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In this episode of California Employment News, Weintraub Tobin attorneys Lizbeth “Beth” West and Meagan Bainbridge continue with the firm’s new Fact or Fiction series of CEN by examining this common misconception.

In this episode, they cover:

• The difference between general rudeness and unlawful harassment
• How comments or conduct tied to protected characteristics can create legal risk
• Why personality, intent, and workplace culture do not excuse unlawful harassment
• What employers should examine when investigating complaints and taking corrective action

Listen for a breakdown of how California employers can recognize harassment risks and respond appropriately to employee complaints.

When a wage-and-hour class action or PAGA lawsuit lands, the arbitration agreement is often the single most important document in the file. I made that point in my article on what businesses need to know about defending a class action and PAGA lawsuit, and the questions I said to answer in the first weeks of a case still apply: is the agreement enforceable, does it contain a valid class action waiver, and how many employees actually signed it?

This week I want to move that conversation earlier, to before a lawsuit is filed, because two dates on the calendar make now the right time to pull the agreement out of the onboarding packet and read it again. On January 1, 2027, AB 2155 takes effect and removes a fallback employers have long relied on to enforce arbitration under California law. And on November 3, the California Supreme Court will hear argument in Leeper v. Shipt, Inc., which will decide whether a PAGA plaintiff can avoid arbitration simply by leaving the individual claim out of the complaint.

Meanwhile, the Courts of Appeal have spent the last few months showing how agreements fail, and very few of those losses had anything to do with whether arbitration is allowed. They failed because of a related document signed at the same time, an outdated form, a scope clause that was too narrow, or how the employer handled the case after it was filed. Here are five things to fix now.

1. AB 2155 removes the state-law safety net. Know which of your employees fall outside the FAA.

For years, when an employee successfully argued that the Federal Arbitration Act did not apply, employers had a second argument: compel arbitration under the California Arbitration Act instead, which has no transportation-worker exemption of its own. Governor Newsom signed AB 2155 on June 30, and it closes that door. Beginning January 1, Code of Civil Procedure section 1281 provides that an arbitration agreement is not enforceable under California law to the extent it is not enforceable under the FAA.

Two federal carve-outs matter most:

• The FAA’s transportation-worker exemption (9 U.S.C. § 1). It covers transportation workers engaged in interstate commerce, including workers who load and unload goods moving across state lines (Southwest Airlines Co. v. Saxon (2022) 596 U.S. 450). Courts have generally drawn the exemption narrowly, but employers with drivers, delivery staff, warehouse workers, or anyone handling goods in the last leg of an interstate shipment should expect the argument, and after January 1, losing it means losing arbitration for that group entirely.
• The Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA). An employee with a covered sexual harassment or sexual assault claim can choose court. California courts are reading the EFAA broadly. In Decloedt v. RadNet Management, Inc. (2026) 121 Cal.App.5th 732, the court held that harassment based on sexual orientation was exempt from arbitration under the EFAA.

AB 2155 does not ban arbitration, and for most employees whose agreements are governed by the FAA, nothing changes. The work is to identify the groups for whom it does. Map your workforce against the transportation-worker exemption, look at whether your agreement leans on the California Arbitration Act as a backup, and decide now what your strategy is for any group that may fall outside the FAA, rather than learning it in an opposition brief.

2. Read every onboarding document together, because a court will.

The most common way a sound arbitration agreement fails is not its own text. It is another document signed the same day.

In Fuentes v. Empire Nissan, Inc. (2026) 19 Cal.5th 93, the California Supreme Court held that small, difficult-to-read print bears on procedural unconscionability, rather than establishing substantive unconscionability. The Court emphasized that a high degree of procedural unconscionability requires correspondingly less substantive unfairness under California’s sliding-scale analysis. It also remanded for further consideration of provisions that potentially allowed the employer to pursue claims concerning unfair competition, trade secrets, and confidentiality in court while requiring the employee to arbitrate claims against the employer.

The Court of Appeal applied that concern in Cluck v. GEO Secure Services, LLC (2026) 122 Cal.App.5th 249. The employee signed both an arbitration agreement and a confidentiality agreement during onboarding. Read together, the agreements required the employee to arbitrate the types of claims he was most likely to bring, while allowing the employer to litigate its likely confidentiality, competition, and nonsolicitation claims in a Florida court. The resulting lack of mutuality supported a finding of substantive unconscionability. The court also found procedural unconscionability in the opt-out process, which required a new hire to obtain an employee number, prepare a separate written statement, and send it to the legal department within 30 days.

