CALIFORNIA MINIMUM WAGE INCREASE
As occurs each year, the California minimum wage for non-exempt employees will increase for 2026 from $16.50 per hour to $16.90 per hour effective January 1, 2026. This increase applies to all employers, regardless of size.
When the state’s minimum wage increases for non-exempt employees, this increase also impacts the minimum salary threshold for exempt employees – as the minimum salary must be two times the state’s minimum wage. With the minimum wage increase, the salary threshold for full-time exempt employees will also increase from $68,640 to $70,304 per year on January 1, 2026.
In addition, the minimum salary for certain job categories will also increase. Effective January 1, 2026, the minimum hourly rate for computer software employees to meet the exemption will be $58.85, with a minimum monthly salary of $10,214.44 (annually $122,573.13). Certain licensed physicians and surgeons must be paid a minimum hourly rate of $107.17 to meet their exemption.
THE PAY EQUITY ENFORCEMENT ACT
Efforts to ensure pay equity continue with the passage of The Pay Equity Enforcement Act which brings significant changes to the pay transparency and pay discrimination laws. (S.B. 642). Starting January 1, 2026, California employers will face stricter job posting disclosures and mandatory inclusion of equity compensation in pay equity analyses.
Current Requirements for California Employers
The Labor Code (Section 432.3) currently provides employers with fifteen (15) or more employees, at least one of whom is located in California, must:
- Include pay ranges in job postings for California-based roles.
- Provide pay scale information upon request to applicants and current employees. “Pay scale” under Labor Code Section 432.3 is currently defined as “the salary or hourly wage range that the employer reasonably expects to pay for the position.”
- Refrain from seeking, or relying upon, prior salary history when hiring or setting wages.
- Retain job and pay records.
Protect employees from retaliation when they exercise their right to request salary information.
New Requirements & Key Changes
Labor Code Section 432.3, which governs pay transparency, now requires job postings to include a “good faith estimate” of the salary or hourly wage range expected for each position “upon hire,” rather than for the position generally. This means employers must now disclose what they expect to pay a new hire for the position on day one rather than expected pay for the position as a whole. This language was specifically added to place “reasonable limits” on the range of a pay scale and to prevent employers from posting overly broad pay scales (e.g., posting a salary from $75,000 to $400,000) that makes the pay disclosure “meaningless” to applicants.
Expanded Definition of “Wages” and “Wage Rates” under the Equal Pay Act 
California’s Equal Pay Act (Labor Code sec. 1197.5) now defines “wages” and “wage rates” to include equity awards, stock and stock options, bonuses, profit sharing, and certain benefits.
When comparing pay between employees performing substantially similar work, employers must account for equity compensation and other non-cash components—not just base salary. This expanded definition of “wages” and “wage rates” applies only to Equal Pay Act claims. SB 642 does not change the definition of “wages” or “wage rates,” and does not modify available remedies, for any other section of the Labor Code, including California’s other wage and hour statutes, such as those covering minimum wage, overtime, or wage statements.
It is important to note that new law (SB 642) does not require equity compensation to be disclosed in job postings.
Longer Claims and Recovery Window
Under revised Labor Code Section 1197.5, employees now have three years (up from two) to file claims for pay bias based on sex, race, or ethnicity. Also, under a “continuing violations” theory, employees will also be able to recover lost pay for up to six years of an unlawful pay practice, doubling the previous three-year limit.
Gender Protections Added
The law also now prohibits an employer from paying wages to an employee that are less than an employee of “another sex” (rather than the previous “opposite sex” language) to encompass non-binary genders. The law now includes gender identity and expression in Equal Pay Act protections.
Action Steps
- Update Job Postings: Ensure all job posting include realistic and specific pay ranges. Employers should be sure that the salary ranges they provide for job postings are narrow enough to provide applicants with a reasonable estimate of the range of salaries they actually expect to pay upon hiring an applicant.
- Document Compensation Decisions: Keep detailed records regarding how compensation decisions are made, based on factors such as experience, skills, market data, and performance. Retain records for at least six years.
- Training:Human Resources, recruiters, and any manager responsible for or participating in the interviewing and hiring process should be trained on new disclosure requirements and compliance best practices.
- Conduct Pay Equity Audits: Regularly review and audit compensation (including base, incentives, and equity) for gaps across protected classes. Use attorney-client privilege to protect sensitive audits where appropriate.
- Record-keeping: Retain all data and documents required for compliance—job postings, pay ranges, compensation methodologies, committee notes, and decision rationales—for the full statutory period. The six-year damages period also creates new record-keeping challenges, as companies may need to retain payroll records longer than previously required.
NEW OBLIGATIONS FOR ANNUAL PAY DATA REPORTS TO THE CRD
Currently California law (Gov’t Code Section 12999) requires private employers with more than 100 employees to submit annual pay data report to the California Civil Rights Department (CRD).
