In this California employment law update for September 2026, a California appellate court rules that SpaceX must comply with a state discrimination investigation even for an employee who never worked in California. Three bills are sitting on Governor Newsom’s desk: one targeting AI-driven firing decisions, one expanding bereavement leave, and one delaying new restrictions on stay-or-pay clauses. Here is what you need to know before the end-of-month signing deadline. At Sherman Law Corporation, our employment litigation practice is watching all of it closely.
It’s a quieter week on the court front, but a big one in Sacramento. The Legislature just wrapped up its 2025 to 2026 session and sent its final bills to Governor Newsom, who now has until the end of the month to sign or veto them. Below, a California appellate court weighs in on how far state regulators can reach, plus three bills worth watching if you’re an employee or an employer in California.
SpaceX Can’t Dodge a California Investigation
A former SpaceX employee who lived and worked in Washington state filed a discrimination complaint with California’s Civil Rights Department, the state agency that investigates workplace discrimination claims. SpaceX tried to shut the investigation down, arguing that because the employee never worked in California, the state had no business looking into it. A California appeals court disagreed and ordered SpaceX to comply with the agency’s subpoena.
The court’s reasoning was straightforward. SpaceX has real, undisputed connections to California, and the company didn’t show that those connections were too thin to support the agency’s authority to investigate. In other words, working outside California doesn’t automatically put you outside the reach of California’s discrimination watchdog, as long as your employer has meaningful ties to the state.
For employers, this is a reminder that a California footprint, whether it’s headquarters, facilities, or substantial operations here, can expose you to state investigations even for employees based elsewhere. For workers, it means your location alone may not close the door on a California discrimination complaint if your employer is rooted here. Read the opinion in Civil Rights Dept. v. Space Exploration Technologies Corp.
For more on how California’s discrimination and harassment laws extend beyond the obvious, see our post on California employers covered under FEHA.
A Bill to Rein In “Robo Bosses”
One of the more talked about bills this session is nicknamed the “No Robo Bosses Act,” and it targets a very modern problem: employers using automated systems, rather than a human being, to decide who gets disciplined or fired. If signed, it would stop companies from relying solely on an algorithm to take that kind of action against an employee. A human would have to actually look into the situation first. The bill would also bar employers from using automated systems to predict how a worker might behave in the future based on their personal information.
This would be the first law of its kind in the country. It’s worth noting the Governor vetoed a similar bill last year, so it’s not a sure thing, but it shows where the conversation in California is headed as more employers lean on software to manage their workforce. If you’re an employee who has been disciplined or let go with little to no explanation, and you suspect an algorithm made the call, this is a bill to watch. If you’re an employer using automated tools in HR decisions, now is a good time to make sure a real person is still in the loop (and that your documentation practices reflect that).
Bereavement Leave Could Cover More Than Family
California already requires employers to provide bereavement leave, but only for the death of close family members connected by blood, marriage, or domestic partnership. A bill awaiting the Governor’s signature would expand that. Employees would be able to designate one person, who doesn’t have to be a traditional family member, whose death would trigger their right to bereavement leave. Employers could limit that designation to one person every twelve months.
This matters because families and close relationships don’t always fit neatly into legal categories. If this bill becomes law, it would give workers more flexibility to grieve and take time off for someone who mattered to them, even if that person wasn’t a spouse, parent, or sibling. Employers should watch for this one too, since it may mean updating bereavement leave policies once the details are finalized.
See a bill awaiting the Governor’s signature that would broaden bereavement leave.
A One Year Reprieve for “Stay or Pay” Clauses
Last year, California passed a law restricting “stay or pay” provisions, the clauses in employment contracts that require a departing employee to repay training, relocation, or similar costs if they leave too soon. Those restrictions were set to take effect, but a new bill with an urgency clause would push the effective date back one full year, to January 1, 2027.
If you’re an employer using stay or pay agreements, this gives you more time before the new restrictions kick in. If you’re an employee who signed one of these agreements and are wondering whether you’re on the hook for repayment if you leave, the rules limiting these clauses are coming, just not quite yet. Review a bill delaying new restrictions on repayment agreements.
Have a California Employment Law Question? Talk to Sherman Law Corporation
Whether you’re an employee or an employer, if you have a workplace issue you wish to discuss, do not wait for the next development to act. At Sherman Law Corporation, Lisa Sherman works directly with every client, telling you exactly where you stand, even when that answer is complicated. Contact our office at lisa@sherm-law.com or call 323-488-2087.
This post is attorney advertising and is intended for general informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship. For advice about your specific situation, please consult a licensed attorney.
What Do These Developments Mean for You?
1. Can California investigate my out-of-state employer?
Yes, if your employer has meaningful California connections. The SpaceX ruling confirmed that the Civil Rights Department’s authority is not limited to employees who physically worked in the state. What matters is whether the employer itself has substantial ties to California, such as headquarters, major facilities, or significant operations here.
2. Can California regulators reach my out-of-state employees?
Yes. The SpaceX decision is a clear signal that a California footprint, even without any California-based employees involved in the specific complaint, is enough to bring your company within the Civil Rights Department’s reach. The court found that SpaceX’s connections to California were real and undisputed, and that was sufficient to enforce the subpoena.
3. Is it legal to use software to fire employees in California?
Currently yes, but the No Robo Bosses Act would change that if signed. It would require a human being to review the situation before any automated system’s recommendation results in discipline or termination. It would also bar employers from using automated tools to predict future employee behavior based on personal data. The Governor vetoed a similar bill last year, so it is not a certainty, but the trend is clear.
4. Am I still bound by my stay or pay agreement?
For now, yes. The new law restricting these clauses has been delayed to January 1, 2027, not eliminated. The restrictions are coming, but they are just not here yet. If you signed one of these agreements and are weighing whether to leave, the specific terms of your agreement will determine your exposure in the meantime.
5. Do I need to update my bereavement leave policy?
Not until the bill is signed. If it does become law, the change would allow employees to designate one person outside of traditional family categories whose death triggers bereavement leave rights. Employers would be able to limit that designation to one person every twelve months. The practical impact for most businesses is modest, but your handbook and leave policies would need to reflect it.
6. How can Sherman Law Corporation help?
Whether you are an employer assessing your exposure under the SpaceX ruling or preparing for new laws before they take effect, or an employee with a discrimination complaint or a contract question, Sherman Law Corporation works directly with you. Contact Lisa at lisa@sherm-law.com or call 323-488-2087.
