California Employers Should Begin Preparing for Wage Increases in the New Year
In August, the California Department of Finance notified Governor Newsom and members of the Legislature that, consistent with the consumer price index for urban wage earners and clerical workers (CPI-W), California’s state-wide minimum wage for employees who are not otherwise covered by a higher industry (e.g., healthcare and fast food industries) or locality (e.g., municipalities) minimum wage would increase to $16.90 per hour effective January 1, 2026. Although that information has not yet been updated on the California Labor Commissioner’s website, employers should begin planning to account for increased wages in the new year.
Other Related Impacts of State Minimum Wage Increases
When California’s minimum wage increases, it also increases the minimum salary requirement for most white-collar exemptions (those for which the minimum salary is two times the minimum wage, e.g., the administrative, executive, and professional exemptions). With a minimum wage of $16.90 per hour, the minimum salary required for those exemptions will also increase to $70,304.00/year or $5,858.67/month.
The minimum wage increase also impacts wages that must be paid to employees subject to collective bargaining agreements (CBAs) that rely upon exemptions for overtime, sick pay, and (in some industries) meal periods. To satisfy those exemptions, employees must earn 30% above the minimum wage. Employers with union employees should review their CBAs to ensure these minimum wages are satisfied in order to take advantage of these exemptions.
Other Minimum Wage Obligations
Higher minimum wages apply to certain industries and roles, including increased minimum wages for certain healthcare workers and fast food workers. The hourly minimum wages for exempt licensed physicians and surgeons and computer software employees will also increase with the CPI effective January 1, 2026. Those rates should be posted on the Department of Industrial Relations’ website soon.
Several localities will also be increasing their rates in 2026, which will increase the minimum hourly rate for nonexempt employees in those locations above California’s state-wide minimum wage requirement. A complete list of locality minimum wages, including information about the dates of the most-recent changes, can be found here. Where an employer operates in a location or employs individuals in an industry where there are multiple applicable minimum wages, the employer must follow the stricter standard applicable to each employee, i.e., the one that is most beneficial to the employee.
The California Labor Commissioner maintains a Minimum Wage Frequently Asked Questions page for more information regarding California minimum wages.
This legal update and any use of its information does not create an attorney-client relationship. Nothing contained on this website should be considered legal advice for any specific employer or employment situation. Consult legal counsel before taking any action as a result of information contained herein.
