California Minimum Wage Increases to $16.90 in 2026

Managing payroll in California requires careful attention to complex regulations. With January 1, 2026, approaching, employers across California face another significant shift in compensation requirements.

This represents more than a standard annual adjustment. Between a new statewide baseline, dozens of city-specific increases, and specialized industry mandates, compliance requires meticulous attention to detail. Whether you operate a single location in San Jose or manage a workforce across multiple California jurisdictions, understanding these changes is essential for maintaining compliance.

This guide provides comprehensive information on what is changing, which rates apply to your business, and the critical steps necessary to protect your organization from costly penalties.

The New Statewide Baseline

Effective January 1, 2026, the baseline minimum wage for all employers in California increases to $16.90 per hour.

This rate applies to all employers, regardless of company size. This increase represents an inflation adjustment designed to keep pace with the rising cost of living.

California law requires that when a city or county ordinance establishes a higher wage than the state minimum, the employer must pay the higher local rate. With numerous municipalities enforcing their own wage schedules, paying $16.90 per hour may not ensure full compliance.

Navigating the Local Wage Requirements

California’s payroll complexity stems primarily from local wage ordinances. Many cities and counties have enacted ordinances that set minimum wages significantly higher than the state mandate. If your employees perform work in these specific jurisdictions—even if your headquarters are located elsewhere—you are typically required to pay the local rate for the hours worked in that area.

For 2026, rates vary significantly across jurisdictions, with some cities exceeding $20 per hour. The following details the new local minimum wage rates taking effect on January 1, 2026:

Bay Area and Northern California

The Bay Area maintains some of the highest wage requirements in the country.

• Belmont: $18.95 per hour.
• Burlingame: $17.86 per hour.
• Cupertino: $18.70 per hour.
• Daly City: $17.50 per hour.
• East Palo Alto: $17.90 per hour.
• El Cerrito: $18.82 per hour.
• Foster City: $17.85 per hour.
• Half Moon Bay: $17.91 per hour.
• Hayward: $17.79 per hour for employers with 26 or more employees. Smaller employers (25 or fewer) apply the state rate of $16.90.
• Los Altos: $18.70 per hour.
• Menlo Park: $17.55 per hour.
• Mountain View: $19.70 per hour.
• Novato: A tiered system applies:
  • 100+ employees: $17.73 per hour.
  • 26-99 employees: $17.46 per hour.
  • 1-25 employees: $16.90 per hour.
• Oakland: $17.34 per hour.
• Palo Alto: $18.70 per hour.
• Petaluma: $18.31 per hour.
• Redwood City: $18.65 per hour.
• Richmond: $19.18 per hour.
• San Carlos: $17.75 per hour.
• San Jose: $18.45 per hour.
• San Mateo (city): $18.60 per hour.
• San Mateo County: $17.95 per hour (applies to unincorporated areas).
• Santa Clara: $18.70 per hour.
• Santa Rosa: $18.21 per hour.
• Sonoma (city): $18.47 per hour for employers with 26+ employees; $17.38 for smaller employers.
• South San Francisco: $18.15 per hour.
• Sunnyvale: $19.50 per hour.

Southern California

Southern California municipalities have adjusted their rates to address cost-of-living pressures.

• San Diego (city): $17.75 per hour.
• West Hollywood: $20.25 per hour.

Employers with staff in West Hollywood should note the $20.25 rate, which represents one of the highest standard minimum wages in the nation.

Industry-Specific Wage Requirements

Industry sector determines specific wage obligations beyond geographic location. California has enacted specific laws targeting the fast food and healthcare sectors, establishing separate wage requirements from standard rates.

Fast Food Workers

California’s fast food council has established specific minimum wage mandates for covered fast food employees. The minimum wage for covered fast food employees is currently set at $20.00 per hour. This exceeds both the state standard and most local ordinances. Fast food sector employers must adhere to this industry-specific requirement.

Healthcare Workers

The healthcare worker minimum wage law has created a structured schedule of increases. These rates vary based on facility size, type of healthcare services provided, and location. These wages are generally set to rise incrementally over the coming years. Healthcare employers must review the specific schedules applicable to their facility type to ensure compliance with these higher requirements, which often exceed the $16.90 state rate.

Hospitality and Transportation

Hospitality sector employers must maintain awareness of specific ordinances. Los Angeles City maintains specific ordinances for hotel and airport workers. San Diego has implemented a Hospitality Minimum Wage Ordinance affecting hotel, event center, and amusement park employees. These ordinances often include phased-in increases that differ from the standard municipal minimum wage.

Exempt Employee Salary Requirements

Minimum wage increases directly impact salaried employees. In California, for an employee to be classified as “exempt” from overtime (specifically under the administrative, executive, and professional exemptions), they must earn a fixed monthly salary of no less than two times the state minimum wage for full-time employment.

This calculation is based on the statewide minimum wage, not local municipal rates.

With the state minimum wage rising to $16.90 per hour in 2026, the new annualized salary threshold for exempt employees will be:

$16.90 x 2 x 2,080 hours = $70,304 per year.

If you have exempt employees currently earning less than $70,304, you must either:

1. Raise their salary to at least $70,304 to maintain their exempt status.
2. Reclassify them as non-exempt, hourly employees, which makes them eligible for overtime pay, meal breaks, and rest breaks.

Industry-specific laws for fast food and healthcare may impose higher salary thresholds for exempt workers in those fields. Review the specific statute governing your industry for accurate requirements.

Compliance Checklist for Employers

Ensuring compliance requires systematic review of payroll practices before the January 1 deadline.

1. Audit Employee Locations: Remote and hybrid work arrangements have created additional compliance considerations. Minimum wage is generally determined by where the employee performs the work, not where the office is located. If you have a remote employee working from home in Mountain View, you must pay them the Mountain View rate of $19.70, even if your office is in a city with a lower rate.

2. Update Payroll Systems: Contact your payroll provider to ensure that the new state rate of $16.90 is programmed as the minimum for all California employees. Input the correct local rates for every jurisdiction where you have active operations. Verify the data independently—do not assume your software provider will automatically incorporate every local ordinance change.

3. Review Exempt Classifications: Generate a report of all exempt salaried staff. Identify anyone earning under the new $70,304 threshold. Prepare compensation adjustment letters or reclassification notices in advance of the new year.

4. Post Updated Notices: Local minimum wage ordinances require specific notice posting. You must post the updated official notices in a conspicuous location, such as a break room or near a time clock.

For Remote Workers: Provide a physical copy of the applicable minimum wage notice to remote employees or ensure they have electronic access to these documents. Providing a physical copy ensures strict compliance with posting requirements.

The Consequences of Non-Compliance

California labor laws impose significant penalties for non-compliance. Underpaying employees can result in claims for back wages, liquidated damages, and waiting time penalties. Local ordinances often allow for civil claims, enabling employees to pursue unpaid wages through direct legal action.

Beyond financial consequences, wage and hour violations can impact your company’s reputation and employee retention. Employees are increasingly informed about their rights, and pay transparency remains a critical factor in workforce satisfaction.

Conclusion

The transition to 2026 establishes new financial requirements for California businesses. With a $16.90 state baseline, local rates approaching $20.25, and a salary threshold exceeding $70,000, labor costs are increasing. Proactive payroll auditing, verification of local mandates, and clear workforce communication will ensure smooth navigation of these changes.

We recommend reviewing every pay rate and employee location now. January 1 will arrive quickly, and in California, thorough preparation provides the best protection against liability.