California Expands Statute of Limitations and Recovery Period for Equal Pay Act Claims Under SB 642
California has significantly expanded the time frame for bringing and recovering on Equal Pay Act claims through the enactment of Senate Bill 642. The law clarifies when an Equal Pay Act violation occurs, extends the statute of limitations for filing claims, and broadens the period for which employees may recover damages. These changes increase potential exposure for employers and underscore the importance of proactive pay equity review and documentation.
The California Equal Pay Act requires employers to provide equal pay to employees who perform substantially similar work when viewed as a composite of skill, effort, and responsibility, and who work under similar working conditions. Pay differentials are permitted only if the employer can establish that the entire wage difference is based on a bona fide factor or factors other than sex, race, or ethnicity, such as seniority, merit, quantity or quality of production, or another legitimate business factor consistent with business necessity.
SB 642 extends the statute of limitations for Equal Pay Act claims by providing that an employee may file a claim up to three years after the last date a cause of action occurs. This change resolves prior uncertainty about when the limitations period begins to run, particularly in cases involving ongoing compensation practices rather than a single discrete pay decision.
In addition to expanding the filing period, SB 642 also expands the recovery period available to employees. When an employee brings a timely Equal Pay Act claim within the three-year statute of limitations, the employee may recover relief for the entire period during which the violation existed, up to a maximum of six years of violations. This means that even though a claim must be filed within three years of the last actionable event, the damages window may reach back significantly further, depending on how long the alleged pay disparity persisted.
SB 642 further clarifies when an Equal Pay Act cause of action occurs. The statute now expressly states that a cause of action arises at any of the following points: when an alleged unlawful compensation decision or other pay practice is adopted; when an individual becomes subject to that decision or practice; or each time the individual is affected by application of the decision or practice, including each payment of wages, benefits, or other compensation resulting in whole or in part from the challenged practice. This clarification adopts a continuing violation framework and makes clear that each affected paycheck can constitute an actionable event.
For employers, these changes materially increase potential liability exposure. Pay decisions made years earlier may now form the basis for claims seeking recovery across extended time periods, particularly where compensation structures or classification decisions were applied uniformly over time. Employers should also expect increased scrutiny of historical pay data, job classifications, and documentation supporting pay differentials.
In light of SB 642, employers should consider conducting periodic pay equity audits, reviewing compensation policies and job descriptions for consistency, and ensuring that any wage differentials are well documented and supported by legitimate, lawful factors. Employers should also retain compensation records in a manner consistent with the expanded recovery period, as the ability to defend pay decisions may depend on documentation reaching back several years.
If you have questions about SB 642, the Equal Pay Act, or how these changes may affect your compensation practices and litigation risk, experienced employment counsel can help you assess exposure and implement compliance strategies tailored to your organization.