California will increase its statewide minimum wage to $17.40 per hour starting January 1, 2027, representing a $0.50 increase from the current rate. This adjustment affects not only the minimum wage employers must pay hourly employees but also the salary threshold required to maintain exempt status for executive, administrative, and professional employees.
Exempt employees must earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment, defined as 40 hours per week. With the 2027 increase, the minimum annual salary for exempt employees will rise to $72,384, up from this year’s $70,304.
While the statewide minimum wage establishes the baseline, California employers must pay the rate most favorable to the employee. When local ordinances impose higher minimum wages, employers must pay the higher local rate for employees working in those jurisdictions. However, the exempt salary threshold remains tied exclusively to the state minimum wage and is not elevated by local ordinances.
Employers should review compensation structures now to ensure compliance by January 1, 2027. Pay particular attention to employees currently earning close to the exempt salary threshold and to those working in jurisdictions with local minimum wage ordinances. Remember that while the exemption salary is based on two times the state minimum wage, employers must track the physical work locations of remote, hybrid, and mobile employees to comply with applicable local wage rates.
To stay up to date on 2027 employment law updates contact the Employer Lawyers at Chauvel & Glatt at contactus@chauvellaw.com.