What to check:

• Every carve-out, in every document. Confidentiality, non-solicitation, and invention-assignment agreements, offer letters, and handbooks. If any of them sends the employer’s claims to court, fix the inconsistency.
• Mutuality. Claims the employer is likely to bring should be arbitrated on the same terms as claims the employee is likely to bring.
• Forum and choice of law. An out-of-state forum for the employer’s claims against a California employee is a red flag on its own (see also Labor Code § 925).
• Presentation. Legible font, a standalone document, and an opt-out process (if you offer one) that a new hire can actually use. I have long favored keeping arbitration agreements separate from the employee handbook (see my earlier article on why).

3. Make sure the agreement covers the claims you will actually face, and know which version each employee signed.

Scope language written for a different purpose can leave the most important claims outside arbitration. In Morales v. Superior Court (2026) 122 Cal.App.5th 239, San Diego Gas & Electric terminated an employee after nearly 20 years. She sued under FEHA and CFRA and for wrongful termination. The employer moved to compel arbitration under the employment agreement she signed when she was hired in 2005, which required arbitration of disputes concerning the agreement or conduct allegedly violating it. The Court of Appeal held that the clause reached only disputes about the employment agreement itself, so her discrimination, leave, and wrongful termination claims stayed in court.

Version control is the related problem. In Hickenbottom v. Medical Solutions LLC (Cal. Ct. App. 2026), the employer’s first motion to compel relied on an arbitration provision in its handbook, and the trial court denied it because that provision had been superseded. The employer then moved again under a different agreement. (The procedural consequence of that second motion is discussed in point four.)

For employers with long-tenured staff, multiple acquisitions, or several rounds of onboarding paperwork, this is where the risk sits:

• Scope. The clause should expressly reach all claims arising out of or relating to the employment relationship or its termination, including statutory wage, discrimination, leave, and retaliation claims, with only the exclusions the law requires.
• Inventory. Know which form each current employee signed, and when. A 2005 agreement and a 2024 agreement may say very different things.
• Supersession. Make sure the current agreement clearly states which earlier agreements it replaces, so there is no fight over which document controls.
• The signature count. If a meaningful share of your workforce never signed, or signed an outdated form, a new rollout with proper consideration and clear communication is worth discussing with counsel. As I noted in August, the percentage of the workforce covered drives everything from motion strategy to the settlement number.

4. An agreement only works if you move promptly once you are sued.

The best-drafted agreement can be lost in the first 90 days of a lawsuit. Under Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, an employee no longer has to show prejudice to establish that an employer waived arbitration. The question is whether the employer’s conduct is inconsistent with an intent to arbitrate.

Mitchell v. Lilac Solutions, Inc. (Cal. Ct. App. 2026) shows how that plays out. The employer answered, pursued three months of extensive discovery, filed cross-claims, and moved to compel only after the employees filed an anti-SLAPP motion. The court upheld a finding of waiver. The employer argued that the EFAA made an earlier motion impractical because the complaint included sexual harassment allegations, but the court said it could have promptly sought a stay or limited discovery to arbitrability. Listing arbitration as an affirmative defense did not preserve the right.

Hickenbottom adds a procedural trap. Because the employer’s second motion sought the same relief as the first, the court treated it as a renewed motion under Code of Civil Procedure section 1008. The employer had not filed the required affidavit identifying new facts or law and explaining why the second agreement was not presented the first time, so the trial court lacked jurisdiction to consider it and the appeal was dismissed.

The practical rules:

• Decide on arbitration at the outset. Raise it in the first responsive filing, and if you intend to compel, do it before engaging on the merits.
• When the complaint mixes arbitrable and EFAA claims, seek a stay or limited, arbitrability-focused discovery rather than litigating the case.
• Bring every agreement the first time. Find all potentially applicable agreements, handbook provisions, and acknowledgments before the first motion is filed, because you may not get a second.
• Be able to prove the signature. Keep signed agreements, electronic-signature audit trails, and onboarding records where you can produce them quickly.

5. Prepare for Leeper: make sure the agreement is built for PAGA either way.

Under Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639 and Adolph v. Uber Technologies, Inc. (2023) 14 Cal.5th 1104, an employer can compel the plaintiff’s individual PAGA claim to arbitration, with the representative (non-individual) claims typically stayed while the arbitration proceeds. That sequencing has become one of the most valuable tools in PAGA defense.

