California is doubling down on workplace equity. Starting January 1, 2026, three new laws will reshape how employers handle pay transparency, data reporting, and wage-theft enforcement.
Equal Pay Act Updates (SB 642)
The Pay Equity Enforcement Act refines California's Equal Pay Act to better align with federal standards and broaden protections for workers.
Under the new law, employers must ensure that all pay scales listed in job postings accurately reflect the wage range they reasonably expect to offer at the time of hire. The definition of “wages” now includes all forms of compensation. This includes bonuses, equity awards, vacation pay, insurance, and other benefits. The goal is to ensure greater consistency and fairness across compensation structures.
In addition, references to “opposite sex” have been replaced with “another sex,” reinforcing inclusive protection for all gender identities. Employees will now have three years to file a civil action and can recover up to six years of back pay, giving them more time and opportunity to seek relief.
Expanded Pay Data Reporting (SB 464)
California's pay transparency rules are also becoming stricter, with more detailed reporting requirements and mandatory penalties for non-compliance.
Employers must now store demographic data separately from personnel files to safeguard employee privacy. The state's Civil Rights Department will impose civil penalties of $100 per employee for an initial failure to file and $200 per employee for repeated offenses.
Looking ahead to 2027, the number of job categories in pay data reports will expand from 10 to 23, offering a more detailed and accurate view of pay practices across industries and roles.
To prepare, employers should review their pay-reporting systems, ensure demographic data is securely stored, and begin adapting to the new categorization framework before it takes effect.
Wage Theft Enforcement for Tips & Gratuities (SB 648)
The Labor Commissioner will soon have expanded authority to investigate, cite, and pursue civil actions in cases involving unlawfully withheld tips or gratuities. This change closes previous enforcement gaps and offers stronger protections for workers in tipped industries such as hospitality, food service, and personal care.
Employers should review tip pooling, distribution, and record-keeping policies now to ensure they align with the new enforcement standards taking effect in 2026.
Next Steps for California Employers
With these reforms on the horizon, employers should start preparing early to avoid compliance risks. Begin by auditing pay ranges to ensure all forms of compensation are included, updating data-reporting and storage systems, and training HR teams on the new enforcement requirements.
These updates mark another step forward in California's commitment to transparency and worker protection. By preparing now, employers can stay ahead of the changes and ensure compliance when the new laws take effect.