California PEO Compliance: What Business Owners Need to Know in 2026
Running a business in California means staying up to date with ongoing legislative changes, and this includes changes affecting professional employer organizations (PEOs). One pending piece of legislation to be aware of is Assembly Bill 1515 (AB 1515). Though not yet signed into law, if it does, it would formally establish state-level registration requirements for PEOs operating in California.
If your business partners with a PEO or is considering one, this pending requirement would directly affect how you select, vet, and maintain your HR outsourcing relationships. Below is what to know about AB 1515 as well as other HR-related legislation affecting employers in California.
What to Know About AB 1515
If passed, AB 1515 would introduce a mandatory registration system for PEOs with the Division of Labor Standards Enforcement (DLSE) under California’s Department of Industrial Relations.
Under this legislation, no person or business would be allowed to provide, advertise, or hold themselves out as offering PEO services in California without being officially registered with the DLSE.
As the current text reads, a PEO would be required to meet one or more of the following criteria:
- Be certified by the U.S. Secretary of the Treasury under Section 7705 of the Internal Revenue Code,
- Be accredited by the Employer Services Assurance Corporation (ESAC), or
- Provide professional employer services through a written, ongoing agreement with its clients.
For small and mid-sized businesses in California, AB 1515 would serve as an additional safeguard. The proposed bill is designed to ensure that any PEO doing business in the state meets consistent standards for financial integrity, insurance coverage, and labor compliance. In other words, it helps weed out unverified or noncompliant providers who could expose your business to risk.
For employers, this means:
- More transparency about which PEOs are properly registered and compliant.
- Fewer compliance risks related to misclassification, payroll tax issues, or unlicensed operations.
- Greater confidence that your PEO is meeting both state and federal requirements.
Other California Compliance Updates to Keep on Your Radar in 2026
Beyond AB 1515, California’s employment landscape remains one of the most complex in the nation and the state has announced a wave of employment-law changes that are relevant to any business operating in the state.
As outlined by industry specialists, the following are just some of the key developments:
- As of January 1, 2026, the state minimum wage will rise to $16.90 per hour, affecting non-exempt employee pay and exempt salary thresholds.
- The “Workplace Know Your Rights” notice requirement (under SB 294) mandates that employers deliver a standalone written notice of key employee rights to all current and new employees with an initial deadline of February 1, 2026.
- Pay-data reporting requirements (under SB 464) are expanding, including mandatory filing penalties and expanded job-category breakdowns.
- Regulations around Automated Decision Systems in employment (AI/algorithms) are evolving; use of these systems by PEOs and employers must be monitored and aligned with new rules.
Contact Us at The OIS Group with Questions
Compliance in California is complex, and the cost of getting it wrong can be significant. At The OIS Group, we help California-based small and mid-sized businesses evaluate their PEO partners, ensure the contract includes state-specific compliance coverage, and prepare for upcoming regulatory changes.
Contact us today for a free review to make sure your California operations are compliant and aligned with your strategic goals for 2026.