Plaintiffs have responded with “headless” PAGA complaints that plead only non-individual claims, so there is nothing to compel. In Leeper, the trial court accepted that approach. The Court of Appeal reversed, holding that every PAGA action necessarily includes an individual component, which must be sent to arbitration while the rest is stayed. The Supreme Court took up the question on its own motion, and argument is set for Tuesday, November 3.

The decision will matter to every employer with an arbitration program, and you do not need to wait for it to prepare:

• Make sure the agreement expressly covers individual PAGA claims and addresses representative PAGA claims in a way that is enforceable under Viking River and Adolph.
• Check the class action waiver and the severability clause. A poorly drafted waiver, or a clause providing that the entire agreement falls if any part of the waiver is unenforceable, can cost you far more than the PAGA question itself.
• Plan for both outcomes. If the Court affirms, an employer can compel the individual PAGA claim to arbitration even when the plaintiff leaves it out of the complaint, and a win in arbitration on the individual claim gives the employer a strong argument that the plaintiff was never an aggrieved employee with standing to pursue the representative case. If the Court reverses, plaintiffs with arbitration agreements will plead representative-only PAGA claims and keep them in court, and the agreement’s value will rest on individual and class claims. PAGA exposure would then turn on the merits and penalty reduction, which is where documented compliance and the reasonable-steps penalty caps do their work.

I will cover the argument and what the justices signal in a future column.

The bottom line: An arbitration agreement with a class action waiver remains one of the most effective tools a California employer has to limit wage-and-hour exposure, but only if it is enforceable, covers the claims you will face, is consistent with everything else in the onboarding packet, and is invoked promptly. AB 2155 takes effect in ten weeks and Leeper will be argued in less than two. That makes this quarter the time to inventory which agreements your employees signed, read them alongside every related document, update the scope, carve-out, and severability language, and identify any groups that may fall outside the FAA, before a plaintiff’s lawyer does it for you.

The post California Employers: Five Steps to Keep Your Arbitration Agreement Enforceable in 2027 appeared first on California Employment Law Report.

Your roof is leaking, your car is totaled, or your health claim was just denied — and the letter from the insurance company reads like a polite “go away.” A denial is not the end of the story in California. Insurers have a legal duty to act in good faith, and you have a structured path to challenge their decision.

Read the denial like an adjuster

• Find the exact reason. The denial letter must state the policy provision or exclusion they’re relying on. Vague denials (“not covered”) aren’t good enough — demand the specific section.
• Pull your actual policy. Read the declarations page, the coverage grants, and the exclusions. Many denials collapse the moment you compare the letter to the real policy language.
• Note the deadlines. California policies and the Insurance Code impose strict timelines — for filing claims, for appealing, and for suing. Missing a deadline can end your case, so calendar every one of them today.

Build your appeal file

1. Gather your evidence. Photos, repair estimates, medical records, receipts, the contractor’s report — everything that proves the loss and its value.
2. Write a formal appeal letter. Reference your claim number, identify the denial date, explain why the denial is wrong under the policy’s own terms, and attach your evidence.
3. Send it in writing. Email creates a paper trail; certified mail creates proof of delivery. Do both for anything important.

Escalate to the California Department of Insurance

• File a complaint with the CDI. The Department of Insurance investigates consumer complaints against insurers — it’s free, and insurers take CDI inquiries seriously.
• Ask for the claim file. Under California law, you’re entitled to see the insurer’s file on your claim — including the adjuster’s notes. It often reveals the real (weaker) reasoning behind the denial.
• Watch for bad faith. If the insurer unreasonably delays, fails to investigate, misrepresents the policy, or lowballs without basis, California’s bad-faith laws may let you recover far more than the claim itself.

When to get help

If the claim is large, the denial looks baseless, or the insurer is stalling past every deadline, talk to a California insurance attorney — many take bad-faith cases on contingency, meaning no upfront cost to you. Bring your policy, the denial letter, and your appeal file to the first meeting.

Get the free kit

Download our free California insurance denial guide — appeal letter template, evidence checklist, and CDI complaint walkthrough. From the Compliance Alliance Network, free forever.

Our free California insurance denial guide walks you through the appeal step by step.

For educational purposes only. This is not legal advice, and no attorney-client relationship is established by reading this article or downloading any linked materials.

