Just Like Clockwork — Here's Your Annual Reminder That The California Minimum Wage Increase Is Not Just For Hourly Employees

While it’s difficult to think about winter and the new year as we swelter through our hottest weeks of the year, the approach of Q4 means that California employers are budgeting for 2027. In case you missed it, the California Department of Industrial Relations has already announced that, effective January 1, 2027, the current minimum wage of $16.90 per hour is increasing to $17.40 per hour. And, as we remind our readers every year, the hourly minimum wage increase doesn't just affect hourly employees' rate of pay. It also increases the salary-basis test for California’s executive, administrative, and professional overtime exemption categories. 

For these exemptions from overtime to apply to salaried employees, California employers must pay a salary that is at least twice the state minimum wage (in addition to meeting the other duties requirements for those exempt classifications). Therefore, in order to remain exempt, salaried employees must receive no less than $72,384 per year (which is $1,392 per week or $6,032 per month) beginning January 1, 2027. (This is an increase from the 2026 minimum exempt salary of $1,352.00/week, $5,858.67/month, or $70,304.00 annually.)

The minimum salary requirement is unforgiving. If an employee receives less than the minimum exempt salary in any pay period, they automatically become non-exempt during that pay period and they become eligible for overtime pay, even if their job duties fully qualify as executive, administrative, or professional. 

As a reminder, although there are as many cities and counties in California with their own minimum wage requirements as there are new Starbucks fall beverage flavors, local minimum wages do not affect the minimum salary threshold for exempt employees, as that is affected solely by the state minimum wage. Nevertheless, employers should monitor local requirements as the local minimum wages for hourly employees generally exceed the state minimum wage.

Finally, employers with out-of-state employees should note that federal regulations require employees to be paid a minimum salary of $35,568.00, or $684.00/week, to qualify as exempt under the executive, administrative, or professional employee exemptions. Employees outside of California who are exempt under the federal Highly Compensated Employees rule must earn $107,432.00/year, including at least $684.00/week paid on a salary or fee basis.