The 2026 changes to the Equal Pay Act double available damages and expand the scope of compensation at issue in such a claim, as detailed in our prior update. Now that employers are no longer busy with annual evaluations, bonus payments, and other beginning of the year obligations, employers should focus on mitigating Equal Pay Act exposure by documenting the rationale underlying pay decisions and completing privileged audits to identify and reduce risk.
2015 – 2025: Ten Years of Expanded Employer Equal Pay Obligations
California’s Equal Pay Act has been on the books for decades. For much of that time, the law prohibited employers from paying employees performing equal work less than their colleagues of the opposite sex. But that original framework required the comparator employee(s) to perform equal work at the same establishment, and few plaintiffs were able to meet this high bar.
Starting in 2016, the Fair Pay Act lowered the prior standard for establishing a claim. Now, instead of comparing equal work, the amended statute requires only that employees perform “substantially similar work,” defined as “a composite assessment of skill, effort, and responsibility performed under similar working conditions.” The amendment also eliminated the requirement that the comparator employee(s) work at the “same establishment” work location. This change broadened the scope of potential comparator employees, making it easier for a plaintiff to bring a claim.
The 2016 amendment also made the “bona fide factor other than sex” defense significantly more demanding. Employers can still invoke factors such as education, training, or experience to justify a pay differential. Now, however, employers must demonstrate that those factors are job-related, consistent with a business necessity, not derived from a sex-based factor, and — critically — that they account for the entire wage differential. The amendments also required employers to keep records for three years instead of two and made it unlawful for employers to prohibit workers from inquiring about or discussing each other’s wages.
One year later, Governor Brown signed a bill extending the Equal Pay Act’s protections to cover race and ethnicity as well. The 2017 amendment also prohibited employers from using an employee’s prior salary to justify any pay difference. In 2018, California enacted Labor Code section 432.3 which prohibits employers from seeking applicants’ salary history information, and required employers to provide pay scales upon applicants’ requests.
Starting in 2023, any employer with 15 or more employees was required to include the pay scale for a position directly within any job posting itself, including direct and agency/job board postings. Pay scale included the salary or hourly wage range the employer reasonably expects to pay, excluding bonuses, tips, or other supplemental compensation. Critically, the Labor Commissioner has interpreted this requirement to apply to any position that may ever be filled in California, whether in-person or remotely.
2026 Revisions Vastly Expanded Damages and Relevant Compensation
As of January 1, 2026, SB 642 modified Labor Code 1197.5, replacing the statute’s prior reference to employees of the “opposite sex” with the gender-neutral “another sex.” Most significantly, the updates to Labor Code 1197.5, “wages” and “wage rates” now encompass “all forms of pay” — including, but not limited to, salary, overtime, bonuses, stock, stock options, profit-sharing arrangements, life insurance, vacation and holiday pay, expense allowances, travel reimbursements, hotel accommodations, and benefits. SB 642 does not include this definition in Labor Code section 432.3’s job posting requirement, but clarified that employers must post a “good faith estimate” of the salary or hourly wage range reasonably expected “upon hire.”
SB 642’s most consequential change is to the statute of limitations and the scope of available relief. Prior to January 1, 2026, a plaintiff asserting an equal pay violation was required to file within two years of the cause of action (three years for a willful violation) and damages were correspondingly capped at two or three years of back wages. The amended statute extends the limitations period to three years for all violations—triggered by the last violation, not when the pay practice was adopted. Plaintiffs can also seek damages from up to six years prior to filing. See Cal. Lab. Code § 1197.5.
Damages have essentially doubled, and the expanded definition of “wages” both broadens the scope of any equal pay audit and correspondingly enlarges the categories of compensation subject to litigation exposure. Employers should document the education, training, or experience to justify employee pay rates at the time of hire or promotion. Employers should also work with internal or external counsel to conduct routine, privileged, wage audits to minimize risk.