The contractor took your $15,000 deposit, demolished your kitchen, and hasn’t been seen in three weeks. His phone goes to voicemail. In California, you have more power than you think — the Contractors State License Board (CSLB) can suspend his license, and his license bond exists to pay victims like you. Here’s exactly what to do.

Step 1: Document everything (today)

• Photograph the work site — the unfinished work, the damage, the materials left behind. Date-stamped photos are evidence.
• Gather your paperwork — the contract, all payments (cancelled checks, credit card statements, receipts), texts and emails, and any change orders.
• Write a timeline — when you hired him, what was promised, what was paid, when he disappeared. Memories fade; paper doesn’t.
• Get competing bids to complete or fix the work. The difference between what you paid and what it costs to finish is your damages number.

Step 2: Send a demand letter

1. Write a formal demand — certified mail, return receipt requested — stating what the contractor failed to do, what you want (finish the work or refund $X), and a deadline (14 days is standard).
2. Cite the license. Include his CSLB license number. It signals you know the system and you’re not bluffing.
3. Keep a copy of everything. If this goes to the CSLB or court, your paper trail is your case.

Step 3: File with the CSLB

• File a complaint online at cslb.ca.gov or call (800) 321-2752. The CSLB investigates complaints against licensed contractors — and unlicensed operators too.
• The CSLB can suspend or revoke the license for abandonment, fraud, and code violations. That threat alone brings many contractors back to the table.
• Unlicensed contractor? In California, anyone doing work over $1,000 (labor and materials) must be licensed. Hiring unlicensed is risky for you — but the CSLB still pursues unlicensed operators, and you can sue in small claims.
• Act within the statute of limitations. CSLB complaints generally must be filed within 4 years of the violation.

Step 4: Go after the license bond

Every licensed California contractor carries a license bond (currently $25,000). If the CSLB process doesn’t make you whole, you can file a claim against the bond — and sue the contractor in small claims court (up to $12,500 for individuals) or superior court for larger amounts. Bond claims and lawsuits can run in parallel with your CSLB complaint.

Protecting yourself next time

Verify the license at cslb.ca.gov before you hire anyone — check that it’s active, in good standing, and covers the right classification. Never pay more than 10% or $1,000 (whichever is less) as a down payment — it’s the law in California. And never pay cash without a receipt.

Our free California contractor dispute guide includes a demand letter template, a CSLB complaint checklist, and a damages worksheet.

Get the free kit

Download the free California contractor dispute guide — demand letter template, CSLB checklist, and damages worksheet. From the Compliance Alliance Network, free forever.

For educational purposes only. This is not legal advice, and no attorney-client relationship is established by reading this article or downloading any linked materials.

You check your bank app and $2,400 is gone — sent through Zelle to someone you’ve never heard of. The bank says “you authorized it” and closes your claim. But federal law — Regulation E — gives you powerful dispute rights that banks don’t advertise. Here’s how to use them in California.

Regulation E: your federal shield

• The Electronic Fund Transfer Act (Regulation E) covers unauthorized electronic transfers — including Zelle, debit card transactions, ACH transfers, and ATM withdrawals.
• Report fast, lose less. Report an unauthorized transfer within 2 business days and your liability is capped at $50. Within 60 days of your statement, capped at $500. After 60 days, you could lose everything — so speed matters.
• “Authorized” is narrower than banks claim. If a scammer tricked you into sending money — a fake bank fraud alert, a bogus buyer, a romance scam — many courts and the CFPB treat that as unauthorized when you were manipulated.
• The bank must investigate. Once you dispute in writing, the bank has 10 business days to investigate (20 for new accounts) — or provisionally credit your account while it looks into it.

How to file a winning dispute: 5 steps

1. Dispute in writing, immediately. Call first, then follow up in writing (email counts). Keep the confirmation number. Written disputes trigger Regulation E’s investigation deadlines.
2. State the magic words. “This was an unauthorized electronic fund transfer under Regulation E.” Say exactly what happened, the date, and the amount.
3. Demand provisional credit. If the bank won’t resolve your claim within 10 business days, it must provisionally credit your account for the disputed amount.
4. Escalate a denial. If the bank denies your claim, demand the documents it relied on in writing — Regulation E requires the bank to provide them. Then file a CFPB complaint at consumerfinance.gov/complaint.
5. In California, add state claims. California’s Unfair Competition Law (Business & Professions Code 17200) and the Consumer Financial Protection Law give you additional leverage against banks that stonewall legitimate disputes.

