In this guide12 sections
- What Labor Code 1182.12 says
- The phase-in schedule written into the statute
- How the yearly adjustment works
- Who the statewide minimum wage covers
- When a higher rate applies
- Penalties and remedies
- Deadlines
- Related sections
- How it plays out
- What to do if you’re paid below minimum wage
- Frequently asked questions
- Sources
California Labor Code section 1182.12 is the statute that sets the statewide minimum wage: it phased the rate up to $15 an hour and now raises it every January 1 by the lesser of 3.5% or the past year’s inflation, rounded to the nearest 10 cents. The Director of Finance runs the calculation each summer, and the new rate applies to every employer in the state, whatever its size.
That formula produced the 2026 rate of $16.90 an hour and the $17.40 rate that takes effect January 1, 2027. For the current statewide figures, see our page on California’s minimum wage for 2026 and 2027. Many cities and counties set higher local rates, listed in our minimum wage by city guide, and the rate employers must post appears in the California Minimum Wage Order. This page explains the statute behind those numbers.
- Labor Code 1182.12 sets California’s statewide minimum wage and the formula that raises it every January 1.
- The rate reached $15 in 2022 for employers with 26 or more employees; since January 1, 2023, every employer pays the same rate.
- Each year the Director of Finance raises the rate by the lesser of 3.5% or the CPI-W change, rounded to the nearest 10 cents; it doesn’t go down if prices fall.
- That formula set $16.90 for 2026 and $17.40 from January 1, 2027 (a 2.99% CPI-W increase certified July 31, 2026).
- Higher local, health care and fast food rates still apply, and Labor Code 1194, 1194.2 and 1197.1 provide the remedies when you’re underpaid.
What Labor Code 1182.12 says
| Subdivision | What it says (paraphrased) |
|---|---|
| (a) | Set the minimum wage at $9 an hour from July 1, 2014, and $10 from January 1, 2016. |
| (b)(1) | Step increases for employers with 26 or more employees, reaching $15 on January 1, 2022, “and until adjusted by subdivision (c).” |
| (b)(2) | The same steps one year later for employers with 25 or fewer employees, reaching $15 on January 1, 2023. |
| (b)(3)–(4) | “Employer” means any person who “directly or indirectly, or through an agent or any other person, employs or exercises control over” wages, hours or working conditions, and includes the state, political subdivisions and municipalities. A special counting rule applies to certain related businesses treated as a single taxpayer. |
| (c)(1) | Each year, on or before August 1, the Director of Finance calculates an adjusted minimum wage: the current rate increased by the lesser of 3.5% or the change in the U.S. CPI-W, rounded to the nearest 10 cents, effective the following January 1. |
| (c)(2) | If the CPI-W change is negative, “there shall be no increase or decrease” that year. |
| (c)(3) | If CPI-W inflation topped 7% in the first year the $15 rate applied to employers with 26 or more employees (2022), indexing started immediately, and the rate for employers with 25 or fewer employees was set equal to the larger-employer rate the following January 1. |
| (d) | Let the Governor temporarily suspend a scheduled increase if the Director of Finance certified weak job, sales tax or budget conditions. This applied only until the $15 rate took effect for larger employers, and suspensions on budget-deficit grounds were limited to two. |
The phase-in schedule written into the statute
| Date | 26 or more employees | 25 or fewer employees |
|---|---|---|
| Jan. 1, 2017 | $10.50 | $10.00 |
| Jan. 1, 2018 | $11.00 | $10.50 |
| Jan. 1, 2019 | $12.00 | $11.00 |
| Jan. 1, 2020 | $13.00 | $12.00 |
| Jan. 1, 2021 | $14.00 | $13.00 |
| Jan. 1, 2022 | $15.00 | $14.00 |
The statute’s next step would have been $15 for small employers in 2023. Instead, the early-indexing rule in subdivision (c)(3) kicked in, and since January 1, 2023, there has been one statewide rate for all employers, adjusted each year under subdivision (c).
How the yearly adjustment works
- Measure inflation. The Director of Finance compares the average U.S. CPI-W (the Consumer Price Index for Urban Wage Earners and Clerical Workers) for the most recent July 1–June 30 period with the period a year earlier.
- Apply the cap. The increase is the lesser of that change or 3.5%.
- Round. The result is rounded to the nearest 10 cents.
- Certify and take effect. The calculation is due on or before August 1, and the new rate starts the following January 1.
- No cuts. If prices fall, the rate stays the same.
Two examples show the formula at work. In 2022, the Department of Finance found that inflation for July 2021 through June 2022 was 7.9%, so the 3.5% cap applied: $15.00 × 1.035 = $15.525, rounded to $15.50 for all employers on January 1, 2023. In 2026, the Department of Finance certified on July 31 that the CPI-W rose 2.99%, so the rate rises from $16.90 to $17.40 on January 1, 2027.
The highest of the state, local or industry rate controls. We can compare your pay stubs against the rates in effect for each pay period.
Who the statewide minimum wage covers
Section 1182.12 applies to every employer, and the Labor Commissioner says the minimum wage must be paid even when there is only one employee, to minors as well as adults, and regardless of any agreement to work for less. Because the statute’s definition of “employer” includes anyone who controls wages, hours or working conditions “directly or indirectly,” it can reach more than the company named on your paycheck.
