The California Department of Industrial Relations (DIR) has announced that California’s statewide minimum wage will increase from $16.90 to $17.40 per hour effective January 1, 2027. The increase follows the state’s annual inflation-adjustment process and was certified by the California Department of Finance on July 31, 2026.
The increase affects not only hourly pay rates, but also salary thresholds for certain overtime exemptions and related employer compliance obligations.
New Statewide Minimum Wage
Beginning January 1, 2027, most employees in California must be paid at least $17.40 per hour. The minimum wage applies broadly, including employees who are compensated on a piece-rate basis.
Employers should note that some cities and counties maintain local minimum wage ordinances with rates that exceed the statewide minimum wage. Where both state and local laws apply, employers generally must comply with the higher rate.
Exempt Employee Salary Threshold Also Increases
The minimum wage increase affects the salary basis requirement applicable to many California white-collar overtime exemptions.
Because California generally requires exempt employees to earn a salary equal to at least twice the state minimum wage based on full-time employment, the minimum annual salary threshold will increase to $72,384 per year ($17.40 × 2 × 40 hours per week × 52 weeks per year).
Employees must still satisfy all applicable duties and other exemption requirements in addition to meeting the salary threshold.
Posting and Pay Requirements Remain Important
The Labor Commissioner’s Office reminded employers that they must:
- Pay employees at least the applicable minimum wage;
- Accurately list wage rates on employee pay statements; and
- Post the applicable state wage order and any industry-specific wage orders in the workplace.
Updated workplace notices are available through the Department of Industrial Relations.
Potential Liability for Noncompliance
Employers that fail to comply with California minimum wage requirements may face liability for:
- Unpaid wages;
- Penalties; and
- Liquidated damages.
Employers Impacted
The increase affects virtually all California employers, particularly those that:
- Pay employees near the current minimum wage;
- Utilize exempt classifications subject to salary thresholds;
- Operate in multiple California jurisdictions with varying local wage rates; or
- Maintain payroll systems that require annual wage updates.
Employer Takeaway
Before January 1, 2027, California employers should review hourly wage rates, exempt employee salaries, payroll systems, and workplace postings to ensure compliance with the new $17.40 statewide minimum wage. Employers should also evaluate whether exempt employees continue to satisfy the increased salary threshold and confirm compliance with any higher local minimum wage requirements.