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California Small Business Compliance Checklist 2026: What San Diego Restaurants Must Do Now
CA minimum wage $16.90, SB 294, AB 692 — all effective Jan 1 2026. MKR Systems helps San Diego restaurants stay compliant. Free checklist.
In California, a single compliance violation can cost $500–$10,000. The new 2026 laws have been in effect since January 1.
Key 2026 California Changes
California updates its employment, tax, and operating rules every year. 2026 is a year when a minimum wage increase, stronger pay transparency, expanded personnel-record obligations, and new employee-notice requirements all take effect at once. Here are the items every restaurant and retail small-business owner needs to check.
$16.90
California statewide minimum wage as of January 1, 2026 (up from $16.50 the prior year)
Source: California Dept. of Finance CPI-W adjustment
$70,304
2026 minimum salary for Exempt employees — below this threshold, overtime pay is required
Source: CA Labor Code (minimum wage × 2 × 2,080 hours)
$10,000
Maximum penalty per employee for an SB 294 notice violation (initial violation $500)
Source: California Labor Commissioner — SB 294 Official Notice Requirements
$20.00
Fast-food chain (25+ locations) employee hourly wage — still in effect
Source: FAST Recovery Act (AB 1228)
Payroll & Employment Compliance
Section 1. Wage & Worker Classification Checklist
- Update hourly pay to at least $16.90 — effective January 1. Major cities such as San Diego, LA, and SF may apply higher rates through their own ordinances. Always confirm your city/county ordinance.
- Immediately check whether Exempt employees fall below the $70,304 salary — if below, raise pay before January 1 or reclassify as Non-exempt (hourly). Reclassification triggers overtime and meal/rest-break recordkeeping obligations.
- Review the gap between existing wages and new-hire wages — after a minimum wage increase, wage compression (new hires earning close to or more than tenured staff) is common. Review internal pay equity.
- Re-confirm your overtime calculation method — California requires 1.5× pay for over 8 hours in a day or over 40 hours in a week. Shift differentials and non-discretionary bonuses must be included in the Regular Rate.
- Re-examine independent contractor (1099) classification — all three prongs of the ABC test must be met to qualify as an independent contractor. Violations trigger unpaid taxes, penalties, and wage claims.
- Verify Wage Statement accuracy — after wage changes, the hourly rate, overtime rate, and total hours worked must be accurately reflected on the pay stub. Errors can cost up to $4,000 per employee.
New Legal Obligations (Effective 2026)
Section 2. Three New Provisions You Must Implement
SB 294 · Effective 2026.01.01
Workplace Know Your Rights Notice
Requires a separate written notice to all current employees plus new hires. Must state worker rights (workers' comp, immigration enforcement inspections, workplace law enforcement). Distribution to current staff must be complete by February 1, 2026.
Penalty $500–$10,000/personSB 513 · Effective 2026.01.01
Expanded Personnel Records
Requires training and education records in the employee personnel file. Must include employee name, training provider, date, hours, training content, and certification info. Existing personnel-file systems need updating.
File training records nowAB 692 · Effective 2026.01.01
Stay-or-Pay Clause Ban
Bans "stay to keep your job" clawback agreements such as sign-on bonuses and training-cost repayment contracts. If your existing employment contracts contain these clauses, they must be removed or amended. Violations cost $5,000+ per employee.
Review contracts nowUrgent check: employee emergency-contact collection deadline — March 30, 2026
Under SB 294, you must give every employee the option to designate an emergency contact. If a workplace arrest or detention occurs, you are required to notify the designated contact. Records must be complete by March 30.
Key Deadline Calendar
Section 3. 2026 California Business Compliance Schedule
| Date | Item | Owner/Notes |
|---|---|---|
| Jan 1 ✓ | Minimum wage $16.90 takes effect — update all hourly pay, confirm Exempt salary of $70,304 | Payroll / HR |
| Jan 1 ✓ | SB 294 / SB 513 / AB 692 take effect — review employment contracts, update personnel files | HR / Legal |
| Feb 1 | Workplace Know Your Rights written notice — complete distribution to all current employees | HR (use Labor Commissioner template) |
| Mar 31 | California S-Corp / LLC tax filing (pre-extension basis — Form 100S / 568) | CPA |
| Mar 30 | Complete employee emergency-contact collection (SB 294 requirement) | HR |
| Apr 15 | Individual income tax / Sole Proprietor filing — including Schedule C | CPA |
| Apr 30 | Q1 CDTFA tax filing (quarterly sales tax return) | Bookkeeper |
| Jul 1 | Healthcare worker $25 wage applies — must verify if you operate a healthcare facility | Payroll |
| Year-round | Pay Data Report — businesses with 100+ employees: annual DFEH pay data reporting obligation | HR / CPA |
Tax & New Fee Items
Section 4. Tax & Fee Updates (Restaurant/Retail Focus)
- Sales tax base 7.25% + local tax — total 7.25%–10.75%
About 8.25% in the San Diego area, 9.5% in the City of LA, 8.625% in SF. Prepared (hot) food is taxable. To-go food and groceries are exempt. - CBE recycling fee (new 2026.01.01 — SB 1215)
When selling battery-embedded products, collect a fee of 1.5% of retail price (max $15) and remit it to CalRecycle. - QBI deduction made permanent (federal)
Late-2025 tax reform made the 20% Qualified Business Income deduction permanent for pass-through entities. Applies to S-Corps, LLCs, and Sole Proprietors. - Tip & overtime income tax deduction (temporary, 2025–2028)
Under federal tax reform, a deduction applies to tip and overtime income. If your payroll has a high share of tip income, review with your CPA. - California Franchise Tax minimum $800/year
Applies to LLCs, S-Corps, and C-Corps. Due even with no revenue. File Form 568 or 100S. - Stronger Pay Transparency
Job postings must state the actual pay range you intend to pay on day one — not just a generic range, but the actual expected amount.
