Watch a summary of 2025-2026 labor and employment updates with White Brenner LLP attorney, Will Creger, or read a full breakdown of the legislative changes below.

Client Alert: California’s Latest Employment Laws Update Pay Transparency, Reinforce Equal Pay Rights, and Restrict Certain Contract Practices

1. SB 642: Pay Equity Enforcement Act

SB 642 expands both California’s Pay Transparency Law and the Equal Pay Act, amending Labor Code sections 432.3 and 1197.5.

A. Amendments to Labor Code § 432.3 (Pay Transparency Law)

Labor Code § 432.3 was enacted to reduce wage inequality by requiring employers to base compensation decisions on a position’s market value rather than an applicant’s prior salary.

Under the current law, employers must provide job applicants with the “pay scale,” defined as the salary or hourly wage range the employer reasonably expects to pay for the position. SB 642 revises the definition of “pay scale” to require employers to disclose “A good faith estimate of the salary or hourly wage range that the employer expects to pay upon hire.”

As a result, employers may no longer provide broad salary ranges and must instead offer a specific, good-faith estimate of expected starting pay.

B. Amendments to the Equal Pay Act (Labor Code § 1197.5)

Expanded Definition of “Sex”

SB 642 updates statutory language by replacing “opposite sex” with “another sex,” reflecting recognition of more than two genders for purposes of pay equity protections.

Expanded Definition of “Wages”

The statute now expressly includes all forms of compensation, including, but not limited to:

• Overtime
• Profit sharing and bonuses
• Benefits
• Stock options
• Life insurance
• Vacation and holiday pay
• “Cleaning or gasoline allowances”

As a result, wage comparisons for equal pay purposes must look to total compensation, not base salary alone.

Expanded Statute of Limitations and Accrual

• Statute of limitations increased from 2 to 3 years for non-willful violations.
• Employees may look back up to 6 years under a continuing violation theory.
• A cause of action now accrues when:
  • the unlawful pay practice is adopted,
  • an employee becomes subject to it, or
  • an employee is affected by it.

Thus, SB 642 effectively creates a new cause of action with each paycheck.

At present, there is no clear indication the Legislature intended the expanded “wages” definition to apply to job posting requirements under the Pay Transparency Law. Whether the expanded definition of “wages” under the Equal Pay Act affects an employer’s obligation to estimate the “wage range” under the Pay Transparency Law remains subject to DLSE interpretation.

2. SB 692: Employment Contract Repayment / “Stay-or-Pay” Prohibition

Effective January 1, 2026, SB 692 prohibits most contractual provisions requiring employees to repay money, incur fees, or face collection actions when they leave employment. Such agreements are void as a matter of public policy, subject to narrow exceptions. Violations subject the employer to actual damages or a minimum of $5,000 per employee, whichever is greater, in addition to injunctive relief and an award of attorneys’ fees and costs.

Signing and Retention Bonus Exception

A limited exception applies to “claw back” provisions related to unearned signing or retention bonuses at the outset of employment, provided strict criteria are met:

• The repayment terms are set forth in a separate agreement from any employment agreement.
• The bonus must be discretionary or unearned and not tied to specific job performance.
• The employee must receive at least 5 business days’ notice and the opportunity to consult with an attorney.
• The repayment obligation must be prorated and interest-free.
• The retention period may not exceed two years.
• The repayment may be triggered only by voluntary resignation or termination for misconduct.
• Employees must have the option to defer receipt of the bonus until the retention period ends.

Tuition Reimbursement Exception

Claw back provisions related to tuition reimbursement are permitted if:

• The contract is offered separately from any employment contract.
• Credentials are transferable and not a condition of employment, and
• The repayment amount is specified in advance and does not exceed the cost to the employer
• The repayment amount is prorated and without an accelerated payment schedule
• Repayment is triggered only by voluntary resignation or termination for misconduct.

SB 692 does not define “employment contract” or “condition of employment,” creating some uncertainty.

The statute is not retroactive, but employers should review and update agreements to address common clawback provisions, such as those for bonuses, tuition reimbursement, and moving expenses.

3. Other Notable 2025 Legislative Updates

SB 261: Enhanced Penalties for Unpaid Wage Judgments

Imposes triple damages, attorneys’ fees, and public disclosure penalties for employers that fail to satisfy wage-related judgments. effective January 1, 2026.

SB 294: Workplace Know Your Rights Act

Effective January 1, 2026, SB 294 requires employers to provide employees and, where applicable, union representatives with an annual stand-alone written notice of workers’ rights, including immigration-related rights. The DIR will publish a model notice by January 1, 2026.

Additionally, employers must allow employees to designate an emergency contact by March 30, 2026, and must notify that contact if the employee is arrested or detained at the worksite.

AB 406: Judicial Proceedings Leave Expansion

Effective January 1, 2026, SB 406 expands protections for employees who take time off due to certain legal proceedings.

• Amends Labor Code 246.5 to allow employees to use paid sick leave for jury duty and to appear in court as a witness.
• Amends Government Code § 12945.8 and Labor Code §230 et seq. to expand job-protected leave for victims of certain serious crimes and their family members, allowing unpaid time off to attend judicial proceedings and use of accrued leave balances.

SB 464: Pay Data Reporting Requirements

Effective January 1, 2026, employers must store demographic data collected for pay reporting separately from personnel files. Courts are required to impose penalties on employers who fail to file the required pay data report when requested by the Civil Rights Department.

SB 590: Paid Family Leave Expansion

Amends Unemployment Insurance Code § 3302 to provide that, commencing July 1, 2028, employees caring for a seriously ill “designated person,” including individuals whose relationship is considered “equivalent” to family, will have access to state-paid temporary disability insurance benefits. This change aligns state disability benefits with employees’ existing right to take leave to care for a “designated person.”

SB 513: Expanded Personnel File Access

Effective October 2025, employees’ inspection rights under Labor Code § 1198.5 will expressly include access to education and training records.

SB 617: CA WARN Act Amendments

Requires more detailed mass-layoff notices, including information about employees’ eligibility for public assistance.

SB 648: Wage Theft Enforcement Expansion

Authorizes the Labor Commissioner to investigate, cite, and litigate wage theft cases, including those involving unlawfully withheld gratuities.

Minimum Wage Increase

Effective January 1, 2026, California’s minimum wage increases to $16.90 per hour, meaning the minimum salary threshold for exempt employees increases to $70,304 annually.

For any questions regarding these legislative updates, as well as their implications, please contact Will Creger at william@whitebrennerllp.com or the White Brenner LLP office at (916) 468-0950.