California employers face one of the most complex wage compliance environments in the country, especially with regular increases to state and local minimum wage rates. Recent minimum wage increases also affect the minimum salary threshold for exempt employees, overtime rates for non-exempt employees, meal and rest break premium calculations, and sick time pay. Below is a summary of the key changes.
California State Minimum Wage. As a reminder, California’s statewide minimum wage increased to $16.90 per hour, effective January 1, 2026. All California employers are obligated to pay no less than the applicable minimum wage for every hour worked, without tip credits, and should ensure that their payroll systems, wage notices, and workplace postings reflect the current rate. As discussed further below, certain industries are subject to higher, industry-specific minimums.
Local Minimum Wage Increases Effective July 1, 2026. Numerous California cities and counties implemented local minimum wage increases on July 1, 2026, many of which significantly exceed the state rate. Key updated rates include: City of Los Angeles — $18.42/hour; Unincorporated Los Angeles County — $18.47/hour; Pasadena — $18.57/hour; Santa Monica — $18.47/hour; Malibu — $17.91/hour; Emeryville — $20.34/hour (the highest general local rate in the state); Berkeley — $19.61/hour; San Francisco — $19.61/hour; Milpitas — $18.50/hour; Fremont — $18.05/hour; and Alameda — $17.76/hour.
Industry-Specific Minimum Wages. California employers in certain sectors must comply with minimum wage rates that exceed the general statewide minimum. Notably:
- Fast Food Workers (AB 1228): Effective January 1, 2026, the minimum wage for fast food restaurant employees (i.e., employees of national fast food chains with 60 or more locations nationwide) increased to $20.00 per hour.
- Healthcare Workers (SB 525): As of June 1, 2025, the minimum wage for healthcare workers at large health systems (10,000+ full-time equivalent employees) and dialysis clinics is $23.00 per hour. Other covered healthcare employers are subject to rates ranging from $18.00 to $21.00 per hour depending on category, with scheduled annual increases through 2028.
- Computer Software Professionals. The minimum hourly rate of pay required to qualify for the computer software professional exemption also increases annually. For 2026, the minimum hourly rate is $56.97, the minimum monthly salary is $9,888.13, and the minimum annual salary is $118,657.43.
Exempt Employee Minimum Salary Threshold. The increase in the state minimum wage directly impacts the minimum compensation required for employees to qualify as exempt from overtime under California’s executive, administrative, and professional exemptions. Exempt employees must be paid a monthly salary equivalent to no less than twice the state minimum wage for full-time employment (40 hours per week). Effective January 1, 2026, this means exempt employees must earn a minimum annual salary of $70,304 (equivalent to $1,352 per week) to satisfy the salary basis test.
Because new minimum wage rates affect all aspect of wage and hour and payroll matters, employers should act now to: (1) verify the applicable local hourly minimum wage rate for each worksite; (2) track daily work locations for remote and hybrid employees to ensure correct rates apply; (3) update payroll systems; (4) post required local minimum wage notices; and (5) review industry-specific obligations, particularly for employers operating fast food or healthcare facilities. Failure to pay the applicable minimum wage exposes employers to significant liability, including back pay, liquidated damages, waiting time penalties, and potential PAGA claims. Please contact us with any questions specific to your workforce and locations.
