Stricter Compliance Ahead: Key Changes to California Pay Data Reporting

California continues to strengthen its commitment to pay equity, introducing Senate Bill 464 (SB 464) and Senate Bill 642 (SB 642), which mandate significant changes to pay data reporting, pay transparency, and enforcement. These legislative updates, signed into law this month, signal an intensified focus on wage disparities and require immediate attention from covered employers.

What’s New for Pay Data Reporting?  

The core reporting requirement remains for private employers with  100 or more employees and/or 100 or more workers hired through labor contractors to annually submit detailed pay and demographic data to the California Civil Rights Department (CRD). However, the new laws introduce critical modifications that impact reporting and recordkeeping. 

Mandatory Penalties and Data Storage (Effective 2026)  

Beginning in 2026, the potential for non-compliance becomes more severe: 

• Mandatory Penalties.  The new law removes the court’s discretion to impose penalties for failure to file a required pay data report when requested by the CRD. The civil penalty amounts remain at $100 per employee for the first failure and $200 per employee for subsequent failures, but the mandatory nature of the penalties makes enforcement stricter. 
• Data Segregation. Employers and labor contractors will be required to store demographic data (including race, ethnicity, and sex) separately from personnel records. This is intended to protect sensitive information and help demonstrate that this data is not being used improperly. 

Expanded Job Categories (Effective 2027)  

Starting with the 2027 filing cycle , the current 10 EEO-1 job categories will be expanded from 10 job categories to 23 job categories . These new categories will be aligned with the Standard Occupational Classification (SOC) system used by the U.S. Bureau of Labor Statistics, requiring employers to reclassify their roles to meet the new detailed reporting structure. 

Broader Pay Equity and Transparency Changes (SB 642)  

Separate from the pay data reporting structure, SB 642 introduces parallel changes to California’s equal pay and pay transparency laws: 

• Expanded Equal Pay Protection. The law replaces “opposite sex” with “another sex,” broadening pay equity protections to be more inclusive. 
• Clarified Pay Scale Disclosure. Amendments clarify that employers must provide a good-faith estimate of the expected wage range for a position upon hire. 
• Expanded Definition of “Wages”. For the purpose of the equal pay statute, “wages” now explicitly include all forms of compensation , such as bonuses, stock options, and profit-sharing, vacation and holiday pay, life insurance allowances and reimbursements, and other benefits where it was not previously specified. 
• Extended Statute of Limitations.  Employees may now recover wages for pay equity violations lasting up to six years, with a three-year statute of limitations from the last date the violation occurred. 

Next Steps for Employers   

Given the stricter enforcement and foundational changes coming soon, covered employers should take immediate, proactive steps to ensure compliance. 

• Audit Recordkeeping Practices: Review your current system for storing demographic data (race, ethnicity, sex) to ensure it can be stored separately from employee personnel records well before the 2026 effective date. 
• Establish Compliance for Future Filings:  While the 2024 deadline of May 14, 2025, has passed, preparations for the next annual filing begin (covering 2025 data and due in May 2026). This preparation should involve verifying the accuracy of the data submitted for the previous cycle and addressing any identified pay disparities before the next report. With the elimination of judicial discretion on penalties, ensure all deadlines for annual pay data reports are met accurately and on time to mitigate the significant financial risk of mandatory fines.  
• Begin Job Reclassification Analysis: Start evaluating your company’s job titles and their corresponding Standard Occupational Classification (SOC) codes now to prepare for the transition to 23 categories for the 2027 reporting cycle. Align reassignments with any other reporting that may be impacted, such as EEO-1 reporting. 
• Review Pay and Disclosure Policies: Update your pay transparency and pay equity policies to align with the expanded definition of “wages” and ensure they are included in any wage notifications that are provided to employees. 
• Conduct Pay Equity Audits:  Consider a proactive review of your compensation practices to identify and address potential pay discrepancies before this information becomes public. This can help ensure that existing employee pay is aligned with the ranges being posted for open positions.  
• Coordinate with Labor Contractors:  For employers using labor contractors, ensure you have a formal agreement and process in place to receive the necessary pay data from them in a timely fashion. With mandatory penalties coming in 2026, relying on a system where contractors can be late is a significant risk. 

These changes represent a significant tightening of the regulatory landscape in California. Taking proactive measures now will ensure a smooth transition and minimize compliance risk. 

How HR Works Can Help  

HR Works assists employers with California Pay Data Reporting, saving employers the administrative burden of completing the report in-house. To learn more about these services and how to leverage our compliance expertise and support, please contact us at [email protected] or call 1-877-219-9062.