California's pay transparency requirements just got tougher. Starting January 2026, those broad salary ranges won't work anymore—the state wants ranges that reflect what you'll actually pay. 

Plus, employees can now challenge pay inequities going back six years instead of two. 

Whether you're scrambling to comply or already posting ranges, these changes affect how you hire, pay, and communicate with your workforce.

California Pay Transparency Laws - At a Glance

What Does California's Pay Transparency Law Require Today?

Salary range posting requirements (SB 1162 + SB 642)

Current requirements (effective January 2023)

• Organizations with 15+ employees must include pay scales in all job postings, whether posted internally, on company websites, or through third-party platforms. 
• The range must show the salary or hourly wage the employer "reasonably expects to pay" for the position.

Every posting needs specific numbers—"competitive salary" or "DOE" won't work. 

What changes in January 2026

• SB 642 tightens the definition significantly. Your posted range must reflect what you "reasonably expect to pay at the time of hire"—not a theoretical span covering everyone from entry-level to senior.
• Those $80,000–$180,000 ranges that technically cover the whole department are out. If you're actually planning to hire someone around $120,000, your range might be $110,000–$130,000. The state wants ranges that give candidates real information, not legal cover for any salary decision.

Pay data reporting

Who must file

• Private employers with 100+ employees nationwide (with at least one employee in California) must submit annual pay data reports to the California Civil Rights Department. 

Count everyone: full-time, part-time, temporary workers—if they're on your payroll during the snapshot period, they're included.

Reporting requirements and deadlines

• Submit your report by the second Wednesday of May each year, covering the prior calendar year. 
• You'll need to capture data from a single pay period between October 1 and December 31 as your "snapshot."

The report breaks down your workforce by:

• Ten standardized job categories (Executive, Professional, Technician, etc.)
• Race, ethnicity, and sex
• Pay bands showing distribution of compensation
• Mean and median hourly rates for each demographic group within each job category

Multiple establishments require separate reports for each location. 

Penalties for non-compliance

• First-time violations: $100 per employee 
• Subsequent violations: $200 per employee 

A 500-employee company missing the deadline? That's a potential $50,000 fine, plus court-ordered compliance.

Equal pay for substantially similar work

The "substantially similar" standard

California doesn't require identical job titles for equal pay claims. Employees doing "substantially similar work"—measured by skill, effort, responsibility, and working conditions—must receive equal pay regardless of gender, race, or ethnicity.

A Marketing Coordinator and Marketing Specialist doing comparable work? They should earn similar wages. Different titles or departments don't shield you from liability if the actual work is substantially similar.

Employer's burden of proof

When an employee raises a pay disparity claim, you must prove the entire wage differential is based on legitimate factors:

• Seniority systems
• Merit systems
• Systems measuring quantity or quality of production
• Bona fide factors like education, training, or experience

These justifications must be applied reasonably and consistently. "We paid them what they asked for" isn't a defense. Neither is "that's what they made at their last job."

Expanded definition of wages (2026)

Starting January 2026, "wages" for equal pay claims include all forms of compensation: salary, hourly wages, overtime, bonuses, stock options, profit sharing, vacation pay, and benefits. An employee earning the same base salary but receiving fewer stock options could have an equal pay claim. (Source)

While you don't need to list all these components in job postings yet, you'll need to justify any disparities in total compensation packages, not just base pay.

Salary history ban and pay discussion protections

What you cannot ask or use

California Labor Code §432.3 prohibits asking job applicants about salary history—period. This includes:

• Direct questions about current or past compensation
• Asking former employers about the candidate's pay
• Using voluntarily disclosed salary history to determine offers

You can ask about salary expectations, but base offers on the role's value and the candidate's qualifications, not their compensation history.

Protected employee discussions

Employees have the explicit right to discuss their wages with colleagues when investigating potential discrimination. 

You cannot discipline or retaliate against employees for:

• Discussing their own wages
• Asking colleagues about pay
• Disclosing their salary to investigate disparities
• Refusing to sign unenforceable pay secrecy agreements

This protection extends to discussions aimed at uncovering discrimination based on any protected characteristic, not just gender.

Record-keeping requirements

• Maintain records of job titles and wage rate history for each employee during their employment plus three years after termination. These records become critical evidence if you need to defend against discrimination claims or demonstrate compliance during audits.
• Document the legitimate factors behind pay decisions when they're made—not retroactively when challenged. Clear contemporaneous records showing why one employee earned more (additional certifications, prior relevant experience, performance metrics) can be the difference between winning and losing an equal pay claim.

What's New in California's Pay Transparency Laws (2025–2026)

Senate Bill 642, effective January 1, 2026, closes loopholes that let employers technically comply while revealing nothing useful. Here's what changes and what's likely coming next.

SB 642: The Core Changes

Narrower, realistic salary ranges

Those $50,000–$150,000 ranges for mid-level roles? Dead in 2026. 

• Posted ranges must reflect what you "reasonably expect to pay at the time of hire"—not theoretical spans covering the entire department.
• If you're budgeting $110,000–$125,000 for a role, that's your range. The days of using one broad posting for multiple seniority levels end. 
• You'll need separate postings: "Engineer II: $95,000–$110,000" and "Senior Engineer: $140,000–$165,000."

Source

Total compensation matters for equality

While job postings still only require base salary ranges, equal pay claims now consider everything: bonuses, stock options, benefits, vacation pay, even expense reimbursements. 

Two employees with identical salaries but different equity packages? That's now a potential violation requiring documented justification.

This means conducting pay equity analyses using total compensation, not just base pay. Document why packages differ when they're created, not when challenged.

Extended liability periods

The window for pay discrimination claims extends from two to three years, with back pay recovery stretching to six years—without proving "willful" discrimination. 