Poster & Notice Requirements
Section 5. Required Workplace Posting Updates
Update now
2026 Minimum Wage Poster
You must replace the poster every time the minimum wage changes. A California All-in-One Labor Law Poster subscription service is recommended. Post it where employees can easily see it.
Not posting = violationBy Feb 1
SB 294 Rights Notice
Use of the official Labor Commissioner template is recommended. Distribute English and Spanish versions. Provide to new hires upon onboarding.
Official template availableConfirm annually
City Ordinance Posters
Cities with their own minimum wage ordinances — San Diego, LA, SF — also require city-level posters. Download the latest version from the county website.
Varies by cityThe MKR Systems View
Compliance is connected to your IT systems.
POS payroll reporting, digital employee notices, training-record management, integrated tax filing — all of it runs on top of a well-structured business operations system. Clover POS payroll-data export settings, an employee records system, and digital notice-delivery workflows can be reviewed now and configured to meet the 2026 standards.
📐 Math Verification
Formula for the Exempt employee minimum salary
California Labor Code basis: exemption threshold = minimum wage × 2 × full-time (FT) hours
2026 calculation: $16.90/hr × 2 × 2,080 hours/year
= $70,304/year ($5,858.67/month) ✓
Source: California Labor Code §515(a); Dept. of Industrial Relations 2026
✓ Verified
Added labor cost from the minimum wage increase
Increase: $16.90 - $16.50 = $0.40/hr
10 full-time employees: $0.40/hr × 2,080 hours × 10 people
= $8,320/year ($693/month) ✓
Source: CA DIR minimum wage increase notice 2026
✓ Verified
Wage-statement error penalty — worst-case calculation
Wage-statement error penalty per employee: up to $4,000
Scenario: 20 employees → $4,000 × 20 = $80,000
SB 294 notice failure (repeat): 20 × $10,000 = $200,000
= Total potential penalty: $10,000–$280,000 ✓
Source: CA Labor Code §226; SB 294 (Labor Commissioner, 2026)
✓ Verified
2026 Compliance Readiness Check
A California compliance checklist for restaurant and retail small businesses — free.
→ Call 888-382-5164 ↓ Learn More
California compliance is not a "do it later" task.
Several items have been in effect since January 1. February and March deadlines arrive fast. Running the checklist now is the cheapest form of risk management.
Several items have been in effect since January 1. February and March deadlines arrive fast. Running the checklist now is the cheapest form of risk management.
References & Data Sources
- [1]California DIR — 2026 Minimum Wage — Official statewide minimum wage: $16.90/hr effective January 1, 2026. dir.ca.gov
- [2]California Labor Code §515(a) — Exempt salary threshold formula: 2× state minimum wage × 2,080 hours = $70,304/year for 2026. leginfo.legislature.ca.gov
- [3]SB 294 — Workplace Know Your Rights Act — Requires annual written notice to all employees. Penalties: $500–$10,000/employee. leginfo.legislature.ca.gov
- [4]SB 513 — Personnel Records Expansion — Effective Jan 1, 2026. Expands Labor Code §1198.5 to include training and education records. leginfo.legislature.ca.gov
- [5]AB 692 — Stay-or-Pay Clause Prohibition — Bans repayment provisions in employment contracts. Penalty: minimum $5,000/employee. leginfo.legislature.ca.gov
- [6]FAST Recovery Act (AB 1228) — California fast food minimum wage: $20.00/hr for chains with 25+ locations nationally. leginfo.legislature.ca.gov
- [7]California CDTFA — Sales Tax Rates 2026 — Base rate 7.25%. Combined city/district rates 7.25%–10.75%. cdtfa.ca.gov
- [8]Senate Bill 1215 — CBE Recycling Fee — Battery-embedded product recycling fee: 1.5% of retail price (max $15). Effective Jan 1, 2026. leginfo.legislature.ca.gov
MKR Systems is an authorized Fiserv / Clover reseller and AT&T Business agent. All analysis, recommendations, and cost models in this article are independently produced by MKR Systems based on publicly available data and our direct operational experience.
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