Zelle scams: what banks don’t tell you

• Imposter scams are the #1 Zelle fraud. A “bank fraud department” texts you, you “verify” yourself, money vanishes. Zelle’s own data shows these scams cost consumers hundreds of millions a year.
• Banks must reimburse imposter scam victims under updated CFPB guidance — if you were tricked into authorizing a transfer by someone impersonating your bank, that’s unauthorized.
• Don’t accept the first “no.” Bank front-line reps deny claims reflexively. Supervisors, written disputes, and CFPB complaints get different answers.
• Document everything. Screenshots of the scam messages, call logs, your dispute letters, the bank’s responses. Paper trails win disputes.

Debit card and ATM disputes

The same Regulation E rules cover debit card fraud and ATM disputes. Report unauthorized debit transactions within 2 business days to cap liability at $50. For billing errors on your statement, you have 60 days from the statement date to dispute in writing. And never use your debit card’s PIN for purchases you can put on a credit card — credit cards carry stronger protections under the Fair Credit Billing Act.

Our free California bank dispute rights guide includes a Regulation E dispute letter template, a deadline cheat sheet, and CFPB complaint instructions.

Get the free kit

Download the free California bank dispute rights guide — dispute letter template, deadline cheat sheet, and escalation scripts. From the Compliance Alliance Network, free forever.

For educational purposes only. This is not legal advice, and no attorney-client relationship is established by reading this article or downloading any linked materials.

Being served with a debt collection lawsuit is terrifying. A process server hands you papers, your stomach drops, and the collector is counting on you doing exactly what most Californians do: nothing. Then they win by default. Don’t let that happen — you have 30 days to respond, and responding changes everything.

The 30-day deadline is everything

• You have 30 calendar days from the date you were served to file your Answer with the court (Code of Civil Procedure 412.20(a)(3)). Count day one as the day after service.
• Miss the deadline and they win automatically. The collector gets a default judgment — and with it, wage garnishment (up to 25% of your paycheck), bank levies, and liens on your property.
• Filing an Answer costs money — but if you can’t afford the filing fee, ask the court clerk for a fee waiver (FW-001). Don’t let the fee stop you.
• You were served, not arrested. A debt lawsuit is civil. You cannot go to jail for not paying a debt.

How to file your Answer: 4 steps

1. Get the right form. Use California Judicial Council form PLD-C-010 (Answer — Contract) for most debt collection cases. It’s free at the court’s self-help center or online.
2. Answer every allegation. For each numbered paragraph in the complaint, check “Deny” unless you are certain it’s true. When in doubt, deny — it forces the collector to prove it.
3. Assert your affirmative defenses. Check every defense that applies: statute of limitations (4 years on most debts in California), lack of standing (the collector can’t prove it owns your debt), improper service, payment, and the debt was discharged in bankruptcy.
4. File and serve. File the original with the court clerk, have someone over 18 (not you) mail a copy to the collector’s attorney, and file the proof of service. Keep copies of everything.

The defenses that actually win

• Statute of limitations. In California, collectors generally have 4 years to sue on a written contract (CCP 337). If the debt is older, say so in your Answer — it’s a complete defense.
• Lack of standing. Debt buyers purchase portfolios of old debts for pennies. They often can’t produce the original contract, a complete chain of assignment, or accurate account records. Make them prove it.
• You already paid or settled. Bring receipts, bank statements, and settlement letters.
• Identity theft or mistaken identity. Not your account? Say so — and consider a police report.

After you file: what happens next

Filing your Answer doesn’t end the case — it starts the real fight, and that’s good news. Most collectors file hundreds of lawsuits expecting defaults. Once you answer, many will offer a steep discount to settle rather than litigate. Discovery lets you demand the collector produce the contract and account history they probably don’t have. And if the collector can’t prove its case at trial, the case gets dismissed.

Our free California debt lawsuit defense guide walks you through the Answer form line by line, with sample affirmative defenses and a deadline calculator.

Get the free kit

Download the free California debt lawsuit defense guide — line-by-line Answer instructions, sample defenses, and a 30-day deadline calculator. From the Compliance Alliance Network, free forever.

For educational purposes only. This is not legal advice, and no attorney-client relationship is established by reading this article or downloading any linked materials.

A used car is the second-biggest purchase most Californians ever make — and the one with the most ways to get burned. Flood cars from out of state, rolled-back odometers, “certified” inspections that certify nothing. Here’s how to buy smart under California law.

