Ten years after initial passage of California’s Fair Pay Act, California continues to fine tune existing pay equity and pay transparency laws. As of January 1, 2026, job postings must include the “good faith estimate” of the salary or wage range an employer expects to pay for the advertised position at the time of the candidate’s hiring. 2026 also brings longer statutes of limitation periods for employee wage discrimination claims, requires employers to separate pay data report information from employee personnel records, and mandates substantial court-imposed civil penalties for an employer’s failure to file an annual pay data report.
Narrower Pay Scale Disclosures
Current California law requires employers to provide pay scale information to applicants and current employees, upon request, and requires certain employers to include a pay scale in job postings. As previously reported, those requirements became effective on January 1, 2023.
As introduced earlier this year, SB 642 originally limited a pay scale to 10% above or below the mean pay rate within the salary or hourly wage range. While the 10% requirement was not adopted as part of the final law, as of January 1, 2026, California employers must define “pay scale” as the “good faith estimate of the salary or hourly wage range that [they] reasonably expect[] to pay for the position upon hire.” (Emphasis added to these new sections of the law). The new language seeks to limit wide pay ranges in job postings.
Broader Definition of Wages and Gender
SB 642 amends Labor Code Section 1197.5(l) to define “wages” and “wage rates” broadly. Beginning January 1, wages and wage rates includes “all forms of pay,” including:
- Salary
- Overtime
- Bonuses and profit sharing
- Stock and stock options
- Life insurance
- Benefits
The new definition further specifies “vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, [and] reimbursement for travel expenses.” Note, while employers need to consider all forms of compensation when evaluating pay decisions and conducting audits, there is not requirement to include compensation other than salary/hourly wage in the posted pay ranges.
The amended law also removes binary gender references consistent with the Fair Employment and Housing Act. The term “another sex” replaces “opposite sex” which broadly includes a person’s gender identity and “gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”
Longer Statute of Limitations Period
Current California law allows employees to bring wage discrimination claims against an employer to recover wages when the employee is paid less than an employee of another sex or race/ethnicity “for substantially similar work.” SB 642 increases the statute of limitations for wage discrimination from two years to three years after the last discriminatory pay act occurred, and up to four years for willful violations. Under the amended law, a cause of action occurs when:
- an unlawful compensation decision or practice is adopted,
- an individual is subject to same, or
- an individual is affected by application of same, including “each time wages, benefits, or other compensation is paid” and results from an unlawful decision or practice.
SB 642 also allows application of the continuing violations and discovery rule doctrines but limits any potential recovery to six years.
Updates to California Pay Data Reporting
California pay data reports are due on May 12, 2026. SB 464 imposes enhanced pay data obligations on private employers in 2026 and 2027. Under SB 464 for 2026:
- Employers must collect and maintain the demographic information for its pay data reporting obligations separate from employees’ personnel files.
- Penalties will become mandatory upon request by California’s Civil Rights Department for an employer’s failure to file the mandatory report, no longer subject to the court’s discretion. A first violation for failure to file will result in a civil penalty of $100 per employee. Subsequent violations will result in penalties up to $200 per employee. Note: if a labor contractor fails to file the report, the court may shift part of the penalty to the contractor.
Beginning January 1, 2027, California will abandon the federal EEO-1 job classification system for its annual pay data reports. As we previously reported here, current California law requires private employers with at least 100 employees anywhere (and one employee based in California) to file a “Payroll Employee Report.” Through 2026, the annual pay data report requires employers to submit, among other details, the number of employees “by race, ethnicity, and sex” in the 10 standard EEO-1 job categories.
However, beginning January 1, 2027, California will instead require employers to detail employee demographics by 23 job categories that mirror the federal Bureau of Labor Statistics’ major groups under the Standard Occupational Classification system. Employers will need to reassign roles to these categories.
Employer Takeaways
Review Job Postings. Employers should review all job postings entering 2026 to ensure pay scales are based on the actual position advertised, the candidate level sought for that position, and expected pay at the time of hire. Under the definition of pay scale set to take effect January 1, 2026, overly broad ranges designed to encompass all experience levels for a particular position will face increased scrutiny. The Labor Commissioner may order an employer to pay a civil penalty between $100 and $10,000 per violation and individuals may bring a civil action for injunctive and other relief.
Audit Personnel Files. Employers should audit employee personnel files to ensure demographic information used for federal and state agency reporting is maintained separate from other personnel records. In addition, as we recently reported, Chair Andrea Lucas of the U.S. Equal Employment Opportunity Commission (the agency tasked with collecting EEO-1 data) cautioned employers about the use of employee demographic data.
Assign Job Roles to the 23 Newly Designated Job Categories Well in Advance of the May 2027 Reporting Date.
Prioritize Privileged Pay Audits. Finally, in anticipation of future reporting deadlines, employers should continue to prioritize privileged pay equity audits to review and analyze employee pay data before reporting to agencies, who may use submitted data for potential enforcement action. These audits should be mindful of changes to the definition of “wages” and “wage rates.”
The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.