California also adopted the Lilly Ledbetter principle: each paycheck containing discrimination creates a new violation. A discriminatory decision from 2018 still matters if paychecks continued within three years. There's no "ancient history" defense anymore.

Gender-inclusive language

The law now says "another sex" instead of "opposite sex," acknowledging non-binary employees. Small change, clear signal about California's direction.

What's Coming Next

Public disclosure inevitable

California hasn't required public pay gap reporting—yet. But when the UK requires action plans by 2027 and EU nations mandate transparency, California rarely stays behind. Expect requirements to publish aggregate pay statistics within 2-3 years.

Mandatory remediation plans

Currently, you file pay data reports without explaining how you'll fix disparities. Future amendments will likely require action plans when gaps exceed thresholds—similar to emerging UK requirements.

Intersectional analysis

Today's reports separate gender and race/ethnicity. Tomorrow's will likely demand intersectional breakdowns—comparing pay for Black women versus White men in identical roles. The state already has this data; public pressure will force granular reporting.

Proactive employee transparency

Beyond employees requesting their pay ranges, expect requirements for annual statements showing where they fall within bands, raise criteria, and promotion possibilities. Some companies already do this voluntarily to build trust.

Full compensation in postings

As "wages" expand to include all compensation, job postings will eventually list typical bonus ranges, equity grants, and benefits values—not just base salary. California's pattern is clear: start with base requirements, then expand.

The trajectory is unmistakable: broader transparency, stricter enforcement, longer liability. Companies treating 2026's requirements as the endpoint will find themselves perpetually scrambling as California accelerates toward full pay openness.

Practical Impact on California Employers

Pay transparency laws fundamentally change how you operate, compete, and manage risk.

Administrative reality check

• Hidden workload: Pay data reporting takes 100+ hours annually, plus weeks standardizing job descriptions and fielding employee questions about posted ranges
• System overhaul: Most HRIS platforms can't handle California's requirements—expect $15,000–$50,000 in upgrades plus ongoing costs for benchmarking tools
• Documentation burden: Every pay decision now needs written justification, compensation history tracking, and demographic data collection across dozens of categories

Legal exposure multiplies

• Six-year liability window: A $10,000 pay gap discovered today means $60,000+ in back pay per affected employee, plus attorney fees
• Active state enforcement: California monitors job boards, investigates complaints, and issues fines up to $10,000 per posting while using pay reports to target company audits

Talent market disruption

• Double-edged transparency: Companies see 40% more applicants with posted ranges, but competitors use your ranges to poach talent
• Internal pressure: Current employees demand raises when new hire ranges exceed their pay; brand damage from violations spreads within hours

The bottom line

Non-compliance costs multiply fast:

• Posting violations: $10,000 per position
• Reporting failures: $200 per employee
• Average discrimination settlement: $75,000 per plaintiff
• Employee replacement costs: $150,000 each
• Reputation damage: Immeasurable

Source

California Pay Transparency Compliance Checklist

How Compport Helps with California Pay Transparency and Equity?

California now counts everything as "wages" for discrimination claims—salary, bonuses, equity, benefits, even reimbursements. Compport's Total Rewards Statements (TRS) automatically consolidate this scattered data into one personalized view.

Here’s a quick overview of Compport’s TRS statement: 

For example, if an employee sees their complete $190,000 package (not just their $120,000 base), pay disparity concerns often evaporate. 

What employees see:

• Base salary: $120,000
• Bonus potential: $15,000
• Equity vesting: $30,000
• Healthcare contributions: $18,000
• Other benefits: $7,000
• Total rewards: $190,000

Plus, these statements create timestamped records of total compensation, crucial evidence if discrimination claims arise years later.

More reasons for Rewards Managers to trust a TRS software like Compport: 

• Evidence showing why pay differences exist (e.g., higher equity offsetting lower base)

• Context transforms "Why do they earn more?" into "Now I understand"

• All compensation components documented in one system
• No scrambling through payroll, equity, and benefits platforms during investigations
• Audit trail showing decision rationale for each component

• Multiple equity grants with vesting schedules
• Growth simulators showing potential earnings
• Location-based adjustments visible

• Clear pay progression paths
• Transparency about raise criteria
• Visual comparisons to market rates
• Performance-reward connections explicit

• Highlight unique benefits
• Include career progression scenarios

Here’s a quick walkthrough of Compport’s TRS statement 👇

When California employees understand their complete $190,000 package—not just the visible $120,000—transparency becomes retention power. And employees stay!

Want to see how an automated total rewards statement can help you stay compliant with the California Pay Transparency Laws? 

FAQs 

What is California pay transparency law? 

It requires employers to post salary ranges in job ads (15+ employees), report pay data annually (100+ employees), ensure equal pay for similar work, ban salary history questions, and allow wage discussions. Stricter rules under SB 642 take effect January 2026.

Do I have to include bonuses in job ad pay ranges?

No. Job postings only require base salary or hourly ranges. However, for equal pay claims, total compensation—including bonuses and equity—is considered starting January 2026, so internal documentation should cover all components.

Can we ask salary expectations?

Yes. You can ask candidates about their salary expectations. What’s prohibited is asking for or using their current or past compensation to determine offers.

How does SB 642 change things?

SB 642 requires realistic “upon hire” salary ranges in postings, counts all compensation as wages in disputes, extends claims to 3 years, allows 6 years of back pay, and treats each paycheck as a new violation—effective January 1, 2026.

Is TRS required by law?

No, but it’s highly strategic. Total Rewards Statements help document full compensation packages, aid in compliance, and build employee trust—especially as California law expands what counts as “wages” in equity claims.