USA – CALIFORNIA Trends and Developments Contributed by: Sanford Heisler Sharp McKnight, Sanford Heisler Sharp McKnight
California’s Pay Equity Laws for 2026, and What It Means for Business Two California statutes that took effect on 1 Janu - ary 2026, SB 642 and SB 464, changed how pay is measured, how far back employees can recover, and what employers have to disclose regarding pay. If you have ever wondered whether you are paid fairly, the law now gives you more room to find out. The wage gap is not an abstraction. It has persisted over decades and imposed distinct disadvantages on working women and their families, resulting in sub - stantial pay shortfalls that compound over an individ - ual’s work life. According to certain published figures , white women in the United States are paid roughly 81 cents for every dollar paid to white men; for black women the figure is about 64 cents, and for Latinas about 55. Disparities based on race and ethnicity can be just as striking and detrimental – especially con - sidering long-standing wealth disparities. Numbers like the foregoing are the reason that Califor - nia has spent a decade building one of the country’s strongest equal pay regimes, embodied in laws such as Labor Code Section 1197.5, and the reason that it strengthened that regime again this year, at the very moment that federal enforcement was receding. For an employee, the practical question is narrower and more personal: what do these new and expanded pro - visions actually give you? The short answer is more time to bring claims, a fuller measure of what counts as pay recoverable in a lawsuit, and better information to work with. What Actually Changed California passed two key bills in relation to pay equity in 2025, and both took effect on 1 January 2026. SB 642 , the Pay Equity Enforcement Act, amended the state’s Equal Pay Act, Labor Code Section 1197.5 and its pay transparency and salary history law, Labor Code Section 432.3. SB 642 makes four important changes worth knowing as a California employee, as follows. It extends the time to bring an equal-pay claim from two years to three after the last date that the cause of action occurs. It also defines when a cause of action
occurs in a broad, employee-friendly manner. This includes when any of the following occur: • an alleged unlawful compensation decision or other practice is adopted; • an individual becomes subject to an alleged unlaw - ful compensation decision or other practice; or • an individual is affected by application of an alleged unlawful compensation decision or other practice, including each time wages, benefits or other compensation are paid, resulting in whole or in part from the decision or other practice. Further, as long as you bring the claim within three years of the last date that a cause of action occurs, such as the last time you receive a discriminatory paycheck or other form of compensation, you can now obtain relief for lost compensation going back six years . SB 642 also redefines “wages” to include “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 accom - modations, reimbursement for travel expenses, and benefits”. This means that a sex/gender-based, race- based or ethnicity-based differential in any one of these areas can potentially give rise to a claim. Furthermore, SB 642 replaces “opposite sex” with “another sex”, ensuring that the law’s protections apply to non-binary workers and to gender identity and expression. Likewise, it incorporates by reference the definition of “sex” from Cal Govt Code 12926 (r), which encompasses gender identity and expression as well as pregnancy, childbirth, breastfeeding and related medical conditions. Moreover, SB 642 refines and strengthens the require - ment for employers to post a good-faith pay range for a position, by now requiring “a good-faith estimate” of the range that the employer expects to pay upon hire. SB 464 amends Cal Govt 12999 as of 1 January 2026, and then repeals and replaces Govt Code 12999 as of 1 January 2027. The bill is aimed at employers, but it matters to employees’ compensation by enhancing
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