Legislation | California heightens pay transparency rules, employers urged to review compensation structures

California Governor Gavin Newsom has approved Senate Bill 642, extending the statute of limitations for pay transparency claims to three years and introducing a six-year look-back period for existing violations.

The measure defines “pay scale” as a “good faith estimate” of expected salary or hourly wages upon hire. It also broadens the term “wages” to include all forms of compensation, from salaries and bonuses to stock, stock options, and benefits.

The legislation builds on California’s 2022 Equal Pay Act, which required employers with fifteen or more workers to include pay ranges in job postings and to provide pay scale details to employees upon request.

Under the revised law, a cause of action arises when an unlawful compensation decision is made, when an individual becomes subject to such a decision, or when they are affected by it. The law clarifies that employees can seek relief for up to six years where a violation continues to exist.