The $16.90 Milestone: How California’s 2026 Minimum Wage Impacts Your Bottom Line
Effective January 1, 2026, California has officially raised its statewide minimum wage to $16.90 per hour for all employers, regardless of size. This 40-cent increase, effective in 2025, is an inflation-based adjustment required by state law.
While a 2.4% increase may seem manageable, the “ripple effect” on exempt salaries and local ordinances creates a complex compliance landscape that requires immediate attention from small business owners.
Actionable Summary: 2026 Wage & Hour Checklist
If you haven’t yet adjusted your payroll for the new year, here are the critical steps to take today:
Update Pay Rates: Ensure all non-exempt employees are at or above $16.90/hour.
Audit Exempt Salaries: Verify that your “white-collar” exempt employees earn at least $70,304/year ($5,858.67/month). If they fall below this, they become non-exempt and eligible for overtime.
Check Local Floors: If you operate in cities like West Hollywood ($20.25) or San Francisco ($18.67+ projected), you must pay the higher local rate.
Replace Postings: Download and post the updated 2026 Minimum Wage Official Notice in your breakroom or common area.
Recalculate Premiums: Update your accounting software to ensure that “regular rate of pay” calculations for overtime and meal break penalties reflect the $16.90 base rate.
Deep Dive: More Than Just an Hourly Bump.
The Exempt Salary “Trap”
In California, the salary threshold for executive, administrative, and professional exemptions is strictly tied to the state minimum wage. It must be at least two times the state minimum for full-time employment.
2025 Threshold: $68,640
2026 Threshold: $70,304
The Risk: If your manager earns $69,000, they are technically non-exempt as of today. You must either raise their salary by $1,664 or begin tracking their hours and paying overtime.
Industry-Specific Outliers
The $16.90 rate is the floor, but several industries have much higher “ceilings” due to specific 2024–2025 legislation:
Fast Food Workers: Minimum wage remains at $20.00/hour, subject to further increases by the Fast Food Council.
Healthcare Workers: Depending on the facility type, rates range from $18.00 to $23.00/hour, with the next scheduled increases set for July 1, 2026.3.
Local Ordinances: The “Highest Rate” Rule
California law requires employers to pay the highest applicable rate, whether federal, state, or local.
Jurisdiction 2026 Minimum Wage
- State of California$16.90
- West Hollywood$20.25
- Mountain View$19.70
- Richmond$19.18
- Santa Clara / Palo Alto$18.70
- San Diego$17.75.
The Impact on “Piece-Rate” and Commissions
For businesses using piece-rate (like agriculture or manufacturing) or commission-based pay, the $16.90 floor changes your “draw” and overtime calculations.
Commission Exemption: To be exempt from overtime under Wage Orders 4 or 7, an employee must earn more than 1.5x the minimum wage. In 2026, that means their total compensation must average at least $25.35/hour.
Proactive Strategy for 2026
Don’t wait for a payroll error to signal a problem. Use this month to perform a comprehensive wage audit. Ensure your “pay scale” estimates in job postings, now required by SB 642, accurately reflect these 2026 floors.
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