Major Revisions to California’s Equal Pay Act Take Effect in 2026
Beginning January 1, 2026, significant updates to California’s Equal Pay Act under Senate Bill 642 (SB 642) will reshape how employers disclose pay information and define fair compensation.
These reforms aim to strengthen pay transparency, recordkeeping, and equity enforcement across the state.
Below is a practical breakdown of the upcoming changes and why they matter for both workers and businesses.
1️⃣ Clearer Definition of “Pay Scale”
The term pay scale will now mean:
“A good-faith estimate of the salary or hourly wage range the employer reasonably expects to pay for the position upon hire.”
What This Means
Employers must base posted ranges on genuine, supportable expectations, not arbitrary numbers.
They must provide this pay scale:
- To applicants and current employees upon request
- In job postings for employers with 15 or more workers
- To third-party job boards posting on their behalf
Companies must also retain pay records for the duration of employment plus three years after the employee leaves.
2️⃣ Expanded Definition of “Wages” and “Wage Rates”
The amended law broadens “wages” to include far more than base salary, such as:
- Overtime pay and bonuses
- Stock options and profit-sharing
- Paid leave and holiday pay
- Housing or travel allowances
- Insurance and other benefits
Why It Matters
California’s equal-pay analysis will now cover total compensation, not just paycheck amounts.
This ensures that employers cannot mask inequities through bonuses, stock grants, or perks.
3️⃣ Updated Definition of “Sex”
The amendment aligns “sex” with definitions used in the Fair Employment and Housing Act (FEHA), confirming protections for all gender identities and expressions.
This alignment promotes uniform enforcement of anti-discrimination laws across California.
4️⃣ New Timeline to File Claims
Beginning 2026:
- Employees will have three years from the last occurrence of a pay violation to file suit.
- They may seek up to six years of back pay for ongoing violations.
Key Point
A cause of action now arises when:
- An unlawful pay practice is adopted,
- An employee becomes subject to it, or
- The worker is affected each time wages or benefits are paid.
This extension makes it easier for employees to recover for long-term disparities.
5️⃣ More Inclusive Pay Equity Language
The law will prohibit paying an employee less than “employees of another sex,” replacing the older phrase “opposite sex.”
This modernized wording explicitly covers non-binary and gender-diverse employees, ensuring broad coverage under the Equal Pay Act.
6️⃣ Enhanced Recordkeeping and Penalties
Employers must maintain detailed wage and job-title records, subject to inspection by the Labor Commissioner.
Failure to maintain these files can create a rebuttable presumption in favor of the employee.
Civil Penalties: Violations of pay-scale posting rules may trigger fines ranging from $100 to $10,000 per offense.
7️⃣ What These Changes Mean for You
For Employees
- Greater access to salary information and benefit data
- A clearer path to identify and challenge pay inequities
- Up to six years of potential relief for wage disparities
For Employers
- Pay transparency is now mandatory, not optional
- All forms of compensation count toward equal-pay compliance
- Recordkeeping and audit systems must be updated to avoid penalties
Final Takeaway
SB 642 reinforces California’s position as a leader in pay equity law.
Employers should begin reviewing job postings, compensation structures, and recordkeeping policies well before January 2026.
Employees should understand that fair pay covers every form of compensation — and that they now have a stronger legal path to enforce it.
For guidance on how these revisions affect your rights or business practices, contact Mills Sadat Dowlat LLP (MSD Lawyers) for a consultation.
📞 Call (916) 758-8058 or visit msdlawyers.com to schedule a review.
