Equal Pay, Pay Transparency, and Pay Data Reporting

By Kevin M. Brown and Alexandra Wallin

Each year, the California Legislature’s hard work to pass new bills often creates new obligations or refined directives for employers. These changes, which can present new challenges, serve as a reminder to refresh and review current practices. Two specific bills that passed and took effect, in part, at the start of the year, directly impact pay-related regulations and specific reporting.

Senate Bill 642

Senate Bill (S.B.) 642 amended the state’s existing equal pay law requirements, including by (1) revising the definition of “pay scale”; (2) expanding the statute of limitations for pay equity claims; (3) extending the time period for lost wages during the time violation; and (4) expanding the definitions of “sex” and “wages” under California’s Equal Pay Act.

Revised Definition of “Pay Scale”

California law requires employers to provide pay scale information to an employment applicant. Employers with 15 or more employees are also required to include a position’s pay scale in any job posting. S.B. 642 revised the definition of pay scale 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.” This revision indicates that rather than providing a general pay scale for the position, an employer should consider providing the applicant with the salary or wage range expected on the employee’s first day of employment. With this revised definition, including expected pay ranges in job postings or upon inquiry for the pay ranges upon hire is required.

Lengthened Statute of Limitations and Extended Time Period for Violations

S.B. 642 extended the statute of limitations period for an Equal Pay Act claim from two years to three years from the alleged violation date. The look-back period was also increased; an employee is now “entitled to obtain relief for the entire period of time in which a violation … exists, but not to exceed six years.” Consequently, employers should consider maintaining pay scale, pay equity, and other wage and hour records for at least six years.

Expanded Definitions of “Sex” and “Wages”

California law prohibits pay disparities based on sex for work performed in a substantially similar manner, and S.B. 642 expanded the definition of sex to prohibit differing pay for “employees of another sex.” Additionally, the legislature broadened S.B. 642 to include “all forms of pay,” including salary, overtime, bonuses and bonus plans, stock and stock options, profit sharing, life insurance, vacation pay, holiday pay, cleaning or gasoline allowances, hotel accommodations, benefits, and travel expense reimbursements. (The bill explicitly outlines that this definition of wages is only applicable to Labor Code section 1197.5 and all other Labor Code sections.) Given this expanded definition, employers may want to perform pay equity audits to ensure that they pay all forms of compensation equally across sexes. 

Senate Bill 464

California law requires certain employers (generally private employers with 100 or more employees) to submit annual pay reports to the California Civil Rights Department. Under Senate Bill S.B. 464, employers reporting pay data must collect and store demographic information obtained for reporting separately from the employees’ personnel records. Based on this update to existing law, employers should consider taking the time to ensure that demographic information collected for pay reporting purposes is properly segregated and maintained wholly separate from the employees’ personnel files, with the appropriate accessing restrictions in place.

Not only do employers need to be aware of properly reporting and separately storing data, but they should also consider how to ensure that they report comprehensive data. Senate Bill 464 expands the job categories that need to be covered in the employer’s pay data report, including by increasing the specified occupational categories from 10 to 23. Starting January 1, 2027, pay data reporting will include information on the number of employees by race, ethnicity, and sex in the following occupational categories: chief executives; management occupations (excluding chief executives); business and financial operations; computer and mathematical; architecture and engineering; life, physical, and social science; community and social science; legal; educational instruction and library; art, design, entertainment, sports, and media; healthcare practitioners and technical; healthcare support; protective service; food preparation and serving-related occupations; building and grounds cleaning and maintenance; personal care and service; sales and related; office and administrative support; farming, fishing, and forestry; construction and extraction; installation, maintenance, and repair; production; and transportation and material moving. As we enter the second half of 2026 and near the effective date for the expanded reporting categories, employers may want to start collecting information for these additional occupational categories and map job architecture for the new special occupational categories.

An additional change to California law created by S.B. 464 concerns civil penalties. Under the new law, a court is required to impose a civil penalty on employers that fail to file the pay data reports if the Civil Rights Department requests the penalty. This change, which creates a mandatory penalty, increases potential exposure for employers and can result in increased costs associated with a failure to comply. Thus, employers may want to review their compensation plans and job-posting policies to ensure compliance, as well as continue collecting requisite pay reporting data and timely comply with any pay reporting obligations.

For guidance on ensuring compliance with current and upcoming legal requirements, employers should contact counsel.