Highlights
Impacted Employers:All employers with employees in California>
Effective Date:January 1, 2026
Summary:California has enacted legislation that clarifies the definition of “pay scale” under the state’s requirement to disclose compensation information to applicants and employees.
Next Steps:Review policies, practices and training to ensure compliance with the changes. See details below.
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The Details
Background
Under Section 432.3 of the Labor Code, all employers must do the following upon request:
· Provide an applicant with the pay scale for the position for which they applied (even before the initial interview).
· Provide an employee with the pay scale for their current position.
An employer with 15 or more employees must also include the pay scale for a position in any job posting. If the employer engages a third party to announce, post or publish a job posting, the employer must provide the pay scale to the third party. The third party is required to include the pay scale in the job posting.
For the purposes of Section 432.3 of the Labor Code, “pay scale” is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position.
Senate Bill 642
Effective January 1, 2026, Senate Bill 642 amends Section 432.3’s 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.
Other Changes
Senate Bill 642 also makes changes to the state’s equal pay provisions under Section 1197.5 of the Labor Code. Effective January 1, 2026, Senate Bill 642 amends Section 1197.5 of the Labor Code to:
· Prohibit an employer from paying employees at wage rates less than the rates paid to employees of “another sex” (rather than the “opposite sex,” as is the case under existing law) for substantially similar work.
· Extend the time in which individuals may commence a civil action to recover wages under Section 1197.5 from two years to three years after the last date the cause of action occurs.
· Entitle individuals to obtain relief under the equal pay law for the entire time in which a violation exists, provided it is six years or less.
· Specify that a cause of action under the equal pay law occurs when an alleged unlawful compensation decision or practice is adopted, when an individual becomes subject to the decision or practice, or when an individual is affected by the application of the decision or practice.
· Clarify the definition of certain terms used in the law. For example, for the purposes of the equal pay provisions, the definition of “wages” and “wage rates” includes 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. See the text of Senate Bill 642 for details.
Next Steps
Review policies, practices and training to ensure compliance with the amended laws.