On August 1, the California Department of Finance Director Joe Stephenshaw officially certified that beginning January 1, 2026, California’s minimum wage will increase to $16.90 per hour for all employers, regardless of size.
Under California Labor Code section 1182.12, the California Director of Finance must determine on or before August 1 of each year whether to adjust the minimum wage for inflation and, if so, calculate the increase.
The director calculates the increase by applying whichever of the following two options would result in the smaller increase:
- A 3.5 percent increase; or
- The actual rate of change per the U.S. Consumer Price Index (CPI).
For the 12-month period from July 1, 2024, to June 30, 2025, the department’s calculations showed that the CPI increased by 2.49 percent compared to the 12-month period from July 1, 2023, to June 30, 2024, meaning the minimum wage will increase by 2.49 percent — to $16.90 per hour — on January 1, 2026.
This hourly increase also affects the minimum salary requirements for full-time exempt employees, which currently is $68,640 per year ($5,720 per month). Beginning January 1, 2026, the minimum salary for a full-time exempt employee will be $ 70,304 per year ($5,858.67 per month).
Employers also must keep in mind that all fast food restaurant employees covered under California Labor Code Section 1474-1476 have their own minimum wage of $20 per hour, plus California’s various health care worker minimum wage rates are in effect — some of which increased on July 1, 2025. It’s important to note that, in these industries, these rates impact exempt salary thresholds. To qualify as exempt, covered fast food employees must make two times the fast food minimum wage. And covered health care employees must make one and a half times the applicable health care rate or two times the state minimum wage, whichever is greater.
In addition, some cities and counties in California have adopted their own local minimum wage rates that are separate from the state rate. If the ordinance where employees are performing work requires a higher minimum wage rate than the state minimum wage rate (such as Berkeley, Los Angeles, Milpitas and San Francisco, to name just a few), the local rate must be paid. Keep in mind, however, that only the state minimum wage — not local minimum wages — determines the minimum salary requirements for exempt employees.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
CalChamber members can read more about Wage and Hour Enforcement and Penalties in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.
