California officials announced today that the statewide minimum wage will increase to $17.40 per hour on Jan. 1, 2027. This wage hike, which is required by a state law that automatically adjusts the rate for inflation each year — impacts much more than hourly pay, and employers must take note.
Snapshot of California’s Minimum Wage Rates
- All employers, regardless of size, are subject to California’s statewide minimum wage, which will increase from $16.90 to $17.40 on Jan. 1, 2027. Governor Gavin Newsom’s office just announced this upcoming rate change today.
- Employers in some industries are subject to higher minimum wage rates under California law, including the fast-food and healthcare industries.
- Employers in certain locations are subject to higher minimum wage rates imposed at the city or county level.
Additional Considerations for Employers
- Exempt employee salary thresholds will increase, as they are tied to the minimum wage. You must ensure exempt workers still meet the new salary basis test. For most exempt employees, the minimum salary will be $72,384 per year.
Reminder: California’s overtime exemptions are much narrower and more protective of employees compared to the federal Fair Labor Standards Act (FLSA). When overtime is required by California law, but not required by the FLSA, there can be surprising implications for purposes of the federal “No Tax on Overtime” rules.
- Inside sales exemptions, tool reimbursements, and certain piece-rate compensation arrangements may need recalibration based on the new wage.
- Premium pay calculations for split shifts, reporting time, and meal/rest period violations must reflect the new hourly baseline.
- Sick leave accruals are also impacted by hourly pay rates.
Action Items for Employers
- Audit employee compensation to ensure compliance with new minimum wage and exemption thresholds.
- Update payroll systems to reflect the new rate for both hourly and salaried workers.
- Revise policies and workplace postings to ensure they align with the updated wage requirements.
- Train HR and payroll personnel on the impact of the wage hike on overtime eligibility, premiums, and paystub accuracy.
- Monitor additional developments at the local and industry level.
Hannah Sweiss is an attorney with Fisher Phillips in Los Angeles. Spencer W. Waldron is an attorney with Fisher Phillips in Irvine, Calif. © 2026 Fisher Phillips. All rights reserved. Reposted with permission.
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