California’s 2026 Minimum Wage Increase: What Employers Must Update When the Floor Moves

Quick Hits

• With California’s minimum wage increasing to $16.90 per hour in 2026, employers may want to adjust their practices now to ensure compliance with new wage thresholds and avoid potential risks.
• The increase in minimum wage will raise the salary threshold for white-collar exemptions to $70,304 annually, prompting employers to verify that exempt employees meet both duties and salary requirements.
• Employers may want to confirm that they have updated pay rate tables, timekeeping systems, and payroll calculations, and ensure all required postings and notices reflect the new minimum wage to maintain compliance.

Salaried Exempt Thresholds

A minimum wage increase immediately raises the salary threshold for most white-collar exemptions under the Industrial Welfare Commission (IWC) wage orders. To qualify for many exemptions, an employee must be paid on a salary basis at a monthly salary equivalent to no less than two times the state minimum wage for full-time employment, defined as forty hours per week.

Applying the $16.90 hourly rate for 2026, the minimum salary basis to qualify for the executive, administrative, and professional exemptions becomes $70,304 annually.Employers may want to confirm that all employees treated as exempt on an executive, administrative, or professional basis meet both the duties requirements and the heightened salary threshold.

Employers may also want to revisit their commission-based exemptions that depend on minimum wage multiples. For the commissioned sales exemption under Wage Orders 4 and 7, an employee’s earnings must exceed one and one-half times the minimum wage, and more than half of compensation must be commissions. With the floor at $16.90, the pay must exceed $25.35 per hour on an earnings basis, with the commissions predominance test still satisfied.

CBA Exemptions

Moreover, collective bargaining agreement (CBA) carve-outs that hinge on a premium above the state minimum wage must be recalculated as well. For example, certain overtime exemptions in the wage orders require a regular hourly rate at least 30 percent more than the state minimum wage, which equates to at least $21.97 per hour at a $16.90 minimum. This minimum hourly rate is required for CBA exemptions to specific state overtime requirements for unionized employees.

Piece Rate Related Compensation

Piece-rate compensation programs also require particular scrutiny. California law mandates separate compensation at no less than the minimum wage for “other nonproductive time” under the employer’s control and requires paid rest breaks at no less than the greater of the applicable minimum wage or the employee’s average hourly earnings for the workweek. An increase in the minimum wage therefore raises the floor for both nonproductive time and rest break pay, so employers may want to confirm that their systems and pay codes calculate and pay these amounts at or above the new rate.

Reporting Time Pay and Split Shift Premiums

Reporting time pay and split-shift premiums also tie to hourly rates and minimum wage floors in the wage orders. When a split shift occurs, one hour’s pay at the minimum wage must be added, and any excess hourly pay above the minimum can be credited toward that premium. As minimum wage rates rise, the cash exposure for these guarantees increases. Employers may want to verify scheduling, timekeeping, and payroll configurations to ensure these payments are triggered and calculated correctly at the new rate.

Required Postings and Notices

California’s posting and notice framework also turns on the minimum wage. Employers must post the applicable IWC wage order(s) and the general minimum wage order, and posting must remain current. With the new rate, employers may want to confirm that prior minimum wage postings have been removed and ensure the correct wage order for their industry or occupation is posted in an area frequented by employees where it can be read during the workday.

At hire, employers must provide required wage notices that include, among other things, the employee’s pay rate and applicable allowances. When rates change, employers must provide timely written notice of the changes unless the updated information appears on a timely issued, compliant wage statement or in another legally required writing within the specified time window.

Local Ordinances and ‘Highest Applicable’ Rule

Many California cities and counties maintain local minimum wage ordinances that exceed the statewide rate. Employers must pay the highest applicable minimum wage among federal, state, and local law. As the state floor rises to $16.90, employers operating across jurisdictions should re-map their minimum wage matrix to ensure each work location aligns with the correct local rate where higher, while still updating statewide floor-dependent thresholds discussed above.

Practical Implementation

From a systems perspective, employers may want to update pay rate tables, timekeeping integrations, and payroll calculations to ensure compliance on and after the effective date.

Employers may also want to consider the following steps:

• retesting overtime, regular rate, premium pay, nonproductive time, and split-shift logic;
• repricing commissioned, CBA-covered, and salaried exempt roles to confirm they exceed the new statutory and wage-order thresholds tied to the minimum wage;
• refreshing required postings and reissue or update notices as needed; and
• finally, auditing a representative pay cycle after the increase to validate that all wage-and-hour calculations reflect the $16.90 floor.

Complying with California’s wage-and-hour rules requires more than changing a single number. The minimum wage is the bottom rung of a broader compliance ladder; when it rises, many other obligations rise with it. A careful, end-to-end update before the effective date is the best defense against avoidable exposure.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will post updates on the California and Wage and Hour blogs as additional information becomes available.

Further information on minimum wage rates and requirements can be found in the Ogletree Deakins Client Portal, including minimum wage and minimum wage tip credit law summaries. (Full law summaries are available for Premium-level subscribers; Snapshots and Updates are available for all registered client-users.) For more information on the Client Portal or a Client Portal subscription, please reach out to clientportal@ogletree.com.

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