What happened?

As a reminder for California employers, several minimum pay standards will increase on January 1, 2026, impacting both exempt and non-exempt employees.

Overview

Why this matters: Employers must meet both salary and duties tests for exempt classifications. Failure to comply can result in employees being reclassified as non-exempt, triggering liability for overtime and penalties.

Action Steps for Compliance

• Audit employee classifications to confirm salary and duties meet exemption requirements.
• Update payroll systems for new rates effective January 1, 2026.
• Check local ordinances for higher minimum wages.
• Post updated wage notices as required by law.
• Statewide Minimum Wage: Increases to $16.90 per hour for all employers.
• White Collar Exemptions: Minimum salary rises to $70,304 annually ($5,858.67 monthly).

• Computer Software Professionals:
  • Hourly: $58.85
  • Monthly: $10,214.44
  • Annual: $122,573.13

• Licensed Physicians and Surgeons: Minimum hourly rate increases to $107.17.

Key Risks for Employers:

• Misclassification of employees due to incorrect application of duties or salary thresholds.
• Exposure to up to four years of back pay, penalties, and litigation.
• Non-compliance with local minimum wage ordinances, which may set higher rates.

For additional details:

• California Department of Finance – Minimum Wage Increase, Director of Finance Calculation of Adjustment
• DIR – Overtime Exemption for Computer Software Employees
• DIR Announcement – Overtime Exemption for Computer Software Employees
• For California and multi-state minimum wage rate increases, see Venure’s Minimum Wage Chart

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