California and many localities will see increases to minimum wage requirements on January 1, 2025. Employers should ensure that they know and understand the recent changes to California’s minimum wage law to confirm they are paying employees correctly and that they are following the rules/requirements of the salary basis test for exempt employees. In this blog, we’ll provide key points employers should be aware of regarding California’s 2025 minimum wage increases.
Minimum Wage Increases Effective January 1, 2025
Due to the enactment of Senate Bill (SB) 3, the California minimum wage increased to $16.50 per hour, effective January 1, 2025, for all employers. This increase applies to all employers, regardless of size. The adjustment is based on the consumer price index (CPI), which saw a 3.18% increase over the past year.
California Municipality Minimum Wage Increases
Below is a list highlighting California’s municipalities that have implemented new minimum wage rates effective this year.
- Alameda: $17.46 (effective July 1, 2025)
- Belmont: $18.30
- Berkeley: $19.18 (effective July 1, 2025)
- Burlingame: $17.43
- Cupertino: $18.20
- Daly City: $17.07
- East Palo Alto: $17.45
- El Cerrito: $18.34
- Emeryville: $19.90 (effective July 1, 2025)
- Foster City: $17.39
- Fremont: $17.75 (effective July 1, 2025)
- Half Moon Bay: $17.47
- Hayward: $17.36 ($16.50 for small employers–the same as the state of California’s minimum wage)
- Los Altos: $18.20
- Los Angeles: $17.87 (effective July 1, 2025)
- Los Angeles County (unincorporated): $17.81 (effective July 1, 2025)
- Malibu: $17.27
- Menlo Park: $17.10
- Milpitas: $18.20 (effective July 1, 2025)
- Mountain View: $19.20
- Novato: $17.00 (very large business rate–100+ employees–$17.27 / small business rate–$16.42– is overridden by the state’s $16.50 minimum wage.)
- Oakland: $16.89
- Palo Alto: $18.20
- Pasadena: $18.04 (effective July 1, 2025)
- Petaluma: $17.97
- Redwood City: $18.20
- Richmond: $17.77
- San Carlos: $17.32
- San Diego: $17.25
- San Francisco: $19.18 (effective July 1, 2025)
- San Jose: $17.95
- San Mateo: $17.95
- San Mateo County (unincorporated): $17.46
- Santa Clara: $18.20
- Santa Monica: $17.81 (effective July 1, 2025)
- Santa Rosa: $17.87
- Sonoma: $18.02 ($16.96 for small employers)
- South San Francisco: $17.70
- Sunnyvale: $19.00
- West Hollywood: $19.65
Please note this is not an exhaustive list of all local minimum wage ordinances.
Industry-Specific Wage Increases
Several California municipalities have established higher minimum wage rates for specific industries, effective July 1, 2025:
Los Angeles City: Hotel workers (hotels with 60 or more rooms) and airport workers will see their minimum wage increase to $22.50 per hour (source). Additionally, LA City airport employers who don’t offer health benefits must add an additional $7.65 per hour as a required health benefit payment, with annual increases starting in 2026 tied to the California Department of Managed Healthcare’s Large Group Aggregate Rates.
West Hollywood: Hotel workers’ minimum wage will increase to $20.22 per hour.
Santa Monica: Hotel workers and businesses operating at the hotel property will see their minimum wage increase to $22.50 per hour.
Impact on Overtime Exemptions
To remain exempt from overtime pay, employees must meet certain duties tests (e.g., executive, administrative, and professional) and earn a minimum salary (also known as the salary basis test). In other words, to be properly deemed an exempt employee, the employee’s job duties must comply with the duties test and their salary must not fall below a specific threshold. California law links the minimum salary for overtime exemption to the state’s minimum wage. As the minimum wage increases, the required salary threshold for exempt employees also increases. As a result, the minimum salary for exempt employees increased to $68,640 annually (or $5,720) monthly starting January 1, 2025.
Industry-Specific Laws
In addition to the general state minimum wage increase, employers should be aware of changing minimum wages for certain sectors.
Fast food. The minimum wage for fast food workers at national fast food chains (defined as a set of limited-service restaurants consisting of more than 60 establishments nationally) increased to $20 per hour starting on April 1, 2024. The Fast Food Council, which is in charge of determining the minimum wage for fast food workers on an annual basis, can increase the hourly minimum wage every year by either 3.5% or the increase in the Consumer Price Index, whichever is smaller. The Council can also establish a single statewide minimum wage or vary the minimum wage by region. At this time, the Council is still considering further wage increases in 2025 but has yet to make any announcement. As a reminder, the law does not apply to bakeries that produce bread for sale on the establishment’s premises and sell bread as a stand-alone menu item or restaurants in grocery establishments where the grocery establishment directly employs the staff of an on-premises restaurant.
Healthcare. Minimum wage increases for California healthcare workers went into effect on October 16, 2024. Also, under the new law, salaried employees of covered employers must earn a monthly salary equivalent to no less than 150% of the healthcare minimum wage or 200% of the otherwise applicable minimum wage, whichever is greater. The change was to originally take effect this past June after the enactment of Senate Bill 525. However, Senate Bill 159 delayed implementation due to budgetary concerns. To be eligible for the minimum wage increase, the workers must (1) work for a “health care facility” covered by the new law and (2) provide healthcare services or support the provision of healthcare. The DIR web page provides a Health Care Worker Minimum Wage Frequently Asked Questions, which details the minimum wage increases by employer type. The only increases that went into effect on January 1, 2025, are those for covered healthcare facilities run by counties. Increases for other types of covered employers are scheduled to go into effect on July 1, 2025.
Ballot Results for $18 Minimum Wage in 2026
California Proposition 32, the $18 Minimum Wage Initiative, was on the ballot in California as an initiated state statute on November 5, 2024. Voters were able to choose whether they wanted an increase to the minimum wage or not as follows:
- A ‘yes’ vote supported increasing the state minimum wage to $18 per hour for all employers by 2026 and adjusting the rate annually based on the increased cost of living.
- A ‘no’ vote opposed this ballot initiative, thereby maintaining the existing law that set the minimum wage to $16 per hour for all employers as of January 2024–which, however, has increased to $16.50 in January 2025.
The ballot measure was defeated.
Election Results:
7,469,803 votes for ‘yes’ (49.29%)
7,686,126 votes for ‘no’ (50.71%)
Additional Reminders for California Minimum Wage Updates
While these are the minimum wage requirements, employers can extend their employees’ wages above the minimum wage requirements and pay employees more than they are required to pay. Employers should also know and comply with all applicable minimum wage laws (and corresponding overtime laws), including posting required notices and keeping appropriate records to avoid fines, wage claims, and/or penalties. Local municipality minimum wages are subject to change and should be checked regularly for compliance.
Contact Hackler Flynn & Associates to stay informed about these important changes to ensure compliance and fair compensation practices in California.
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