New Law Requires Employers to Engage in More Pay Transparency and Provides More Employee Protections for Pay Equity Violations

Senate Bill 642, also known as the Pay Equity Enforcement Act, was signed into law by California’s Governor Gavin Newsom on October 8, 2025. This new law went into effect on January 1, 2026 and expands the employee protections previously established in California’s Equal Pay and Pay Transparency laws.

First, the new law requires employers, upon request, to provide a “pay scale” to both job applicants and current employees. A “pay scale” is defined in the new law as a “good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.” This definition has changed and encourages more transparency because it makes job applicants aware upfront of what they can expect to be paid now- at the time of hire- and not later at some time in the future. In addition, any employer with 15 or more employees is automatically required to include a “pay scale” for a position in any job posting. If an employer uses a third party to post or publish the job posting, the pay scale must be given to the third party and posted or published with the job positing. As such, employers must engage in due diligence and have a pay scale readily available. That means that larger employers are automatically required to publish their pay scale, or how much they are looking to pay an applicant for the position upon hire. Employers are now no longer able to provide a mere estimate of how much they would pay for the position in general. Clearly, a person who is newly hired for the position would make far less than someone who has held the position for ten years. Likewise, employees will be fully aware of how fairly (or unfairly) they are being compensated for their position.

Second, the new law prohibits employers from paying “any of its employees at wage rates less than the rates paid to employees of another sex for substantially similar work.” The rule has been expanded from “opposite sex” to “another sex” which presumes that there is more than two sexes and is referring to non-binary genders such as gender identities and gender expressions. Clearly, this change in verbage has the capacity to increase an employer’s potential liability. Likewise, the employer cannot “pay any of its employees at wage rates less than the rates paid to employees of another rate or ethnicity for substantially similar work.”

Third, an employee has a cause of action under the law when any of the following occurs “(A) An alleged unlawful compensation decision or other practice is adopted; (B) An individual becomes subject to an alleged unlawful compensation decision or other practice; (C) When an individual is affected by application of an alleged unlawful compensation practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from the decision or other practice.” Thus, an employee has a right to file a lawsuit the minute the employer makes an unlawful compensation decision or practice. The employee does not have to actually be subject to or even affected by the employer’s unlawful compensation decision or practice.

Fourth, the new law expands the statute of limitations by requiring lawsuits for pay equity violations to be filed within 3 years- not 2 years- from the date of the alleged violation. This means that any employee who believes he or she is being paid at a wage less than the rates paid to another employee of another sex, another race, or another ethnicity for similar work now has an extra year to file a lawsuit. Finally, an employee can recover wages for the entire time period that a violation exists; however, this recovery period cannot extend beyond 6 years.

Fifth, the terms “wages” and “wage rates” have been expanded for this new law only. These terms are so broad that they include more than what we traditionally view as “wages”, i.e. the employee’s paycheck. The term “wages” and “wage rates” now includes “all forms of pay, including, but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.” Thus, wages can now include any amount of compensation or anything of value that is given to the employee.

Employers with 15 or more employees should now be sure to include pay scale information in all their job postings. Employers should also conduct their due diligence and prepare pay scale information for all positions in which they are hiring, may be hiring, and have already hired (current employees). These pay scales are required upon request. Further, employers should take steps to ensure that their pay policies and practices do not result in any pay inequities between employees.