The report must include a breakdown of employees by race, ethnicity, and sex in 10 specified job categories, along with data on the number of employees by race, ethnicity, and sex within federal pay bands used by the U.S. Bureau of Labor Statistics in its Occupational Employment Statistics survey; the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category; and the total number of hours worked by each employee counted in each pay band during the reporting year.
Recent legislation (SB 464) modifies Gov’t Code Section 12999 and now requires employers to collect and store any “demographic information” they gather for the purpose of preparing and submitting the required pay data report separately from employee personnel records.
Second, there is an increase in the number of job categories for which employers must report pay data from 10 to 23 categories beginning January 1, 2027.
Additionally, Section 12999 is amended to require courts to impose a civil penalty for a failure to file the pay data report if the civil penalty is requested by the Civil Rights Department.
EXTENDED STATUTE OF LIMITATIONS FOR SEXUAL ASSAULT/HARASSMENT CLAIMS
Persons who wish to file a claim arising out of an alleged sexual assault have an extended period of time to do so pursuant to new legislation. If the claim would have been time barred due to the expiration of the statute of limitations (deadline to file) Plaintiffs now have an extended eligibility period to “revive” such claims. To revive sexual assault claims, including derivative claims for wrongful termination and sexual harassment, among others, the plaintiff must demonstrate that one or more entities legally responsible for damages engaged in a cover up. This bill amends Section 340.16 of the Code of Civil Procedure. (SB 303)
The bill defines a “cover up” as a “concerted effort to hide evidence relating to a sexual assault that incentivizes individuals to remain silent.” The bill permits a cause of action for any such claim to proceed if already pending in court on the effective date of the bill or, if not filed by that date, to be commenced between January 1, 2026, and December 31, 2027.
BIAS MITIGATION TRAINING DISCLOSURE PROTECTIONS
In an effort to encourage employers to conduct bias training, new legislation (SB 303) introduces protections for employees who self-report their own personal biases. This law amends the California Fair Employment and Housing Act (FEHA) which requires employers to prevent workplace discrimination by conducting workplace training. Now FEHA expressly provides that an employee’s assessment, testing, admission, or acknowledgment of their own personal bias that was made in good faith and solicited or required as part of a “bias mitigation training” does not constitute unlawful discrimination, and that conducting bias mitigation training is not, by itself, unlawful discrimination.
For purposes of the new law, “bias mitigation training” means bias mitigation or bias elimination training, education, and activities an employer provides to educate employees on understanding, recognizing, or acknowledging the influence of conscious and unconscious biases. Bias mitigation training also includes implementing strategies to mitigate the impact of personal biases, such as assessments or tests, workshops, toolkits, and tracking bias mitigation efforts.
FEHA ENFORCEMENT PROCEDURES
Under existing law, individuals alleging FEHA violations (e.g., discrimination, harassment, retaliation, etc.) must file a verified complaint with the California Civil Rights Department (CRD) before initiating a civil action – called exhausting the administrative remedies. When a complaint is filed, the CRD is charged to investigate and may pursue conciliation or litigation on behalf of the complainant if the complainant does not seek an immediate “right to sue.” During the time that the CRD is investigating the claim, the statute of limitations for filing a civil lawsuit is tolled (paused) until the CRD issues a closure notice or files its own civil action.
Currently, the CRD must issue a right-to-sue notice within one year (for individual complaints) or two years (for group or class complaints) unless it files suit. Complainants then have one year from the closure notice to file a civil action. FEHA also authorizes the CRD to bring group or class complaints where a discriminatory practice affects multiple individuals, but it has never expressly defined that term. 
New legislation (SB 477) makes several changes to the FEHA as follows:
- Defines “Group or Class Complaint”: A “group or class complaint” means any complaint alleging a pattern or practice of unlawful conduct. This clarification ensures that systemic discrimination claims fall squarely within the CRD’s group-complaint authority and provides a clearer procedural basis for multi-complainant enforcement actions.
- Tolling Statute of Limitations Period: The new law expands the circumstances under which statutory filing periods are tolled (paused). Starting 1 January 2026, tolling will apply:
1) during any appeal within the CRD following issuance of a closure notice, extending through one year after the CRD provides written notice that the appeal has been resolved;
2) during the pendency of any petition to compel CRD action; and
3) while a written tolling agreement between the complainant and the CRD is in effect, provided the agreement is executed prior to the applicable deadline.
- Deferral of Right-to-Sue Notices: Where a complaint is related to a director’s complaint or a group or class complaint, the CRD must now defer issuance of right-to-sue notices until all related administrative proceedings, civil actions, and appeals have been fully resolved. This provision allows the CRD to coordinate the resolution of interrelated claims and prevents premature individual filings that could disrupt ongoing enforcement efforts.
This Newsletter is intended as a brief summary of employment law. While every effort has been made to ensure the accuracy of the information contained herein, it is not intended to serve as “legal advice,” or to establish an attorney-client relationship. If additional information is needed on any of the topics contained herein, please contact our office. All rights reserved. ©2025.