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Starting January 1, 2026, California's minimum wage for non-exempt employees will increase from $16.50 to $16.90 per hour — a 2.49% increase over 2025 rates.
(Certain industries – fast food and health care – are already subject to higher hourly rates, as are employees in many local jurisdictions throughout the state.)
While employers with operations in California will need to ensure that non-exempt employees are paid at least $16.90 per hour (or higher applicable industry or local rates), they must be mindful that the increase in the state minimum wage also impacts what they must pay to many exempt employees. That is because the salary threshold for most California overtime exemptions is derived directly from the state minimum wage. An increase in the minimum wage results in an increase in the exempt threshold for many exempt employees.
To maintain exempt status for employees under the professional, executive, and administrative exemptions, California employers must pay the employees at least twice the state minimum. (Of course, employees must also satisfy the duties tests for those exemptions.)
With the new $16.90 minimum wage, the annual minimum salary for employees under those exemptions will increase to $70,304 (or $1,352 per week) effective January 1, 2026.
Other exemptions, such as the computer professional exemption, will also see adjustments on January 1, 2026. The California Department of Industrial Relations has set the 2026 threshold for computer professionals at $122,573.13 annually ($10,214.44 monthly or $58.85 per hour) — a 3.3% increase over 2025 rates.
Putting aside all other requirements, commissioned salespeople must be paid at least one and one-half times the minimum wage for each hour worked in a week to be considered exempt.
Employers must ensure compliance with these updated thresholds to avoid misclassification risks and potential wage-and-hour claims, including class actions and Private Attorneys General Act claims. As California continues to adjust wages, employers should regularly review compensation structures to maintain compliance with the law not only to avoid minimum wage claims, but to retain exempt status for eligible employees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
