Quick Hits
- Starting January 1, 2027, California’s minimum wage rate will rise to $17.40 per hour, reflecting a 2.99 percent adjustment based on federal inflation data.
- Employers may want to prepare for the upcoming wage adjustment and remain aware of existing higher minimum wage rates for fast food workers, health care workers, and various municipalities throughout California.
The increase is slightly larger than the $0.40 increase that took effect at the start of 2026, and it continues a trend of steady annual growth in California’s minimum wage rate since the state reached $15.00 per hour on January 1, 2023.
Under California Labor Code section 1182.12(c), California’s director of finance must annually calculate an adjustment to the state’s minimum wage rate before August 1 of each year. By law, the adjustment must be the lesser of 3.5 percent or the rate of change in the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W), which increased 2.99 percent for the period of July 1, 2025, to June 30, 2026, from the prior twelve-month period.
As with prior increases, higher wage floors already apply to certain workers and localities. A $20.00 per hour minimum wage rate continues to apply to workers at most fast food restaurants in California under the California Food Accountability and Standards Recovery Act (FAST Recovery Act). Certain healthcare workers are also subject to a higher minimum wage under Senate Bill (SB) No. 525. Additionally, several municipalities in California maintain local minimum wage rates that exceed the state requirement, so employers with operations in those jurisdictions should confirm which rate applies.
The increase in the minimum wage will also raise the minimum salary payable to certain white collar, exempt employees under California wage laws. Based on the new $17.40 hourly rate, the minimum annual salary for exempt status will rise to $72,384 from the current $70,304, an increase of $2,080. Employers should remember that satisfying the salary threshold is only part of the exemption analysis. Employees must also meet the duties test and other requirements applicable to the specific exemption claimed.
Next Steps
California employers may want to begin preparations now to ensure that their compensation structures will comply with the new minimum wage rate effective January 1, 2027, along with the higher rates already in effect for fast food workers, certain healthcare workers, and employees in several California municipalities. Employers may also want to update required workplace postings once the state’s 2027 minimum wage order and applicable industry wage order are released, and confirm that pay stubs accurately reflect each employee’s wage rate. Employers may also want to revisit exempt employee salaries now to determine whether adjustments will be needed before the new threshold takes effect.
Ogletree Deakins’ California offices and Wage and Hour Practice Group will continue to monitor developments and will provide updates on the California and Wage and Hour blogs as additional information becomes available.
The Ogletree Deakins Client Portal provides subscribers with timely updates on wage and hour laws, including minimum wage. Our updated minimum wage and minimum wage tip credit law summaries contain state and major locality current minimum wage and tip credit rates, and other future minimum wage and tip credit rates that states and major localities have published and/or announced. 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.
Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts
