On October 8, 2025, California Governor Gavin Newsom signed the SB 642 into law. It takes effect on January 1, 2026 and amends the California Equal Pay Act and California Fair Pay Act in an effort to increase pay equity protections.
California and Colorado – Leaders in Pay Equity Legal Trends
California and Colorado have been leaders in pay equity laws over the last decade, often following the other’s legislative lead. In 2016, California’s Fair Pay Act went into effect, closing loopholes employers previously relied on to justify unequal pay between male and female employees and protecting employee discussion of wages. In 2019, Colorado enacted its Equal Pay for Equal Work Act (EPEWA), which included pay transparency provisions, making the state the first to require employers to provide pay scales for positions in job postings. EPEWA went into effect in 2021. Shortly thereafter, in 2022, California passed its pay transparency law, which became effective in 2023. It should not come as a surprise that California’s SB 642 comes only two years after Colorado amended its EPEWA to permit employees to recover wages extending back six years.
With these changes, California will exceed the protections of the federal Equal Pay Act. Notably, the federal Equal Pay Act only provides a statute of limitations of two years from the last unlawful pay discrimination practice, or three years for a willful violation. California will now permit employees to bring a cause of action against their employer for conduct occurring up to three years earlier, regardless of whether the conduct was willful.
Other states are following California’s and Colorado’s lead and are enacting efforts to achieve pay equity statewide. Fifteen states and Washington, D.C. have passed or enacted pay transparency laws on a statewide or local level. California, Colorado, Connecticut, the District of Columbia, Hawaii, Illinois, Maryland, Minnesota, Nevada, New Jersey, New York, Rhode Island, Vermont, and Washington all have statewide pay transparency laws. Massachusetts has passed a pay transparency law that will become effective on October 29, 2025. Several Ohio municipalities have enacted their own pay transparency laws.
New Definitions in SB 642 Expand Employee Protections and Employer Obligations
California’s pay transparency law already requires employers to provide a pay scale for all job postings. SB 642 now provides a definition of “pay scale,” requiring employers to provide “a good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.” This prevents employers from advertising speculative pay ranges that undercut the pay scale requirement.
SB 642 also expands the definition of “wages” as used in the pay transparency law and Fair Pay Act to clarify that the definition of wages for pay equity causes of action is the same as the federal Equal Pay Act and includes “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.” This revision expands the concept of pay equity beyond salary. Employers now must treat employees the same when it comes to stock options, work travel expenses and accommodations, and benefits. SB 642, however, does not require employers to include these types of compensation – aside from salary – in their posted pay scales.
SB 642 also adopts a nonbinary definition of “sex” as used in the pay transparency and wage disparity provisions. Previously, these provisions prohibited employers from paying employees of the “opposite sex” less for performing substantially similar work. These provisions now prohibit paying employees of “another sex” less for performing substantially similar work. This revision addresses wage disparities that exist between nonbinary employees and their male and female colleagues, affording nonbinary employees greater protection under the pay transparency law.
Extended Statute of Limitations for Violations of the California Fair Pay Act
SB 642 also expands the statute of limitations for violations of the Fair Pay Act, which requires employers to pay the same wages to employees performing similar work regardless of their race, ethnicity, or gender. The previous statute of limitations for this cause of action was two years, and employees were allowed to recover wages dating back two years. Come January 1, 2026, employees will be allowed to recover wages dating back six years for causes of action that accrued within the last three years.
According to the Act, a cause of action arises under Section 1197.5 when:
- An alleged unlawful compensation decision or practice is adopted.
- An individual becomes subject to the decision or practice.
- An individual is affected by the application of the decision or practice.
This addition to Section 1197.5 will make it easier for employers to determine whether a pay equity cause of action has accrued and whether it's time barred by the statute of limitations.
Key Takeaways and Considerations for Employers
Employers in California must be prepared to comply with the amendments before January 1, 2026. This includes:
- Reviewing current recruitment and hiring practices to ensure job postings comply with updated pay-scale requirements.
- Revising materials to include the revised definitions provided in SB 642.
- Reviewing company stock options, bonuses, and profit-sharing policies to assess whether they have created or may create any actionable unequal pay claims when considered together with employees’ base compensation.
If you have any questions, or would like additional information, please contact one of the attorneys on our Labor & Employment team.
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