What's Happening?
Governor Newsom has signed SB 642, known as the Pay Equity Enforcement Act, into law, which introduces significant amendments to California's Equal Pay and Pay Transparency laws. Effective January 1, 2026, these changes include a broadened definition
of 'pay scale' and 'wages', an extended statute of limitations for claims, and specific categories of unlawful practices. The law now requires employers to provide a 'good faith estimate' of salary or wage ranges upon hiring, rather than a general estimate for the position. Additionally, the definition of 'sex' has been expanded to include non-binary genders, ensuring equal compensation for substantially similar work across all gender identities. The amendments also extend the time for employees to bring claims under the Equal Pay Act to three years, with potential recovery for up to six years of violations.
Why It's Important?
The amendments under SB 642 are crucial for promoting gender pay equity in California, impacting employers with 15 or more employees. By mandating transparency in pay scales and expanding the definition of wages, the law aims to close the gender pay gap and ensure fair compensation practices. Employers must now consider all forms of compensation, including bonuses and stock options, in their pay equity assessments. This legislation reflects a broader societal push towards inclusivity and fairness in the workplace, potentially influencing similar legislative efforts in other states. Employers who fail to comply may face legal challenges, making it imperative for them to update their pay policies and practices to align with the new requirements.
What's Next?
Employers in California need to prepare for the implementation of SB 642 by January 1, 2026. This involves revising job postings to include the required pay scale information and ensuring that all forms of compensation are equitably distributed across genders. Legal and HR departments will need to review and possibly overhaul existing pay policies to prevent potential violations. As the law takes effect, it is likely that there will be increased scrutiny and potential litigation regarding pay practices, prompting employers to proactively address any disparities. The broader implications may also lead to increased advocacy and legislative action in other states, as the push for gender pay equity gains momentum nationwide.
