CA minimum wage increase next year also affects overtime exemption

California’s minimum wage will increase to $16 per hour for all employers on January 1, 2024. Some cities and counties in California have a local minimum wage that is higher than the state rate.

State law requires that most California workers be paid the minimum wage. Workers paid less than the minimum wage are urged to contact the Labor Commissioner’s Office in their area to file a wage claim.

The change in the minimum wage also affects the minimum salary an employee must earn to meet one part of the overtime exemption test. Exempt employees are not subject to the payment of overtime for hours worked. An employee must earn no less than two times the state’s minimum wage for full-time work to meet this initial requirement of the exemption test. As of January 1, 2024, employees in California must earn an annual salary of no less than $66,560 to meet this threshold requirement.

In 2023, the minimum wage is $15.50 for all employees regardless of employer size.

One of the protections of the minimum wage law is an annual review of the wage rate using the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers (U.S. CPI-W). The Department of Finance calculated that the U.S. CPI-W increased by 6.16 percent for the period from July 1, 2022, to June 30, 2023, compared to the prior 12-month period. The minimum wage increases each year by the lesser of 3.5 percent, and the rate of change in the averages of the two most recent U.S. CPI-W, unless those averages are negative. If the averages are negative, there is no change in the minimum wage for the following year. On July 31, 2023, Governor Newsom certified the minimum wage increase for all employers for 2024.

Employers must post the Minimum Wage Order and the Wage Order applicable to their workplace at a worksite area accessible to employees. The wage orders can be downloaded and printed from the workplace postings page on the DIR website.

Employers must ensure that the wage rate is displayed on the employee’s pay stub, and that employees are paid at least the minimum wage even when employees are paid at piece rate.