Update Applicable to:	Effective Date
All Employers in California	January 1, 2026

What happened?

On October 8, 2025, California Governor Gavin Newsom signed Senate Bill 642 (AB 642) into law, updating California’s labor code to reinforce timely payment of wages to employees.

Overview:

SB 642 amends Sections 432.3 and 1197.5 of the Labor Code relating to employment:

• Clarifies employer obligations under Labor Code Section 204, which governs regular pay period.

• Employers must:
  
  • (1) Pay wages earned between the 1st and 15th of the month by the 26th.
  • (2) Pay wages earned between the 16th and end of the month by the 10th of the following month.

• Late payments may result in statutory penalties payable directly to employees, in addition to civil penalties owed to the state.

• Underpayments are treated as late payments subject to penalties.

Additional Information:

Expanded Definition of Wages and Wage Rates: This expanded definition of “wages” and “wage rates” reinforces the importance of accurate and complete wage payments, ensuring employers account for all forms of compensation when calculating and issuing wages.

This now covers:

• Overtime
• Bonuses
• Stock and stock options
• Profit-sharing and bonus plans
• Life insurance
• Vacation and holiday pay
• Travel reimbursements
• Hotel accommodations
• Gasoline allowances
• Other employment-related benefits

Legal Timeframes for Wage Claims: The law clarifies the legal timeframes for employees to file wage-related claims:

• Employees may recover unpaid wages for violations that occurred over a period of up to six years.

• A civil action must be filed within three years from the last date the cause of action occurred.

A cause of action is considered to occur when:

• An unlawful compensation decision or practice is adopted.
• An individual becomes subject to such a decision or practice.
• An individual is affected by the application of the decision or practice—including each time wages are paid under that system.

Source References

• California SB 642 – Employment: payment of wages

Resources

• California Department of Industrial Relations – Late Payment of Wages FAQs
• DLSE Wage Claim Adjudication Process

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