California’s 2026 legislative session produced two enacted workers’ compensation measures that claims administrators, employers and practitioners will carry into 2027: a budget trailer bill that rewrites eligibility for the Subsequent Injuries Benefits Trust Fund (SIBTF) and makes the current reconsideration deadline permanent, and a short bill that keeps prepaid card indemnity payments available indefinitely. Several other closely watched proposals, including a permanent disability rate increase, did not reach the governor. The governor’s deadline to act on bills passed this year was September 30.
This report was compiled from the chaptered bill digests, the governor’s signing announcements and legislative tracking by the Commission on Health and Safety and Workers’ Compensation (CHSWC). The California Workers’ Compensation Institute has issued its own summary of the 2026 session as a Bulletin, which is available to CWCI members and subscribers through its Bulletins page.
The centerpiece is Senate Bill 171, a labor budget trailer bill approved by Governor Gavin Newsom on July 13, 2026 and chaptered as Chapter 83, Statutes of 2026. As a budget measure it took effect immediately. The Legislative Counsel’s digest explains that case law had treated a prior condition as “labor disabling” if it could have supported an award had it been industrial, without requiring any showing of lost earnings. SB 171 replaces that approach with a statutory definition: the impairment must have caused a loss of earnings, interfered with the employee’s work in their occupation, or otherwise had a demonstrable impact on the ability to work.
The bill also changes how the preexisting disability is proved. Its existence at the time of the later industrial injury must be shown by substantial evidence drawn from medical records, testimony and other evidence that already existed before that injury. In determining whether the subsequent injury meets the statutory threshold, the bill excludes any adjustment for future earning capacity or the corresponding adjustment factor. It sets a filing deadline for SIBTF claims of five years from the date of the subsequent injury or six months from the resolution of permanent disability in the underlying claim, whichever is later.
How the new rules apply to the existing backlog was the most contested question. The digest states that claims filed on or before July 1, 2020, and claims that had reached a specified procedural status on or before June 1, 2026, are exempt from the changes, and that those provisions become inoperative on July 1, 2031 and are repealed on January 1, 2032.
SB 171 makes administrative changes to the fund as well. The Director of Industrial Relations, as trustee of the SIBTF, replaces the State Compensation Insurance Fund as the entity that pays awards, and State Fund’s authority to reimburse itself for related costs is deleted. A Senate Republican Caucus summary of the enacted budget reports 13 million dollars and 57 positions to work down backlogged SIBTF claims. That is in line with the 12.7 million dollars and 57 positions the administration requested in January, a request that CHSWC’s June legislative update said would grow to 36.5 million dollars and 177 positions by fiscal year 2030-31.
The reforms respond to rapid growth in the program. A July 2025 report by the Legislative Analyst’s Office found a backlog of more than 25,000 claims and estimated lifetime benefit costs of 2 billion to 3 billion dollars for each annual cohort of claims, costs that are funded through assessments on employers.
The second major workers’ compensation provision in SB 171 concerns petitions for reconsideration under Labor Code § 5909. Since 2024, a petition has been deemed denied unless the Workers’ Compensation Appeals Board acts within 60 days of the date the trial judge transmits the case to the Board. That rule was scheduled to expire on July 1, 2026, when the clock would again have started on the date the petition was filed. SB 171 removes the sunset, so the transmission-based deadline is now permanent.
Two further provisions affect payers directly. Workers’ compensation surcharges and assessments must now be paid by electronic funds transfer, and the bill imposes a 10 percent penalty on late or unpaid amounts and on payments not made electronically, with the penalties deposited in the Workers’ Compensation Administration Revolving Fund. The bill also removes the Administrative Director of the Division of Workers’ Compensation from a statutory salary schedule.
The other enacted measure is Assembly Bill 1683, an Assembly Insurance Committee bill that the governor signed on July 6, 2026. Existing law allowed employers to deposit disability indemnity payments into prepaid card accounts only until January 1, 2027. AB 1683 extends that authorization indefinitely. CHSWC noted that the bill tracks the recommendation in its own report on prepaid card programs, approved in February. Because the bill is not an urgency measure, it takes effect January 1, 2027, the same day the prior authorization would have lapsed.
Several bills that drew attention during the session were not enacted. Senate Bill 555 would have raised the weekly earnings range used to compute permanent partial disability indemnity from the current 240 to 435 dollars to a range of 363 to 658 dollars for injuries on or after January 1, 2027. Its first Assembly committee hearing, set for June 24, was canceled at the author’s request and the bill did not advance. Assembly Bill 1576, a separate SIBTF reform vehicle, and Assembly Bill 1048, which would have required explanations of review to identify the contract behind a discounted payment and required physicians to sign requests for authorization, were both held in committee on August 13. CHSWC’s update lists two more as having missed legislative deadlines: Assembly Bill 2098, on leave for medical treatment during work hours, and Senate Bill 632, which would have created injury presumptions for hospital employees providing direct patient care.
The permanent disability question is likely to return. Business Insurance reported in July that the chief lobbyist for the California Coalition on Workers’ Compensation told the group’s conference that employers are preparing for negotiations in 2027 over permanent disability benefits, and will seek offsetting savings in areas such as cumulative trauma claims and medical-legal costs.