California’s minimum wage will increase on January 1, 2026, this time to $16.90 per hour, marking another step in the state’s ongoing efforts to keep wages in line with inflation and the cost of living. Although the 40 cent increase may seem small, it has significant effects. The new figure also increases the required salary for exempt employees, in addition to impacting certain special categories and is linked to several new labor laws that will take effect in 2026. For this reason, employers must prepare.
The minimum wage in California has increased steadily since 1916, when it was just $0.16 an hour. It reached $10 in 1957 and $10 in 2016. The new wage of $16.90 by 2026 places California among the nation’s highest minimum wage jurisdictions, fourth, after Washington DC, Washington state and Connecticut.
The 2026 increase comes from a legal mechanism that allows annual adjustments of up to 3.5% when national inflation exceeds 7%. This process raised the minimum wage to $16 in 2024 and $16.50 in 2025. Likewise, many cities and counties will charge wages above the state rate, as they have in the past. Some sectors, like fast food and health care, will also maintain higher wage floors.
Cities and counties that will pay higher wages
- Belmont – $18.95 per hour
- Burlingame – $17.86 per hour
- East Palo Alto – $17.90 per hour
- El Cerrito – $18.82 per hour
- Half Moon Bay – $17.91 per hour
- Hayward – $17.79 per hour (for businesses with 26 or more employees)
- Los Altos – $18.70 per hour
- Los Angeles – $17.87 per hour
- Menlo Park – $17.55 per hour
- Mountain View – $19.70 per hour
- Palo Alto – $18.70 per hour
- Petaluma – $18.31 per hour
- Redwood City – $18.65 per hour
- Richmond – $19.18 per hour
- San Diego – $17.75 per hour
- San Jose – $18.45 per hour
- San Mateo – $18.60 per hour
- Santa Clara – $18.70 per hour
- Santa Rosa – $18.21 per hour
- San Francisco – $19.18 per hour
- South San Francisco – $18.15 per hour
- Sunnyvale – $19.50 per hour
- West Hollywood – $20.25 per hour
New annual minimum salary for exempt employees
Exempt employees are workers who are not entitled to overtime pay, provided they meet certain requirements. One of the most important consequences of raising the minimum wage is its effect on these workers. California law requires most exempt executive, administrative, and professional employees to earn at least twice the state minimum wage for full-time employment. Thus, on January 1, 2026, the minimum annual salary of these employees will increase from $68,640 to $70,304.
This change will affect thousands of employees across the state and require employers to update compensation, revise job classifications and adjust budgets. Incorrect classification can result in significant legal liabilities, such as back pay for overtime, fines and legal fees.
Some exempt categories have their own calculations based on the Consumer Price Index (CPI). As of January 1, 2026, they will be:
- Software professionals: minimum of $58.85 per hour, $10,214.44 per month or $122,573.13 per year.
- Licensed physicians and surgeons: $107.17 per hour minimum.
These rules aim to keep wages at market rates for highly specialized professions.
Although the increase in the minimum wage is the main change, it comes in a year full of new labor laws that influence remuneration, salary transparency and personnel management, so that 2026 will be a particularly demanding year for companies.
Adjustments to the Equal Pay Act (SB 642)
Revisions to the Equal Pay Act change key definitions that directly influence salary documentation. From 2026:
- “Salary Range” must be a good faith estimate of the expected salary range upon hire.
- “Salaries” include all forms of compensation, such as bonuses, stock options, benefits, vacation time, and overtime pay.
- Employees will be able to claim salary arrears for a maximum period of six years.
Penalties for Unpaid Wage Judgments (SB 261)
Employers who fail to pay a wage judgment within 180 days will face fines of up to three times the amount owed, plus mandatory legal fees.
Expanded Salary Data Reporting (SB 464)
Employers with 100 or more workers will face mandatory penalties – $100 per employee or $200 for repeat offenders – for failing to file wage reports. Since these reports are based on accurate salary and demographic data, properly updating the minimum wage increase will be essential.
Employers must therefore:
- Review local ordinances with higher minimum wages.
- Update payroll systems with the new minimum wage.
- Verify that exempt employees are meeting the new annual salary.
- Adjust salary documentation and audits to comply with SB 642.
- Perform payroll audits to avoid SB 261 penalties.
- Prepare updated notices, policies and records.
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