More Equal Pay Act Amendments Passed

You may have heard of Disney’s recent Equal Pay Act lawsuit, where the company agreed to a $43.25 million settlement to resolve claims that it underpaid female employees in California. On October 8, 2025, Governor Newsom signed SB 642, amending California’s Equal Pay Act, which for decades has prohibited paying an employee less than employees of the opposite sex for equal work.

Effective January 1, 2026, SB 642 expands on Equal Pay Act protections by clarifying pay transparency requirements, making the law inclusive to non-binary workers, and extending the time period for employees to recover damages for violations.

What is the Intention of California’s Equal Pay Act?

The Equal Pay Act prohibits employers from paying any of their employees wage rates that are less than what it pays employees of another sex, race, or ethnicity for substantially similar work, when taking into account skill, effort, and responsibility, and work performed under similar conditions.

An employer can defeat an Equal Pay Act claim by proving that the difference in pay for substantially similar work is due to:

• seniority;
• merit;
• a system that measures production; and/or
• a “bona fide factor other than sex, race, or ethnicity,” such as a reason that is job-related and consistent with business necessity.

What are the New Protections for Employees?

The Equal Pay Act’s language has been amended to prohibit paying an employee less than employees of “another sex” for substantially similar work. References to “the opposite sex” have been removed. This change is consistent with other antidiscrimination laws and signals that non-binary workers are also protected.

The term “wages” and “wage rates” were revised to include “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 and gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.”

SB 642 makes major changes to the statute of limitations. Currently, Equal Pay Act claims in court are valid two or three years after the cause of action occurs, depending on whether the violation is “willful.”  The amendment changes this to three years from the last date the cause of action occurs for all claims, regardless of willfulness, and provides that an employee may recover for the entire period of time a violation existed, up to 6 years!  SB 642 also clarifies when a cause of action “occurs” – confirming that each time wages, benefits, or other compensation is paid under an unlawful compensation decision or practice is an occurrence.

Example:  Assume employer has two employees, of different races, performing substantially similar work and both employees were hired at the same time. Six years ago, employee A received a raise and employee B did not, without any justification for the difference in pay. Over time, employee B continued to be paid less than their peer for substantially similar work, including within the last three years. Employee B’s claim would be timely because the violation occurred within the last three years, and the amended law allows the employee to recover damages back to six years ago when the initial pay disparity started.

Although California employers are required to retain payroll records for up to four years, we now recommend holding on to payroll records and any records related to salary decisions for up to six years, based on this change in the law.

What are the Pay Transparency Requirements?

California employers must provide the pay scale to any employee for their position, or to an applicant for the position they applied for, upon request.  And, employers with 15 or more employees must also include pay scales in job postings.

Good News!  SB 642 amends the definition of pay scale to clarify that it is an estimate of the expected wage range that an employer reasonably and in good faith expects to pay for the position upon hire. This means businesses may just disclose the starting salary range, instead of the entire range for a position!

How Should Employers Respond?

In addition to updating pay scale records and job postings, it is crucial for employers to audit their equal pay practices and ensure employees of all races, ethnicities, and sexes are being paid equally for substantially similar work. CEA members may call us with questions at 800.399.5331.