How California's minimum wage rules actually work
There is a state floor, higher city floors, separate industry rates, and a salary threshold that moves with the state figure. Employers have to satisfy all of them.
California minimum wage is not one number. It is a floor set by the state, over which cities and counties may set higher floors, over which certain industries have their own rates. An employer must satisfy whichever is highest for that employee, in that location, in that industry.
The layers
The state rate applies everywhere and is adjusted annually. Many cities and some counties set a local minimum above it, usually adjusted on their own schedule, which means the applicable rate can change mid-year rather than in January.
Certain industries have separate rates set by statute or by an industry council. Where one applies it typically sits above both the state and local figures.
The exempt salary threshold
This is the part employers most often miss. To classify an employee as exempt from overtime under the common white-collar exemptions, the employee must earn a salary of at least a fixed multiple of the **state** minimum wage for full-time work, and must genuinely perform exempt duties.
Because the threshold is defined as a multiple of the state rate, it rises automatically whenever that rate rises. An employee who was validly exempt last year can fall below the threshold without any change to their pay or their job.
“Every state minimum wage increase is also an exempt-salary increase. Budget for both.”
A local minimum wage that is higher than the state figure does not raise the exempt threshold — that calculation uses the state rate.
Practical points
- Maintain a rate table by location, not a single company-wide figure.
- Review exempt salaries every time the state rate changes, before it takes effect.
- Remember that meeting the salary threshold is necessary but not sufficient; the duties test still applies.
- Post the required notices for each jurisdiction you operate in.
