California’s Pay Equity Laws for 2026, and What It Means for Business

Two California statutes that took effect on 1 January 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 substantial pay shortfalls that compound over an individual’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 considering long-standing wealth disparities.

Numbers like the foregoing are the reason that California 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 provisions 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 unlawful 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 accommodations, 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 requirement 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 existing pay reporting requirements designed to foster greater pay equity. It turns the annual pay-data report into a tool that the state’s Civil Rights Department uses to find pay disparities, and it makes the penalties for failing to file mandatory rather than optional. The information that your employer reports does not sit in a drawer; it goes to the same division that investigates discrimination and enforces equal-pay law.

You Can Now Recover Lost Wages Going Back Six Years

SB 642 lets you recover for the entire period that an unequal-pay violation persisted, up to six years, and it treats every discriminatory paycheck as a fresh violation.

That distinction is the heart of the change. Under prior formulations, a pay decision made years ago could be out of reach even though the employee continues to experience unequal pay. Under the bill, each paycheck issued under a discriminatory policy or practice restarts the clock, so a gap that has quietly persisted does not become untouchable in a lawsuit simply because it began long ago. The clock does not run out on your claims until three years after:

• your employer ends the discriminatory practice and begins paying you fairly; or
• you leave your employment.

It is worth looking at an example of how this could play out in practice. Suppose that two employees of different genders do substantially similar work under similar working conditions, and one is paid USD15,000 a year less than the other for reasons that have nothing to do with seniority, merit or any lawful non-discriminatory factor. Over six years, that amounts to USD90,000 in unpaid wages, before the law’s provisions for liquidated (double) damages, interest and other relief are even considered.

This example illustrates the scale and impact of the law, not an automatic result: the disparity has to be proven, and the employer’s defences still apply. However, it explains why a difference that looks small on a single paycheck is not small over time – and this is the case for an individual worker. If the employer adopts a similar discriminatory practice towards a large number of employees, when multiplied out, the losses and potential recoveries can reach many millions of dollars.

Your Bonus and Your Equity Count, Not Just Your Salary

For equal-pay claims, SB 642 now defines “wages” to reach nearly all compensation: bonuses, profit-sharing, stock, stock options and restricted stock units, allowances and most benefits – not base salary alone.

This closes a gap that has long hidden real disparities. Two employees can carry nearly identical salaries while a discretionary bonus or an equity grant stacked in favour of members of one gender opens a six-figure compensation difference between them. A comparison that looks only at base pay would show a false parity that does not exist. The point often lands hardest in the technology sector, where so much compensation arrives in the form of stock. This should not give employers licence, for example, to bestow sweetheart compensation deals on white men while withholding them from similarly situated members of other groups.

The authors’ own work in the sector, including a USD19.5 million settlement with Qualcomm on behalf of roughly 3,300 women in STEM, turned on exactly this principle: pay has to be compared in full.

Pay Must Be Based on Non-Discriminatory Factors That Cannot Include Prior Salary or Salary History

For several years, California has barred employers from setting your starting pay based on your salary history. See Cal Labor Code Sections 1197.5(a)(4) and 432.3(a). Indeed, to ensure compliance, employers are prohibited from even seeking salary history information from applicants. See Cal Labor Code Section 432.3(b). These provisions are based on the long-standing recognition that reliance on compensation history can often serve to incorporate and perpetuate past disparities. If your current pay was built on what you earned at a prior job, that history may be carrying an old disparity forward into your present salary. Instead, your pay must be based on your qualifications, experience and what you actually do in your job.

This is the primary theory at issue in Jong v Apple, an ongoing class action which alleges that, even after it became illegal to do so, Apple continued to enquire about applicants’ prior pay under the guise of their compensation expectations; it then used this information to set starting salaries. This practice allegedly perpetuated past pay disparities and resulted in lower pay rates for women than for men who performed substantially similar work. In January 2025, a court largely allowed the claims to proceed.

Two More Changes

SB 642 extends equal-pay protection to non-binary workers, and it requires employers to be honest in what they post.

The law used to speak of the “opposite sex”, a framing that left gender-diverse workers in an uncertain position. It now reaches pay disparities measured against “another sex”, and against gender identity and expression.

