California Tightens Pay Transparency: What Employers Need to Know About SB 642 and SB 464

California continues to expand its pay equity and transparency framework through robust reporting obligations, increasing potential exposure for non-compliance. Among these are two notable legislative amendments to the California Equal Pay Act, Senate Bill (SB) 642 and SB 464 signed into law by Governor Gavin Newsom on October 8.

What Does California’s Equal Pay Act Entail?

Under California Labor Code § 432.3(e), employers are prohibited from seeking or using an applicant’s salary history, including compensation and benefits, in the hiring process. Specifically, an employer may not request an applicant’s salary history and may not rely on such information in deciding whether to extend an offer or what compensation to offer, unless the applicant voluntarily and without prompting discloses that information. In addition, an employer may not rely on prior salary, by itself, to justify any pay disparity based on sex, race, or ethnicity. Employers must also provide the pay scale for a position to an applicant upon a reasonable request.

What Are California’s Pay Data Reporting Obligations for Employers?

Private employers with 100 or more employees, as well as those with 100 or more workers hired through labor contractors, are required to comply with annual pay data reporting requirements administered by the California Civil Rights Department (CRD).

Covered private employers must submit detailed pay data reports to the CRD on an annual basis. The 2024 reporting deadline is May 14, 2025. This reporting obligation applies to one or both of the following.

1. Private employers with 100 or more payroll employees (provided they have at least one employee in California).

2. Private employers with 100 or more workers hired through labor contractors (at least one labor contractor in California).

Employers must report pay, demographic, and other workforce data for both payroll employees and labor contractor employees, as applicable. The required data includes, but is not limited to, employee job categories, pay bands, race/ethnicity, and sex. Reports must be submitted electronically through the CRD’s designated portal.

Please see our previous alert on SB 1162 here.

What Is SB 642?

SB 642 establishes a three-year statute of limitations for civil actions alleging violations of the state’s pay transparency requirements, with a six-year “look-back” period to obtain relief for an existing violation. The legislation also clarifies that the “pay scale” employers must disclose in job postings is defined as a “good faith estimate” of the expected compensation and expands the definition of “wages” to include all forms of compensation, such as stocks and stock options. SB 642 is effective as of January 1, 2026.

What Is SB 464?

SB 464 updates California’s employer pay data reporting law enforced by the CRD. It preserves the existing annual reporting framework for private employers with 100 or more employees and makes three notable changes.

1. Requires employers to separate demographic data from personnel files.

2. Beginning January 1, 2027, requires employers to classify employees using the federal Standard Occupational Classification (SOC) system and assign each employee to one of 23 SOC categories, eliminating reliance on EEO‑1 job categories for this purpose.

3. Authorizes courts to impose civil penalties for non‑filing when requested by the CRD.

How Do These Requirements Apply to Remote Employees?

For businesses that operate outside of California but have remote employees who work in California, or for employers that have employees in California who render services nationwide, the Labor Commissioner has clarified that the pay scale must be included in the job posting if the position may ever be filled in California, either in-person or remotely.

What Happens if an Employer Fails to Comply?

California’s pay transparency law imposes additional obligations on employers, including requirements to provide pay scale information to applicants and employees. Notably, the law now authorizes private parties to bring civil actions for violations. This private right of action, combined with the expanded definitions and extended relief period as per SB 642, significantly increase the risk of litigation and underscores the importance of strict compliance with both reporting and transparency requirements.

Key Takeaways for Employers

Employers subject to California’s pay data reporting and pay transparency laws may want to consider the following.

• Review workforce data collection and reporting processes to ensure timely and accurate submission by the May 14, 2025, deadline.

• Evaluate compliance with pay scale disclosure requirements and related transparency obligations.

• Assess risk exposure and consider implementing or updating internal policies and training.

Employers are encouraged to consult with their AFS attorney to address compliance strategies and mitigate potential liability under California’s evolving pay equity and transparency landscape.