The rule itself
Model plumbing code requires individual shower and tub-shower valves to be a balanced-pressure, thermostatic, or combination balanced-pressure and thermostatic type meeting ASSE 1016 or ASME A112.18.1/CSA B125.1, and to be equipped with a way to cap the maximum setting at 120°F, field-adjusted per the manufacturer's instructions.[1]
That rule exists because a basic two-handle or single-lever valve with no pressure-balancing has no defense against a sudden pressure change, like a toilet flushing elsewhere in the house, sending scalding or freezing water at whoever is in the shower.
Pressure-balance vs. thermostatic
A pressure-balance valve senses a shift in hot or cold water pressure and moves a piston to rebalance the mix, keeping the output temperature close to constant even if pressure on one line drops.
A thermostatic valve goes a step further, sensing actual water temperature rather than just pressure, and it can hold a preset temperature more precisely. Thermostatic valves are more common in higher-end installations and often pair with multiple outlets, like a rain head and a handheld, controlled from one thermostatic mixing point.
Why an old valve almost never qualifies
A shower built before this requirement became standard in most jurisdictions is likely running a simple mixing valve with no balancing mechanism at all, which is one of the most common reasons an inspector flags a replacement job even when the homeowner only asked for new tile.
Replacing wall material without replacing an outdated valve behind it is possible in some cases, but many contractors will recommend swapping the valve anyway while the wall is already open, since re-opening finished tile or panels later to fix the valve costs far more than doing it during the original job.
What to ask your contractor
Ask specifically whether the new valve is pressure-balance or thermostatic, and ask for the brand and model rather than accepting 'a new valve' as an answer, since the two types differ in both price and how they feel to use day to day.
Ask whether the 120-degree maximum has been set, and by whom. This is a field adjustment made at installation, not a factory default that's automatically correct for your home's water heater setting.[1]
How this fits into a replacement's timeline and cost
Swapping a valve is rough plumbing work, done before any new wall material goes up, so it has to be decided early in the job rather than added as an afterthought once tile or panels are already in place.
Plumbing labor on a shower job runs $45 to $200 an hour depending on the market, and a valve swap alone is typically a small slice of that time compared with the wall and pan work around it, though it can grow if the supply lines behind the wall also need updating.[2]
Ask your plumber to price the valve swap as its own line item, separate from the surround work, so you can see exactly what the code-required upgrade is adding to the total bill.