Question: As a business owner, I normally update my staff hourly wages at the beginning of each year. Can you remind me of the minimum wage for 2026 and how it might impact non-hourly employees?
Answer: On Jan. 1, California’s statewide minimum wage increased from $16.50 to $16.90 per hour. The increase applies to most employers regardless of size.
With the increase to the minimum wage rate, employers also need to ensure that the annual salary for their exempt employees meets the minimum salary requirements for an exempt employee. To satisfy the compensation prong of the exemption, most exempt employees must be paid a salary of at least two times the state minimum wage for full-time work. For 2026, this translates to a minimum annual salary of $70,304 (calculated as $16.90 multiplied by two over 40 hours/week multipilied by 52 weeks/year). Paying the salary threshold is only one part of the requirement. Employees must also pass the duties test to avoid misclassification issues involving overtime and mandatory meal-and-rest periods.
Certain exemptions have their own compensation floors that do not track with the general minimum wage. For example, California’s computer software employee exemption (a narrow exemption that depends heavily on the work actually performed) requires at least $58.85 per hour, or a minimum annual salary of $122,573.13, in 2026. Similarly, the licensed physicians and surgeons exemption requires a minimum rate of $107.17 per hour as of Jan. 1. If an otherwise exempt employee’s salary falls below the minimum threshold, the exemption fails. The employee must be reclassified as a nonexempt employee, requiring time tracking, overtime compensation, and compliance with all applicable meal and rest break regulations.
Industry-specific minimum wages can complicate the analysis. Fast-food restaurants covered by the fast-food minimum wage law are subject to a separate, higher hourly minimum wage than the statewide rate. Moreover, health care employers may be subject to a separate wage schedule depending on the type of facility and role, and the number of employees the employer employs. If you operate in those industries (or contract into them), confirm which wage rules apply before you assume the statewide $16.90 rate controls your payroll planning.
Finally, keep in mind that many California cities and counties set local minimum wages above the state rate. Unlike state law, many localities increase the minimum wage every July. The rule is simple: an employer must pay the highest applicable minimum wage for the location where the employee works. A list of California city and county minimum wage rates maintained by University of California Berkely is available here: https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/#s-2.
After you implement wage changes, California also requires timely written notice of pay-rate changes under Labor Code section 2810.5. The Department of Industrial Relations publishes template notices and the updated minimum wage poster that employers must display in a visible, conspicuous location in the workplace. The “Notice to Employee” can be downloaded for use https://www.dir.ca.gov/dlse/dlse-publications.htm. The required minimum wage poster can be downloaded at https://www.dir.ca.gov/iwc/MW-2026.pdf.
California’s minimum wage rules are increasingly varied based on a variety of factors, including industry, employer size, and the location of the business and its employees. Employers are encouraged to review their payroll records to ensure compliance with the minimum wage increase, and any impact it has on exempt employees. Those with questions regarding the minimum wage increase or its impact on exempt employees should consult with their employment counsel.
Marco Lucido is a lawyer with Fenton & Keller in Monterey. This column is intended to answer questions of general interest and should not be construed as legal advice. Email queries to mlucido@fentonkeller.com
