Effective January 1, 2026, all employers in California must pay at least the state minimum wage of $16.90 per hour, an increase from 2025's $16.50 per hour.

In addition, California sets a minimum salary threshold for most "exempt" employees. The salary requirement is tied to the state minimum wage—not local ordinances. The current minimum salary threshold in California is $68,640 per year. Beginning January 1, 2026, the new exempt salary threshold will be:

• $70,304 per year, which equals two times the state minimum wage (based on a 40-hour workweek multiplied by 52 weeks = 2080 hours).

This means that even if your city or county has a higher local minimum wage, the exempt salary requirement is always based on the state minimum wage rate, not the local one.

A Word of Caution: Exempt vs. Non-Exempt

Meeting the salary minimum alone does not automatically make an employee exempt from overtime, meal and rest break requirements, or other wage protections. California applies a strict "duties" test—and it is not the same as the federal standard, primarily because California requires an employee to spend more than 50% of their time performing exempt tasks. Employers must carefully analyze the actual work performed by an employee before classifying them as exempt; and also ensure that the work is exempt as defined by the law. Improper classification can expose employers to significant liability, primarily for unpaid overtime.

Next Steps for Employers

To prepare for January 1, 2026:

• Update payroll systems to reflect the new $16.90 hourly minimum wage.
• Confirm that all exempt employees meet the increased $70,304 salary threshold, as well as the required duties test.
• Post updated state minimum wage notices in the workplace.
• Remember: when both state and local wage rates apply, the higher hourly minimum wage controls for non-exempt employees, but the exempt salary threshold always follows the state standard.

California's wage and hour laws continue to evolve quickly. Employers should review classifications, pay practices, and notices now to ensure compliance in the new year.

For questions about any other employment law issues, contact the attorneys at LightGabler LLP.