On January 1, 2026, California’s minimum wage will increase from $16.50 to $16.90 per hour.
Each year, California’s minimum wage increases—and it doesn’t just affect hourly workers. It also raises the minimum salary employees must earn to qualify as exempt from overtime. Under California law, an employee must (1) fall into a recognized exempt category and (2) meet a required salary threshold to be treated as exempt.
General Exempt Employees: New Salary Threshold for 2026
The most common exempt classifications are:
- Executive
- Administrative
- Professional
Employees in these roles may qualify for exempt status if:
- Their duties meet the detailed criteria set out in California law; and
- They earn a salary of at least twice the state minimum wage for full-time work.
Beginning January 1, 2026, the minimum salary for these exempt employees will increase from $68,640 per year to $70,304 per year. This reflects California’s requirement that exempt employees earn at least double the state minimum wage based on 40 hours per week, 52 weeks per year.
Special Exemptions Tied to CPI Adjustments
For some categories of exempt employees, the minimum pay level is not tied directly to the general minimum wage. Instead, the Department of Industrial Relations (DIR) adjusts their pay thresholds annually based on changes to the California Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI).
Two key groups impacted by these CPI-based adjustments are:
- Certain computer software employees
- Certain licensed physicians and surgeons
For these employees, the Labor Code sets out specific minimum hourly or salary rates that must be met to maintain exempt status.
Computer Software Employees – Labor Code § 515.5
Under Labor Code section 515.5, employees working in the computer software field may be exempt from overtime if they meet both duties and compensation requirements.
To qualify, these employees must:
- Primarily perform work that is intellectual or creative in nature,
- Exercise discretion and independent judgment, and
- Possess a high level of skill in tasks such as:
- Programming
- Systems analysis
- Software design
Effective January 1, 2026, the minimum pay levels for this exemption will be:
- Hourly rate: $58.85
- Monthly salary: $10,214.44
- Annual salary: $122,573.13
Employees who do not meet both the duties test and these compensation thresholds may not qualify for the computer software exemption and could be entitled to overtime.
Licensed Physicians and Surgeons – Labor Code § 515.6
Similarly, Labor Code section 515.6 provides a specific overtime exemption for certain licensed physicians and surgeons, provided they are paid at or above a required hourly rate.
Effective January 1, 2026, the minimum hourly rate for these professionals to qualify for the exemption will be:
- $107.17 per hour
If a physician or surgeon is not paid at or above this hourly rate, they may not meet the exemption and could be owed overtime compensation under California law.
Local Minimum Wage
In addition to California’s minimum wage increase, on January 1, 2026, several local municipalities will increase their minimum wage rates.
Below is a list of some of the local minimum wages increasing at the start of the year.
- Belmont – $18.95
- Burlingame – $17.86
- East Palo Alto – $17.90
- El Cerrito – $18.82
- Half Moon Bay – $17.91
- Hayward – $17.79 (26+ employees) / $16.90 (25 or fewer)
- Los Altos – $18.70
- Menlo Park – $17.55
- Mountain View – $19.70
- Palo Alto – $18.70
- Petaluma – $18.31
- Redwood – $18.65
- Richmond – $19.18
- San Carlos – $17.75
- San Diego – $17.75
- San Jose – $18.45
- San Mateo – $18.60
- San Mateo County (unincorporated) – $17.95
- Santa Clara – $18.70
- Santa Rosa – $18.21
- South San Francisco – $18.15
- Sunnyvale – $19.50
- West Hollywood – $20.25
Industry-Specific Minimum Wage
The fast food and healthcare industries are subject to higher minimum wage thresholds than the state’s minimum wage. The healthcare worker’s minimum wage is based on a tiered system, which is higher than the state’s minimum wage, and which is set to increase on July 1, 2026. While fast food workers currently earn a minimum of $20 per hour.
Next Steps
Employers must continue to monitor the minimum wages at the industry, local, and state levels.
If you have questions about California’s overtime exemption requirements or minimum wage issues, please reach out to Eanet, PC.