When a new year begins, many workers ask: Will my pay change? In California, the answer is yes — minimum wage rates are adjusted annually based on cost-of-living factors. For 2026, employees and employers alike need to be aware of the upcoming changes, how they affect exempt status, and the implications at the city/county level.
What’s Changing in 2026
Statewide Minimum Wage Rise
- On January 1, 2026, California’s state minimum wage will increase from $16.50 to $16.90 per hour.
- This 40¢ increase reflects a 2.49% adjustment under California Labor Code § 1182.12(c), which ties the wage increase to the U.S. Consumer Price Index (CPI-W), subject to a maximum of 3.5%.
Impact on Exempt Employees
In California, to qualify for executive, administrative, or professional exempt status, an employee must satisfy both a duties test and be paid at least twice the state minimum wage (on a full-time basis).
- With the new minimum wage, the exempt salary floor rises. As of January 1, 2026, the minimum exempt salary will increase to $70,304 per year (or $5,858.67 per month).
- Employers must ensure that any employee classified as exempt meets this salary threshold (in addition to the duties test). Failure to do so could result in misclassification claims.
Local & Industry-Specific Minimum Wages
Not all minimum wage rates in California are uniform:
- Some cities and counties enforce higher rates than the state floor. For instance, places like Emeryville, Berkeley, Los Angeles, Fremont, and others have their own schedules.
- Certain sectors (e.g. fast food) are already subject to higher minimum wages under state law. For example, under the FAST Recovery Act, many fast-food workers are covered by a statewide $20/hr rate.
- Employers must apply whichever wage is higher — the state minimum, the local jurisdiction’s rate, or the sector-specific rate.
What Employees Should Watch Out For
1. Check Your City or County’s Rate
If you’re employed in a city with its own minimum wage, your employer must comply with that higher rate. Always compare.
2. Review Your Classification
If you are classified as exempt, confirm that your salary meets the new $70,304 threshold (and that your job duties align with exempt status).
3. Overtime & Regular Pay Protections
Employees paid minimum wage must still be paid overtime as required (time-and-a-half after 8 hours/day or 40 hours/week, etc.) unless exempt.
4. Retroactive or Back Pay Claims
If an employer fails to adjust your pay to comply, you may have a wage claim for underpaid wages after January 1, 2026.
5. Employer Notice & Posting Requirements
Employers must update their wage notices, internal policies, payroll systems, and any public or internal postings to reflect the new rate.
Examples: How the Increase Affects Real Wages
| Scenario | Hourly Rate | Monthly Equivalent (40 hrs/wk) | Comment |
|---|---|---|---|
| Nonexempt employee currently earning $16.50/hr | $16.90/hr | ~$2,946 | Will see direct raise to meet minimum |
| Exempt employee at $68,640/year | – | – | Falls below new exempt threshold, needs raise or reclassification |
| City with higher minimum (e.g. $19/hr) | $19.00/hr | ~$3,290 | That higher rate governs over state level |
What To Do If You’re Affected (Employees’ Checklist)
- Review your recent pay stubs and employment classification.
- Ask your employer whether they plan to adjust your pay.
- If your raise is not applied, send a written inquiry or demand.
- Keep all written records and communications.
- Consult with a labor attorney (like at EFLL) if your employer refuses to comply.
For Employers: Key Compliance Tips
- Audit payroll systems now to ensure they can accommodate the change.
- Train HR and payroll staff about the new thresholds.
- Update job offers, contracts, and employee handbooks to reflect the $16.90/hr and new exempt salary floor.
- Communicate transparently with employees about how the increase affects them.
- Monitor and adjust for local or sector-specific requirements.
In Summary
- California’s state minimum wage will rise on January 1, 2026 to $16.90 per hour.
- The exempt salary floor increases to $70,304/year in 2026.
- Employers must follow higher local or industry-specific wage rates when applicable.
- Employees who do not receive proper adjustments may have wage claims.
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