California’s Pay Equity Rules Continue to Sharpen

California employers should revisit compensation practices in light of Senate Bill 642, which updates California’s equal pay and pay scale rules effective January 1, 2026.

The law makes several important changes. It revises “pay scale” to mean a good-faith estimate of the salary or hourly wage range the employer reasonably expects to pay for the position upon hire. It also extends the time period for certain equal pay claims and allows recovery for the full period of a violation, up to six years.

The message for employers is clear: compensation decisions need to be explainable, consistent, and documented.

Job postings should continue to include pay ranges that reflect what the employer actually expects to pay. Ranges that are artificially broad, outdated, or disconnected from the position may create unnecessary risk.

Employers should also review internal pay practices. California’s Equal Pay Act focuses on substantially similar work, considering skill, effort, responsibility, and working conditions. Lawful pay differences may still be based on factors such as seniority, merit, production, education, training, or experience, but those factors must be applied reasonably and must account for the entire wage difference.

That means employers should not wait until a claim is filed to figure out why two employees are paid differently. The better practice is to document compensation factors when pay decisions are made.

A practical compliance review should include:

• current job descriptions;

• posted pay ranges;

• starting pay decisions;

• raise and bonus criteria;

• title and wage history records;

• manager discretion in setting pay; and

• any unexplained disparities between employees doing similar work.

Pay equity compliance is not about making every employee’s compensation identical. It is about making sure differences are lawful, job-related, consistently applied, and supported by records.

For employers, the best defense is a compensation system that makes sense before anyone challenges it.