California Amends Pay Transparency Requirements

California’s new bill, SB 642, amends California’s Equal Pay Act, California job posting requirements, and the remedies available in equal pay litigation. This LawFlash highlights key changes and new considerations for employers.

KEY CHANGES OF THE NEW BILL

SB 642, effective January 1, 2026, implements new amendments to the Labor Code change job posting requirements, equal pay analyses, and the scope of private rights of action for covered employers.

For equal pay claims, SB 642 expands the definitions of “wages” and “wage rates” under Section 1197.5 to include total compensation, including incentive compensation, expense reimbursement, stock awards, etc. [1] Notably, this expanded definition does not affect job posting requirements.

Additionally, SB 642 suggests that litigants may rely on the doctrine of “continuing violation” in their equal pay claims. Under this doctrine, an action arising in relation to facts that occurred outside the original statute of limitations will be deemed timely in the event of a present, continuing violation. [2] Upon a showing of a pattern of conduct, employees will not be barred from asserting claims that would have otherwise been dismissed due to the applicability of the statute of limitations, such as allegations of pay disparity between employees.

For job posting requirements, SB 642 amends the definition of “pay scale” under Section 432.3 to mean a “good faith estimate” of the salary or hourly wage range that the employer reasonably expects to pay “for the position upon hire” —i.e., on the date the hired applicant commences work for the company as opposed to what the company anticipates offering for the position more generally. [3] The amendment to include “good faith” language aims to avoid situations where employers post meaningless pay scales simply to be in compliance.

Changes to Job Posting Requirements in Labor Code Section 432.3

Changes to Equal Pay Requirements under Labor Code Section 1197.5

ANALYSIS

SB 642’s new amendments leave room for interpretation. Some examples of questions that remain include the following:

• Whether employees can bring an action in relation to events involving ongoing acts of violation if those acts are intrinsically different under the pay transparency requirements, or whether the claims relate to the same occurrences for the employees to rely on the doctrine of “continuing violation.” [4]
• Whether all violations are covered by the “discovery rule.” What if the employers assert that the violation is severe enough that the employees could have reasonably been able to discover it to exclude the exception to the statute of limitations?
• How “good faith estimate” is defined. Will there be any outer limits to the pay scales or ranges?
• How does the addition of “another gender” impact the comparison population? And particularly for those employees who transition or redesignate their gender during their tenure.

KEY TAKEAWAYS FOR EMPLOYERS

Employers should consider taking the following steps in anticipation of the new law, including the following:

• Identifying all wage components for each job position and auditing pay practices for salary determinations in California
• Determining and documenting salary ranges for all positions with incumbents currently working in California
• Reviewing existing job posting templates to use after January 1, 2026
• Training supervisors, managers, compliance personnel, human resources, and legal professionals on the implications of the new law—including as to appropriate communications with applicants and employees
• Extending the retention period of pay statements, job posting and related documentation falling within the scope of the new law for employees who were recently discharged or decided to leave voluntarily
• Monitoring for additional rulemaking and guidance from the California Civil Rights Department and California Division of Labor Standards Enforcement on implementation of the new law