee had not suffered any Labor Code violations, the court applied a legal doctrine called “issue preclusion,” which prevents the same issue from being relitigated once it has been finally decided, including for pursuing PAGA penalties based on the same alleged violations.
The appeals court affirmed every ruling in the employer’s favor. The arbitration agreement was valid; the employee’s individual Labor Code claims failed on the merits; and because those claims failed, he had no standing to pursue PAGA penalties. The court was careful to note, however, that its ruling was limited in scope, indicating it did not prevent California’s Labor and Workforce Development Agency from independently investigating or pursuing claims against the employer, nor did it bar other employees at the company from bringing their own claims. Nonetheless, this case highlights the importance of arbitration agreements as a potential means to manage PAGA claims.
Action Items
- Have arbitration agreements reviewed by legal counsel and disseminated to employees for signature.
California: Arbitration Agreement Does Not Apply to Third-Party Non-Signers
On May 5, 2026, in Toothman v. Redwood Toxicology Laboratory, Inc., the California Court of Appeals said that a staffing company’s arbitration agreement with its employee did not apply to the subsequent employer, given that the third-party employer was not a party to the agreement and the agreement did not address claims by the employee to the third-party employer. In this case, when the employee left the staffing company and was subsequently hired by the placed employer, the new employer did not have the employee sign their own arbitration agreement, and so the employer unsuccessfully attempted to use the staffing company’s arbitration agreement as a shield. Employers hiring an employee originally placed or provided by a staffing company should have their own agreements, including arbitration agreements, executed by the new employee to ensure enforceability.
California: Updated Cal/OSHA Notice
The “Safety and Health Protection on the Job“ notice was recently updated by California Division of Occupational Safety and Health (Cal/OSHA) with minor revisions to Cal/OSHA’S contact information including updated contact information for the Santa Barbara and San Francisco offices. Cal/OSHA did not change any substantive information on the poster. As a reminder, California law requires employers to display at least one Safety and Health Protection on the Job notices in a conspicuous place at each physical location where business is conducted. Employers should review and post the updated notice in compliance with Cal/OSHA’s requirements.
Los Angeles, CA: Hotel and Airport Worker Minimum Wage Change
Effective June 29, 2026, the annual Los Angeles City hotel and airport worker minimum wage rate adjustments will slow. Previously, covered workers were to receive $30 per hour by 2028; now, covered workers will reach $30 per hour in 2030. Similarly, adjustments were also made to the minimum health care benefit requirement. As of July 1, 2026, covered workers must receive $25 per hour for all time worked, and $4.25 per hour worked toward health care benefits. Covered employers should prepare to adjust wage rates and health care benefits for compliance.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase