California enacted the Equal Pay Act in 1949 and most recently amended the law with the Fair Pay Act and Wage Equality Act, which took effect in 2016 and 2017, respectively. Under the law, both public and private employers are prohibited from paying any of their employees less than employees of another sex or of another race or ethnicity for “substantially similar work.” The term “ethnicity” is not defined by the law. The law also addresses “pay secrecy,” which the legislature found contributes to the gender wage gap “because women cannot challenge wage discrimination that they do not know exists.”

The burden is on employers to justify pay differentials from an acceptable list of factors that must be applied reasonably. The relied upon factors must account for the entire wage differential.

Unlike FEHA, the California Equal Pay Act does not require an employee to show any discriminatory intent.

California law provides greater protections than federal law. Other state and federal wage equality protections also exist. For more information, see “Other Fair Pay Laws” on this page.

Proving Unfair Pay

Under the California Equal Pay Act, you are prohibited from paying any of your employees an amount less than employees of the opposite sex or of another race or ethnicity for “substantially similar work.”1 “Substantially similar work” means a composite of skill, effort and responsibility that is performed under similar working conditions. It does not have to be the exact same job title or function.

Employer Burden to Show No Disparity

Paying different wages to employees of different genders, races or ethnicities who are performing substantially similar work can only be justified if the employer shows all of the following:2

• The pay difference is based on one or more of the following four listed factors:
• 1) A seniority system.
• 2) A merit system.
• 3) A system that measures earnings by quantity or quality of production.
• 4) A bona fide factor other than sex, race or ethnicity, such as education, training or experience.
• Each factor you rely on is applied reasonably; and
• The one or more factors you rely on account for the entire pay difference.

To defend a pay differential based on the fourth factor — “bona fide factor other than sex, race or ethnicity” — you must also demonstrate that the factor:

• Is not based on or derived from a sex, race, or ethnicity-based difference in pay;
• Is job related; and
• Is consistent with “business necessity.”

Employers must be ready to show legitimate bona fide factors for any pay disparity. A recent court ruling allowed a female employee who earned less than one male employee in the same position — even though she earned more than six other male employees doing the same work — to bring her EPA claim to trial, highlighting the challenges an employer faces when its pay practices are scrutinized between employees of different demographics in the same position.3

Prior Salary

Prior salary cannot be relied on to justify any disparity in compensation. The only exception is that employers may make compensation decisions based on a current employee’s salary, so long as any resulting wage gap is justified by one or more of the four factors listed above. The rationale behind this law is that reliance on prior salary history perpetuates previous salary discrimination.

The law is intended to “help ensure that both employers and workers are able to negotiate and set salaries based on the requirements, expectations, and qualifications of the person and the job in question, rather than on an individual’s prior earnings, which may reflect widespread, long-standing, gender-based wage disparities in the labor market.”

California law prohibits asking about a job applicant’s salary history, including information on compensation and benefits, or relying on salary history information for decisions about hiring or how much to pay the applicant. The employer also is banned from seeking the information through an agent, such as a third-party recruiter.4

You are still allowed to ask an applicant about their “salary expectation” for the position applied for. Additionally, you must, upon reasonable request, provide the pay scale for a position to an applicant applying for a job.

Pay scale means a "good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire..”5

Employers must comply with the following requirements regarding the disclosure of pay scale information.

First, employers with 15 or more employees must include the pay scale information for a position in any job posting.6 If an employer uses a third party to “announce, post, publish or otherwise make known a job posting,” the employer must provide the pay scale to the third party, who must include it in the job posting.

In addition to job applicants, employers must provide a current employee, upon reasonable request, the pay scale for the position in which the employee is currently employed.7

Employers must maintain records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment, which must open to inspection by the Labor Commissioner.

An individual that claims to be aggrieved by a violation of the salary history and pay scale disclosure provisions found in Labor Code section 432.3 can file a claim with the Labor Commissioner or a civil action, which could result in penalties, injunctive relief or any other relief a court deems appropriate. Civil penalties range from $100 to $10,000. The Labor Commissioner will determine the amount of the penalty based on the totality of the circumstances, including whether the employer has previously violated these provisions. However, for a first violation of the requirement for employers with 15 or more employees to post pay scale information in job postings, the Labor Commissioner will not assess a penalty if the employer demonstrates that all job postings for open positions have been updated to include the pay scale as required.8

For more information, see Salary History Ban.

Business Necessity

“Business necessity” is specifically defined under this law to mean that you have an overriding legitimate business purpose and the factor relied upon effectively fulfills the business purpose it is supposed to serve.

If the employee shows that an alternative business practice exists that would serve the same business purpose without creating the pay difference, you cannot rely on this defense.9

Geographic Differences, Shift or Hour Differentials

Under the Fair Pay Act, however, the employee does not need to meet this requirement. Employees who claim that they are being paid unfairly based on gender, race or ethnicity can compare themselves to employees working in different geographic locations.

It will be the employer’s burden to show that a pay difference based on different geographic locations, different shifts, or different times of day is consistent with business necessity and job related, as specified above.

If the pay of an employee in Bakersfield, for instance, is being compared to the pay of an employee in San Francisco it does not automatically disqualify the claim. Instead, the employer must justify why this is a “bona fide factor.”

Pay Secrecy Prohibited

Under California’s Equal Pay Act, employers cannot prohibit employees from:10

• Disclosing their own wages
• Discussing the wages of others
• Asking about another employee’s wages
• Aiding or encouraging other employees to exercise their rights under the Equal Pay Act

However, the Act does not create an obligation to disclose wages when asked.

It is important to remember that the ability of employees to discuss wages is also protected by other existing state and federal laws. For more information, see ”Discussion of Wages or Working Conditions” in Wage and Hour Enforcement and Penalties.

Retaliation Prohibited

The Equal Pay Act also prohibits employers from terminating, discriminating or retaliating against an employee who exercises their rights under the Act, assists others in exercising their rights or acts in any way to invoke or enforce the Act, such as bringing a complaint with the Labor Commissioner.11

Equal Pay Act Remedies

The law provides different enforcement methods and remedial measures.

Administrative remedies include:

• An employee can file a complaint with the Division of Labor Standards Enforcement (DLSE) that the employer has violated the Equal Pay Act. The DLSE can investigate and enforce any payment owed to the employee(s).12
• The Department of Industrial Relations (DIR) or the DLSE can bring a civil action on behalf of the employee and other similarly affected employees to recover unpaid wages, an additional equal amount as liquidated damages and costs of suit.13
• In other words, if $15,000 of wages were owed due to the unlawful wage differential, the employee would get an additional $15,000 in liquidated damages.

Civil remedies include:

• An employee can bring a civil action for the amount of wages not fairly paid, an equal amount of liquidated damages, interest, costs of suit and reasonable attorneys’ fees. A civil action must be brought within three years after the cause of action occurs; if the violation is willful, then the claim must be brought within three years.14
• An employee who has been retaliated or discriminated against for asserting their rights or for protected wage discussions can file a civil action for reinstatement, reimbursement of lost wages and work benefits, interest and other equitable relief. A civil action under this provision must be brought within one year after the cause of action occurs.15

• Effective January 1, 2026, the law was revised to expand the statute of limitations to three years whereas it was previously two years, with the exception of a cause of action resulting from a willful violation. Additionally, the law now allows employees to recover up to six years of damages.16

• Also effective January 1, 2026, California expanded the definition of “wages” for purposes of Equal Pay Act claims to include “salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits.” 17

In addition, private employers, who willfully pay any employee wages less than the rate paid to employees of another sex, race or ethnicity, or who reduce the wages of any employee in order to comply with the Equal Pay Act requirements, can be found guilty of a misdemeanor punishable by a fine of not more than $10,000 or six months of jail time, or both. This provision does not apply to public employers.18

Recordkeeping Under the Equal Pay Act

You must keep the following employee records for three years:19

• Wages and wage rates
• Job classifications
• Other terms and conditions of employment

How to Evaluate Whether a Pay Differential Exists

Employers may want to examine pay rates for the same or substantially similar jobs in light of the California Equal Pay Act. For example, to determine if there is a pay disparity between employees of another sex, employers can group all employees of the same gender that do substantially similar work into one group. This will be the “comparator group” that must be used by the employee to demonstrate a gender wage disparity. When grouping employees, look at the skills, effort and responsibilities of the job as well as the working conditions. For instance, if male employees in the comparator group are paid $10,000 more a year than a female employee in the same comparator group, then a gender pay disparity exists.

If, for example, a gender pay disparity exists, review the four factors listed above and determine whether, based upon the four factors reasonably applied, the differential is justified and accounts for the entire pay difference. Remember that if you rely on the fourth factor — “bona fide factor other than sex” — you must also demonstrate that the factor is not gender based and is job related and consistent with business necessity, as defined.

This same type of exercise can be done to determine whether there are pay disparities between races and ethnicities.

Pay close attention to market factors when evaluating whether a pay differential exists. While market factors may be relevant when negotiating a compensation package, market factors alone will not overcome a pay differential.

Additionally, take note of any geographic differences between employees located in different locations. Like market conditions, geographic differences can be considered a “bona fide factor,” when justifying the existence of a wage disparity. However, it is no longer the case that geographic differences alone will justify a wage differential.

• Because of potential exposure to an Equal Pay Act claim, consider conducting any analysis of pay rates with the advice of an attorney. In addition, documentation of salary decisions is crucial.

Equal Pay Act Guidance

The following are tips to consider:

• Ensure that compensation decisions are based on objective considerations. This includes increases for retention purposes, as well as discretionary bonuses.
• Remember that compensation doesn’t just mean straight salary, but includes all forms of compensation, such as bonuses or commissions.
• Document all compensation decisions. This includes all factors relevant to the employee’s compensation, such as market factors, geographic location, etc.
• Review job descriptions to ensure that they support salary decisions and reflect actual job duties, functions, skills and responsibilities.
• Ensure that you do not discipline employees for discussing wages and review employee handbooks to remove any prohibitions that may exist.
• Remember that, while an employee can ask about wages, the employer is not required to disclose the wages of other employees.
• Train hiring managers and others that make salary related decisions on how to comply with the Eqaul Pay Act.
• Follow the rules relating to prior salary history.
• Update, if necessary, your record retention practices to account for the three-year record retention requirement under the law.
• Prohibit retaliation against employees for asserting rights under the Equal Pay Act and ensure that you have a reporting mechanism in place. This can be part of your existing equal employment opportunity policy.

• Again, strongly consider working with legal counsel to develop anyequal pay analysis.

Other Equal Pay Laws

In addition to California’s Equal Pay Act, the state Fair Employment and Housing Act (FEHA) also prohibits gender discrimination which includes discrimination in compensation decisions.20

Moreover, while California law is now broader than federal law, the federal Equal Pay Act,21 the federal Lilly Ledbetter Fair Pay Act of 2009 and the federal Title VII also prohibit discriminatory compensation decisions.

The federal Equal Employment Opportunity Commission (EEOC) has settled several matters involving pay discrimination in recent years and considers it a priority enforcement issue.

1. Lab. Code sec. 11975(a)(b)