The Labor Commissioner lists a few groups who are not owed the minimum wage, including outside salespersons, the employer’s parent, spouse or child, and apprentices regularly indentured under the Division of Apprenticeship Standards. “Learners” with no similar experience may be paid 85% of the minimum wage for their first 160 hours in that job.
When a higher rate applies
The statewide rate is a floor. You must be paid the highest rate that applies to your job:
- Local ordinances. Labor Code 1197 says state law doesn’t change local minimum wage laws, so a higher city or county rate controls. See minimum wage by city.
- Health care workers. Covered health care facilities follow a separate schedule under Labor Code 1182.14 (SB 525). See our SB 525 guide.
- Fast food. Workers at covered limited-service restaurants in national chains of 60 or more locations have been owed $20 an hour since April 1, 2024 (Labor Code 1474–1476).
The state rate also sets the salary floor for most overtime exemptions: at least twice the state minimum wage for full-time work, which is $70,304 a year in 2026 and $72,384 in 2027. See Labor Code 515.
Penalties and remedies
Section 1182.12 sets the rate; other sections enforce it.
- Labor Code 1197 makes paying less than the minimum wage unlawful.
- Labor Code 1194 lets you recover the unpaid balance, interest, reasonable attorney’s fees and costs, “notwithstanding any agreement to work for a lesser wage.”
- Labor Code 1194.2 adds liquidated damages equal to the unpaid minimum wages plus interest. A court or the Labor Commissioner may reduce them if the employer proves it acted in good faith with reasonable grounds.
- Labor Code 1197.1 lets the Labor Commissioner cite the employer: $100 per underpaid employee per pay period for an intentional first violation, and $250 per employee per pay period for a later violation, in addition to the wages and liquidated damages owed to you.
- Labor Code 203 waiting time penalties may apply if you left the job and wages are still unpaid.
Deadlines
| Claim | General deadline | Source |
|---|---|---|
| Unpaid minimum wage (wage claim or lawsuit) | Generally 3 years for liabilities created by statute | Code Civ. Proc. 338(a) |
| Liquidated damages | Any time before the deadline for the underlying wage claim runs | Labor Code 1194.2(a) |
| Retaliation complaint with the Labor Commissioner | 1 year after the retaliation | Labor Code 98.7 |
Related sections
| Section | What it adds |
|---|---|
| Labor Code 1197 | Paying less than the minimum wage is unlawful; local minimum wage laws still apply |
| Labor Code 1194 and 1194.2 | Lawsuits for unpaid minimum wage, liquidated damages |
| Labor Code 1197.1 | Labor Commissioner citations and civil penalties |
| Labor Code 1182.14 | Health care worker minimum wage (SB 525) |
| Labor Code 515 | Exempt salary floor tied to the state minimum wage |
| Minimum Wage Order | The IWC order employers post with the current rate |
How it plays out
💡 Example: Ana, a hypothetical warehouse packer in a California city with no local minimum wage, earns $16.90 an hour in 2026. When the 2027 rate takes effect, her employer forgets to update payroll and keeps paying $16.90 for her first six biweekly pay periods of 2027, 80 hours each. The shortfall is $17.40 − $16.90 = $0.50 an hour, or $0.50 × 80 = $40 per pay period, and $40 × 6 = $240 in all. Under Labor Code 1194 and 1194.2 she can seek the $240, an equal $240 in liquidated damages, and interest, and the Labor Commissioner can separately cite the employer.
What to do if you’re paid below minimum wage
- Find the highest rate that applies to you: statewide, city or county, or an industry rate.
- Compare it with the hourly rate and hours on each pay stub. Our wage and hour calculator can help total the gap.
- Keep pay stubs and your own record of hours, and get advice before the three-year window closes on the oldest pay periods.
Frequently asked questions
What is Labor Code 1182.12?
It is the California statute that sets the statewide minimum wage. It phased the rate up to $15 and now adjusts it every January 1 for inflation, capped at 3.5% a year.
When does the California minimum wage go up?
Every January 1. The Director of Finance calculates the new rate on or before August 1 of the year before, using the July–June CPI-W.
Can the minimum wage go down or be paused?
It can’t go down: if inflation is negative, the rate stays the same. The Governor’s power to pause increases in subdivision (d) applied only until the $15 rate took effect for employers with 26 or more employees, and the Labor Commissioner says the Governor is no longer able to pause a scheduled increase.
Does the state minimum wage apply to small businesses?
Yes. Since January 1, 2023, employers of every size pay the same statewide rate.
My city’s minimum wage is higher. Which one applies?
The higher one. Labor Code 1197 preserves local minimum wage laws, and the Labor Commissioner says the stricter standard controls.
Sources
- Labor Code 1182.12 (California Legislative Information)
- Labor Code 1197, 1194, 1194.2 and 1197.1
- Department of Finance minimum wage certification (July 31, 2026)
- DIR News Release 2026-66: 2027 minimum wage
- DIR News Release 2022-102: $15.50 for all employers in 2023
- Labor Commissioner: Minimum Wage FAQ
- Labor Commissioner: Fast Food Minimum Wage FAQ
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