Before you shop: know the rules

• California dealers must give you a written contract with all terms disclosed — price, down payment, finance charge, total of payments, and payment schedule (Civil Code 2982, the Automobile Sales Finance Act).
• The Buyer’s Guide is federal law. Every dealer must post the FTC Buyer’s Guide on the window of each used car, stating whether it’s sold “as is” or with a warranty and what that warranty covers. No guide on the window? Walk away.
• “As is” doesn’t mean “no rights.” Even an as-is sale can’t disclaim the implied warranty of merchantability under the Song-Beverly Consumer Warranty Act if the dealer knew about serious defects — and fraud is never disclaimed.
• Smog certification is the seller’s job. In California, the seller — not the buyer — must provide a valid smog certification at the time of sale (with limited exceptions for transfers between family members).

The 10-point inspection checklist

Do these before money changes hands:

1. Run the VIN. Get a vehicle history report (Carfax, AutoCheck, or the free NICB VINCheck for total-loss and theft records). Look for salvage titles, flood damage, and odometer discrepancies.
2. Check for open recalls at nhtsa.gov/recalls. Dealers must disclose unrepaired safety recalls.
3. Get a pre-purchase inspection from an independent mechanic — not the dealer’s shop. $150–$200 buys you the truth about the engine, transmission, frame, and electronics.
4. Test-drive like you mean it. Highway speeds, hard braking, tight turns, full A/C and heat, every button and switch.
5. Check the title in hand. Match the VIN on the title to the VIN on the dash and door jamb. Liens? Salvage brands? Walk away if anything doesn’t match.
6. Look for flood and accident signs. Musty smell, silt under carpets, mismatched paint, uneven panel gaps, new carpeting in an old car.
7. Verify the odometer. Compare the mileage to the history report and service records. Odometer fraud is a federal crime — report it to the DMV.
8. Confirm smog certification. Ask for the certificate before you sign. No cert, no deal.
9. Get everything in writing. Verbal promises about repairs, warranties, or “we’ll take care of it” are worthless. If it’s not in the contract, it doesn’t exist.
10. Sleep on it. The deal that’s “only good today” is designed to stop you from thinking. Real deals survive the night.

At the dealership: the paperwork gauntlet

• Read every line of the retail installment contract. Verify the price, down payment, APR, term, and total cost match what you were told.
• Decline the add-ons you don’t want. Extended warranties, GAP insurance, paint protection, VIN etching — each is optional and often wildly overpriced. Say no, or negotiate hard.
• Watch for spot delivery. Don’t drive home “pending financing” — see our guide on yo-yo financing scams.
• Keep copies of everything you sign. California law entitles you to copies on the spot.

Buying from a private seller

Private sales are “as is” by default in California, so your inspection matters even more. The seller must still provide smog certification, sign over the title properly, and report the sale to the DMV within five days (you must register within 10). Never pay cash without a bill of sale, and meet at the DMV or a bank — never a parking lot at night.

Our free California used car buying guide includes the full 10-point inspection checklist, a paperwork review worksheet, and scripts for declining add-ons.

Get the free kit

Download the free California used car buying guide — inspection checklist, paperwork worksheet, and add-on scripts, all in one place. From the Compliance Alliance Network, free forever.

For educational purposes only. This is not legal advice, and no attorney-client relationship is established by reading this article or downloading any linked materials.

In my final scorecard on the Governor’s signing decisions, AB 1883 got two sentences and one piece of homework: ask your camera-analytics and call-monitoring vendors whether any feature scores “sentiment” or “engagement,” and turn it off for employees. That is still the homework. But at yesterday’s Zaller Law Masterclass on the new laws for 2027, my partner Joshua Dale walked through AB 1883 in more detail, and the questions that came in through the chat showed where employers are actually going to run into this law. It is not where most people expect.

Quick background. On September 30, Governor Newsom signed AB 1883, which adds new provisions to the Labor Code beginning January 1, 2027. Employers may not use a workplace surveillance tool that uses artificial intelligence on employees to (1) recognize, or make inferences or predictions about, an employee’s emotional state, or (2) collect neural data. As Joshua put it, AB 1883 is a vestige of SB 7, the broader “No Robo Bosses” bill the Governor vetoed last year. Most of SB 7 came back this year as the narrower SB 947; the piece aimed at emotional surveillance came back as its own bill.

