Hunton Employment & Labor Perspectives

S.B. 642, the Pay Equity Enforcement Act, brings significant changes to California’s pay transparency and pay discrimination laws. Signed by Governor Gavin Newsom on October 8, the law takes effect January 1, 2026, and is poised to reshape employer obligations statewide.

The new law amends two separate sections of the California Labor Code. First, Section 432.3, which governs pay transparency, now requires job postings to include a “good faith estimate” of the salary or hourly wage range expected for each position “upon hire,” rather than for the position generally. This means employers must now disclose what they expect to pay a new hire for the position on day one rather than expected pay for the position as a whole.

S.B. 642 also expands the rights of workers to sue and recover damages for pay discrimination. Under revised Section 1197.5, employees now have three years (up from two) to file claims for pay bias based on sex, race, or ethnicity. Under a continuing violations theory, employees will also be able to recover lost pay for up to six years of an unlawful pay practice, doubling the previous three-year limit. The law also now prohibits an employer from paying wages to an employee that are less than an employee of “another sex” (rather than the previous “opposite sex” language) to encompass non-binary genders and redefines “wages”, for purposes of assessing a wage differential among employees, to include all forms of pay such as “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.”

As California continues to strengthen pay equity laws, employers may benefit from proactively reviewing compensation practices to audit for wage differentials across job categories and compensation types to mitigate against lawsuits. The six-year damages period also creates new recordkeeping challenges, as companies may need to retain payroll records longer than previously required.

Employers also should review and update (as needed) job postings and pay structures, and plan for longer-term record retention requirements.