Separately, the salary range that an employer lists in a job posting must be a genuine good-faith estimate of what it expects to pay upon hire. A range so wide that it discloses almost nothing, such as the familiar “USD90,000 to USD250,000” posting, no longer satisfies the law. It is not sufficient to post a broad range generally associated with a position as opposed to the projected starting pay.

The Honest Part: A Pay Gap Alone Is Not Proof

A difference in pay, standing by itself, is not unlawful. The law asks whether that difference can be explained by common non-discriminatory factors.

This is the caveat that no responsible discussion should omit. If an employee proves that they suffer from a pay gap as compared to a similarly situated employee of a different sex/gender, race or ethnicity, an employer is still entitled to justify that pay difference as being the result of legitimate non-discriminatory factors. It can do show by showing that the difference stems from a bona fide seniority system, a merit system, a system that measures the quantity or quality of work, or another genuine factor other than sex/gender, race or ethnicity – such as education, training or experience – that is job-related and consistent with business necessity. SB 642 did not abolish those defences; thus, a pay differential does not, by itself, establish a case. It is a reason to look closely, with advice specific to your situation, as to whether the other employee is performing substantially similar work to you under similar conditions and whether there is some other legally acceptable justification for the difference. No worker should assume that a disparity is unlawful, or lawful, without an individualised legal analysis.

What to Do If You Think You Are Underpaid

If you suspect that your pay does not reflect equal work, a few concrete steps protect your position.

Identify your comparators

Note your colleagues doing substantially similar work, measured by the skill, effort and responsibility the job requires, under similar conditions.

Account for all of your pay

Compare total compensation, salary, bonus, equity and benefits, not base salary alone.

Gather what you can

Relevant evidence includes offer letters, pay stubs, bonus and equity statements, performance reviews, and job postings with their stated ranges. However, you should generally only assemble documents that are publicly available or that are provided to you in the ordinary course of applying for over-performing your job.

The law protects you from retaliation for disclosing your own wages to your employer or to other employees, discussing the wages of others, enquiring about another employee’s wages, or aiding or encouraging any other employee to exercise their rights under California’s Equal Pay Act. If you are fired, discriminated against, or otherwise retaliated against for exercising these rights, you may have a claim for retaliation regardless of whether or not you have a valid claim for unequal pay. See Labor Code Section 1197.5(k).

Mind the clock

The limitations period is three years from the last violation, with potential recoveries going back up to six years. Waiting narrows your options.

Get individualised advice

An equal-pay analysis is fact-specific, and much of it is best done under the protection of the attorney-client relationship.

Frequently Asked Questions

How do I know whether I am being underpaid under California law?

Employees should compare their total compensation to that of colleagues of a different sex/gender, race or ethnicity doing substantially similar work, then ask whether any difference rests on a lawful factor such as seniority, merit or experience. A gap that cannot be explained that way may support a claim for discriminatory pay.

How far back can I recover for unequal pay in California?

SB 642 allows recovery for the entire period that a violation persisted, up to six years. The deadline to file is three years from the date of the last violation.

Do stock options and bonuses count when comparing pay?

For claims under Labor Code Section 1197.5, “wages” do now include bonuses, stock, stock options and Restricted Stock Units (RSUs), profit-sharing, allowances and most other benefits – not salary alone.

Is a pay gap by itself illegal?

A pay gap by itself is not illegal. The law permits pay differences that rest on a bona fide seniority, merit or production system, or a genuine factor other than sex. A disparity is unlawful only when no such justification accounts for it.

What if my employer set my pay using my prior salary?

California bars employers from relying on salary history to set pay. A starting salary built on lower past earnings can carry an old disparity forward, which is one of the practices the new law and recent litigation are testing.

Am I protected from retaliation?

Labor Code Section 1197.5(k) protects employees from retaliation for actions that they take in support of enforcement of the Equal Pay Act. This would include complaints about unequal pay, disclosures or discussions about pay, enquiring about other employees’ pay, and aiding or encouraging other employees with potential equal pay claims. Other provisions of the Labor Code, anti-discrimination laws and labour relations law may also protect employees from retaliation for making complaints or reports of pay discrimination, or for discussing pay.