Here are five takeaways for California employers.

1. The line is mood, not movement.

The most useful framing from the masterclass was Joshua’s: think of AB 1883 as regulating subjective emotional states. The law does not ban video monitoring, and it does not ban AI. Many businesses have to run cameras, and they can keep doing so. Employers can still use AI to track where employees are, whether a break was taken, or what task someone is performing. What employers cannot do is use an AI tool to conclude that an employee looks tired, angry, stressed, frustrated, or disengaged.

Two features of the statute make that line broader than it first sounds:

• Inferences and predictions count. A tool does not need to claim it “reads” emotions. A “burnout risk” flag, a “frustration” score on a recorded call, or a prediction that an employee is disengaged can all qualify.
• “Emotional state” is not defined. Stress, frustration, enthusiasm, and “engagement” are obvious candidates. Fatigue and attentiveness are harder calls (see point 3).

It also helps to know what the law does not reach. It applies only to tools that use AI. A supervisor who watches a camera feed and decides an employee seems upset is not covered. Software that makes the same call is. And the ban turns on how the employer uses the tool, not on what the tool is capable of. An earlier version of the bill reached tools merely “capable of” these functions; the enacted version does not. That matters a great deal for point 2.

2. The risk comes in through your vendors, not your own AI projects.

Very few restaurant, hospitality, or retail employers are building their own AI platforms. As Joshua noted, the exposure is far more likely to arrive through a system someone else rolls out to you: a CCTV upgrade with new “AI enhancements,” a call-analysis tool, a franchisor-required platform, or a national vendor release that turns on a new feature across every customer at once. A system that was giving you objective data last quarter may start scoring tone or mood this quarter, and nobody at the store level will notice.

Samantha Gallagher of Harri, who joined us for the masterclass, made the same point from the vendor side: know which laws apply to the technology you use, not just to your own employment practices, and follow up with your vendors to make sure they understand what is expected of them if there is an audit or a lawsuit.

Because the law focuses on use, the practical fix is usually straightforward:

• Ask in writing. Does the product recognize, infer, or predict anyone’s emotional state from video, voice, or text? Does it collect data measuring nervous system activity? Can those features be turned off for California employees?
• Turn it off and document it. A dated record of which features were disabled, when, and by whom is one of the most valuable compliance documents you can create for this law.
• Get notice of changes. Build a contract term requiring the vendor to notify you before enabling new analytics features of this kind.
• Re-check after every update.Turning a feature off once is not the end of it. Software updates and new releases can add new analytics or reset settings to the vendor’s defaults. Assign someone to review release notes for your camera, call-monitoring, and HR platforms and confirm that emotion-related features are still off after each update.

3. Driver and safety monitoring: watching the eyes is fine; predicting the feeling is not.

The most common question in the chat was about driver safety systems, and it is a good one for any employer with delivery, catering, transportation, or field service drivers. AB 1883 says it does not prohibit an employer from using a workplace surveillance tool “to ensure safety,” and Joshua’s guidance on how that plays out was practical:

• Physical cues are fine. A system that detects whether a driver’s eyes are closing, whether the driver is looking at the road, whether they are on their phone, or whether they are nodding off is monitoring physical aspects of driving, not mood.
• Timers are fine. A system that says “you have been driving for six hours, take a break” is not making any inference about the driver’s emotional state.
• Algorithmic predictions of how someone feels are the risk. If a system starts predicting that a driver is getting tired or stressed from a combination of algorithmic factors, rather than from observable physical cues, it is moving into territory AB 1883 may prohibit.

Employers should know that the safety provision is one of the open questions in the statute. The text protects tools used “to ensure safety, or otherwise if it does not meet the specifications” of the ban, and early commentators have split on whether a safety tool is protected even when it does infer an emotional state or collect neural data. Until a court weighs in, the conservative approach is the one Joshua described: keep the safety tools that monitor physical behavior, watch for vehicle-manufacturer and vendor updates that add “stress” or “mood” detection, and turn those features off. For any tool you rely on as a safety tool, document the specific hazard it addresses, and keep the data out of performance reviews and discipline. A safety rationale is hardest to defend once the data starts being used to manage performance.

4. Wearables: the “neural data” label matters less than what the device concludes.

The second prong of the law bars using an AI-enabled tool to collect neural data, which the statute defines as information generated by measuring the activity of an employee’s central or peripheral nervous system that is not inferred from nonneural information. The clear examples are fatigue-monitoring EEG headbands and “focus-tracking” earbuds. For those devices, collection alone is a violation, whether or not the data is ever used.

