California’s Equal Pay Act Must Help Drive Employer Compensation Decisions

By Matthew J. Roberts, Associate General Counsel, Labor and Employment

Figuring out how much to pay employees is a recurring challenge for employers as they recruit new hires and try to retain their existing employees. While employers have some discretion in making these decisions, California’s Equal Pay Act (EPA) — along with other pay equity and transparency laws — are an ever-present compliance risk for employers.

Designed to prohibit certain types of discrimination in employee compensation, the EPA gets recurring attention from the California Legislature. For example, effective January 1, 2026, Senate Bill (SB) 642 expanded employer liability and potential monetary damages for EPA violations. Also, in the past several years, the California Legislature has:

• Enacted a prohibition on employers inquiring about an applicant’s salary history;
• Required employers with 100 or more employees to report pay data on their California employees; and
• Required all employers to create pay scales for all positions within their organization, among other pay scale requirements.

Taken together, employers must evaluate all their compensation decisions through the lens of the EPA and these related laws. By prohibiting salary history inquiries, requiring pay scales for job positions and mandating certain employers file annual pay data reports, California’s evolving pay equity laws require employers be able to justify compensation disparity through strictly job-related, bona fide factors.