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Ballard Rosenberg Golper & Savitt, LLP

California Statewide Minimum Wage Rises to $17.40 Effective January 1, 2027

On July 31, 2026, California Department of Finance Director Joe Stephenshaw officially certified that California’s statewide minimum wage will increase from $16.90 to $17.40 per hour for all employers, regardless of size, effective January 1, 2027.

Under California Labor Code section 1182.12, on or before August 1 each year the Director of Finance must determine whether to adjust the minimum wage for inflation and, if so, apply whichever of the following produces the smaller increase:

  • 3.5 percent; or
  • The actual rate of change in the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

For the 12-month period from July 1, 2025 to June 30, 2026, CPI-W rose 2.99 percent — below the 3.5 percent cap. The minimum wage therefore increases by 2.99 percent (a 50-cent bump) to $17.40 per hour on January 1, 2027.

Impact on Exempt Salary Thresholds

Because the executive, administrative, and professional (“white collar”) exemptions require a guaranteed salary of at least two times the state minimum wage for full-time employment (2 × hourly rate × 2,080 hours), the statewide increase automatically raises the exempt salary floor. The current minimum salary of $70,304 per year ($5,858.67 per month) rises to $72,384 per year ($6,032 per month) on January 1, 2027. An employee who does not satisfy this salary-basis requirement is non-exempt regardless of job duties.

Industry-Specific Rates Carry Their Own Exempt Thresholds

1.  Fast food. Employees covered under Labor Code sections 1474–1476 (AB 1228 — limited-service chains with 60+ locations nationally) remain at a $20 per hour minimum wage. To qualify as exempt, covered managers must earn two times that rate, or $83,200 per year. The Fast Food Council has not announced a further increase as of this writing.

2. Healthcare. California’s healthcare worker minimum wages vary by facility type (currently ranging roughly $19.28 to $25 per hour), with some rates having increased on July 1, 2026. The exempt salary threshold is the greater of 1.5 times the applicable healthcare minimum wage or two times the state minimum wage.

Local Minimum Wages

Numerous California cities and counties maintain local rates above the state floor (Emeryville, Los Angeles, San Diego, and San Francisco, among others). Where the locality in which the work is performed requires a higher rate, that local rate governs the hourly wage. Critically, however, only the state minimum wage — not local rates — sets the exempt salary threshold.

Action Items for Employers

  • Confirm all non-exempt hourly rates meet $17.40 (or any higher applicable local rate) by January 1, 2027.
  • Audit exempt salaries against the new $72,384 floor — and against the $83,200 fast-food threshold or applicable healthcare calculation where relevant — and adjust before the effective date.
  • Verify exempt employees are actually paid on a guaranteed salary basis, not variable or hourly compensation.
  • Update payroll systems, wage-theft prevention notices, and required workplace postings.
  • Review compensation structures that key off minimum wage (e.g., piece-rate or commission plans and regular-rate-of-pay calculations) for downstream effects.

As always, if you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700 or visit us online at www.brgslaw.com .

This advisory is provided by Ballard Rosenberg Golper & Savitt, LLP for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Employers should consult counsel regarding the application of these requirements to their specific circumstances.

 Sincerely,

 

Richard S. Rosenberg

Katherine A. Hren

Matthew B. Golper