The harder cases are ordinary wearables. Joshua held up his own smartwatch during the masterclass, which reports a “stress” score. Technically, a stress reading derived from heart rate is probably not neural data under the statutory definition, because it is inferred from nonneural information. But that distinction does not help the employer much. If the device uses AI to infer stress, it falls under the first prong — an inference about the employee’s emotional state — so the practical answer is the same: an employer should not be collecting or using that score. The bottom line for wearables is to look at what the device concludes about the employee, not just at what it measures.

Wearables also connect to another bill signed this year. AB 1331 bars workplace surveillance in bathrooms (which was already unlawful in California, but now it is explicit) and gives employees the right to leave wearable surveillance devices outside the restroom. As I mentioned during the masterclass, wearables also raise a question employers have not fully thought through: if an employee is being tracked during a meal or rest break, are they really relieved of all duty? Any wearable program should address what the device records during breaks and how employees can turn it off.

5. Call and sales analytics are the gray area.

I have not seen many clients using emotion-detection tools directly. Where I do see it come up is in sales and customer service environments that record calls or video meetings, then grade the representative. Many of these platforms rate whether the customer seemed engaged and coach the representative on how to approach the conversation differently. That is a gray area. A tool that analyzes the guest’s sentiment is a different question than one that scores the employee’s tone, but many platforms do both, and the employee-facing piece is what triggers AB 1883. Joshua’s concern was the same one from point 2: a vendor adds tone or mood analysis to a call-scoring system that used to rely on objective metrics, and you are out of compliance without changing anything yourself.

On enforcement, the Labor Commissioner may investigate, issue citations, and file a civil action, and public prosecutors may also enforce the law. Remedies include injunctive relief, punitive damages, attorney’s fees and costs, and a civil penalty of up to $500 per violation. The statute does not define what counts as a single violation. Earlier drafts included a private right of action, and the final bill removed it, but as Joshua noted, the civil penalty may well make its way into PAGA notices.

That is also why the documentation matters. The tool inventory, the vendor responses, and the record of disabled features are the kind of compliance work that supports a “reasonable steps” position under the 2024 PAGA reforms if a notice ever arrives.

Practical steps before January 1, 2027:

• Inventory features, not just products. Review camera analytics, CCTV, call-monitoring, contact center, video meeting, HR analytics, and wellbeing platforms for anything labeled sentiment, tone, emotion, engagement, mood, stress, wellbeing, or burnout. Separately list any wearables or fatigue-monitoring devices.
• Send the vendor questions in writing and keep the answers.
• Disable and document any feature that infers how an employee feels.
• Review driver and safety systems for “smart” features beyond physical-cue and timer-based monitoring.
• Update monitoring policies and train managers that AI-generated conclusions about how an employee feels are off limits, whether they come from a camera, a microphone, or a chat log.
• Coordinate with the other technology laws. The same vendor review should cover the No Robo Bosses Act (SB 947), which requires human corroboration and notice when an automated decision system drives discipline or termination beginning July 1, 2027, and SB 951, which changes Cal-WARN notices for AI-driven layoffs.

The bottom line: AB 1883 does not stop employers from monitoring the workplace, running cameras, or using AI. It stops employers from using AI to decide how employees feel. For most employers, compliance will not mean changing what they monitor. It will mean finding the sentiment, mood, and “engagement” features their vendors have quietly added, turning them off for California employees, and keeping a record that they did — before January 1, and before a vendor’s next update turns one back on.

Join us in person on November 17. We will be covering AB 1883 and the other new laws for 2027 in more depth at our in-person Employers Summit at the Proud Bird in Los Angeles, along with panels from business operators on the state of employment and the economy in California heading into 2027 – learn more about the Employer’s Summit and register at our website here.

The post California Bans AI That Reads Employees’ Moods (AB 1883) — Five Takeaways from Our 2027 New Laws Masterclass appeared first on California Employment Law Report.

In this special Fact or or Fiction episode of California Employment News, Weintraub Tobin shareholder Ryan Abernethy and associate Christopher Horsley explain how wage and hour rules, expense reimbursement requirements, and employee location affect remote work arrangements.

 

Listen for an informative breakdown of what California employers need to know to manage remote teams and reduce compliance risks.