New California Laws 2026
SB 642: Raises the bar on pay equity and employer accountability
By Ryne C. Posey and Anthony E. Guzman II C alifornia has spent the past decade tightening the rules around pay equity—strengthening the state’s Equal Pay Act, banning salary histo- ry inquiries and mandating pay scale transparency. But even with those reforms, pay data shows that dis- parities stubbornly remain while the rate of change slows. SB 642 seeks to address perceived structural gaps in California law. This time, the Legislature’s focus is not just on what employees are paid, but how employers’ pay structures are built and enforced. To get there, California starts by reworking the ba- sics. Until now, California’s pay equity laws left just enough ambiguity to invite confusion and practices that did little to promote real pay transparency. SB 642 confronts these issues by refining and expand- ing several foundational definitions, including: Pay scales: Previously, Labor Code § 432.3 re- quired employers to post what they “reasonably ex- pect[ed] to pay for the position”—a formulation that resulted in some employers posting broad annual compensation ranges untethered to their actual pay practices. To combat this practice, SB 642 will now require “a good faith estimate” of what employers ex- pect to pay “upon hire.” Pay parity: Labor Code § 1197.5 prohibited wage disparities but arguably failed to address other po- tentially discriminatory pay practices involving cer- tain employee compensation and benefits. SB 642 addresses that perceived gap through a section-spe- cific definition of “wages” encompassing “all forms of pay,” including, but not limited to, salary, overtime, bonuses, stock, stock options, profit-sharing plans, life insurance, vacation and holiday pay, cleaning and gas allowances, travel reimbursements and benefits. A biased binary: Labor Code § 1197.5 also de- fined protections in relation to the “opposite sex,” which SB 642 now substitutes with “another sex,” while extending wage protections to gender identity and expression. To bolster enforcement, SB 642 also expands the statute of limitations and recovery period—employ-
ees can now file for up to three years after a cause of action accrues and recover for the entire period they were subject to the disparate pay practice, up to a six- year maximum. Combined with the statute’s existing remedies—including double damages and attorneys’ fees—the cost of missteps can be significant, posi- tioning California’s equal pay regime as a potential focal point for high-stakes litigation. SB 642’s broadened scope may also increase pres- sure from both current and former employees, in- cluding through: Internal visibility: Once posted ranges reflect more realistic “upon hire” offers, employees who see new hires earning close to—or above—their own pay may respond with resentment or formal complaints. Equity’s force multiplier: Including equity in the wage calculation means past disparities in stock or option grants would now appreciate up to six years. At high-growth companies, potential disparities in equity grants can quickly turn small gaps at grant into substantial liability today, even before liquidated damages are considered. SB 642 seeks to raise the bar by closing perceived structural gaps in California’s pay equity laws and expanding liability. But more importantly, it signals a dual mandate: one that sees California policing not just pay outcomes, but also the systems that create them. Ryne C. Posey is a partner, and Anthony E. Guzman II is an associate at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates.
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