Starting January 1, 2026, the minimum wage in California will rise to $16.90 per hour for non-exempt employees. For many employers, this seemingly modest increase will trigger more compliance updates than they may be aware of. This wide range of updates includes payroll and exempt-employee classification to overtime, premium pay, and required notices.
Because California uses the minimum wage as a baseline for exempt salary thresholds, the impact extends beyond hourly workers. Under the state’s wage-and-hour laws, white-collar exemptions (executive, administrative, professional) require employees to be paid a salary that meets or exceeds twice the state minimum wage. With the new $16.90 floor, that threshold jumps to $70,304 annually (assuming a 40-hour workweek). Why is this important? Employers who do not adjust exempt salaries or otherwise verify classification risk exposing themselves to wage-and-hour claims, including unpaid overtime and meal/rest-break violations.
Employers should understand that compliance isn’t optional and the details matter. Wage requirements vary depending on local ordinances, industry-specific regulations, and the nature of the work. For example, certain municipalities set higher local minimum wages; union-covered, commissioned-sales, or specialty-exempt employees may be subject to additional rules; and premium or shift-differential pay often must be recalculated against the new wage base.
Below, we’ve created a practical compliance checklist your company should complete before the new year.
What You Should Do Now
- Review hourly wages for all non-exempt employees and update them to at least $16.90/hour, or the applicable higher local or industry rate.
- Audit all exempt classifications. This includes not just salary, but also duties to ensure they meet the new salary threshold of $70,304/year.
- Recalculate any overtime, piece-rate, shift-differential, or premium pay to confirm compliance under the new wage floor.
- Verify compliance with relevant local minimum wage ordinances or industry-specific wage laws, which may impose higher rates.
- Update required California labor postings and internal notices to reflect the new minimum wage.
- Communicate changes clearly to employees.
California employers often view minimum wage increases as a matter of hourly workers, but the ripple effects are actually broader. For salaried, “exempt” staff, including many office, professional, and managerial roles, the increase can change whether a role still qualifies for exemption. A salary that was properly exempt under a $16.50 floor may no longer meet the standard at $16.90.
What are the potential ramifications? If re-classification is overlooked, employers may face claims for unpaid overtime, meal and rest-break violations, premium pay miscalculations, or penalties for failures to post wage notices. The costs can accumulate quickly: back wages, statutory penalties, interest, and legal fees.
Navigating minimum wage increases in California is rarely straightforward. Factors like local ordinances, industry exceptions, salary-versus-hourly tests, and overtime/payment-structure rules combine to create a complex legal landscape.
As experienced employment lawyers, we can review your payroll, classifications, and documentation to identify potential compliance gaps. For companies operating across multiple locations, with mixed employee types, or in regulated industries, this external review is often the difference between safe compliance and costly litigation.
If you would like help assessing your current practices, our team at EmployLaw Group is available to guide you. Contact us today for more information: (805) 586-1381.