California Minimum Wage Increase
California already boasts one of the highest minimum wage rates in the nation, and it has recently increased even further. Effective January 1, 2025, California’s minimum wage has risen from $16.00 to $16.50 per hour, applicable to all employers, regardless of size.
Employers must stay informed about these changes to ensure compliance with the law. This article highlights key information that employers should keep in mind.
Minimum Wages Differ
The federal minimum wage is $7.25 per hour. When state and federal minimum wage rates differ, the rate most favorable to the employee applies. Since California’s minimum wage is higher, employers must ensure they are paying their California employees at the state rate.
How is Minimum Wage Calculated?
California, which is raising its minimum wage from $16.00 per hour to $16.50 per hour, is now one of 14 states adjusting the minimum wage to account for inflation. As of January 1, 2024, employers should note that California’s new minimum wage is calculated annually based on the Consumer Price Index (CPI), which reflects the aggregate price level of commonly purchased goods from the previous year.
As of January 1, 2024, the new California minimum wage is calculated annually based on the consumer price index which measures the aggregate price level in an economy based on commonly purchased goods of the previous year. Going forward, the minimum wage may be adjusted annually up to 3.5 percent to account for inflation, as measured by the CPI.
Local Minimum Wage Ordinances
Local minimum wage ordinances in California require some employers to pay a minimum wage that exceeds the state’s rate. Here’s a breakdown of the local minimum wage rates that have increased across northern California effective January 1, 2025: (Cal Chamber)
Locality |
Minimum Wage |
Belmont |
$18.30 per hour |
Burlingame |
$17.43 per hour |
Cupertino |
$18.20 per hour |
Daly City |
$17.07 per hour |
East Palo Alto |
$17.45 per hour |
El Cerrito |
$18.34 per hour |
Foster City |
$ 17.39 per hour |
Half Moon Bay |
$17.47 per hour |
Hayward |
$17.36 per hour (26 or more employees); $16.5/hour (25 or fewer employes) |
Los Altos |
$18.20 per hour |
Menlo Park |
$17.10 per hour |
Mountain View |
$19.20 per hour |
Novato |
$17.27 per hour (100 or more employees) $17.00 per hour (26-99 employees) $16.42/hour (25 or fewer employees; employers must pay higher state minimum) |
Oakland |
$16.98 per hour |
Palo Alto |
$18.20 per hour |
Petaluma |
$17.97 per hour |
Redwood City |
$18.20 per hour |
Richmond |
$17.77 per hour |
San Jose |
$17.95 per hour |
San Mateo (City) |
$17.95 per hour |
San Mateo (County) |
$17.46 per hour |
Santa Clara |
$18.20 per hour |
Santa Rosa |
$17.87 per hour |
Sonoma (City) |
$18.02 per hour (26 or more employees) $16.96 per hour (25 or fewer employees) |
South San Francisco |
$17.70 per hour |
Sunnyvale |
$19.00 per hour |
Exceptions to Minimum Wage Requirements
Employers take note that the California minimum wage laws do not apply to:
- Learners and apprentices
- Organized camp counselors, program counselors, and student employees are exempt from the minimum wage if they receive a salary of at least 85 percent of the minimum wage for a 40-hour week
- Any individual who is a parent, spouse, child or legally adopted child of the employer
- Outside salespeople. An “outside salesperson” is an employee who spends more than half of their working hours away from the employer’s place of business, selling items or obtaining orders
Industry – Specific Wages
Employers should also stay informed about recent updates to industry-specific wage laws. Beginning in 2024, California has implemented new minimum wage rates and schedules specifically for certain fast-food chains and healthcare facilities as discussed below.
Minimum Wage Requirements for Fast Food Restaurants:
Starting April 1, 2024, the Fast-Food Workers Minimum Wage Law mandates a minimum wage of $20.00 per hour for fast food employees at chains with over 60 locations nationwide that:
- Share a common brand or that are characterized by standardized options for décor, marketing, packaging, products and services; and
- Primarily provide food and beverages for immediate consumption on or off premises where patrons generally order or select items and pay before consuming, with limited or no service time
The following restaurant establishments are not covered by the new law:
- Restaurants that operate a bakery that “produces” and sells “bread’ as a stand-alone menu item as of September 15, 2023, and continue to do so are exempt from the law
- The law doesn’t apply to wide array of restaurants that operate in conjunction with larger enterprises, including a restaurant that is:
- Located in an airport
- Connected to or operated in conjunction with:
- Hotels;
- Event centers;
- Theme parks;
- Public or private museums; and
- Gambling establishments
- Located on a corporate campus, primarily serving employees and subject to a concession or food service contract
- Located on certain public lands owned by the state, city or county
The $20.00 per hour minimum wage for fast food workers is higher than California’s minimum wage of $16.50. While local cities or counties cannot set a higher wage for fast food workers alone, they can set a higher overall minimum wage for all employees, in which case fast food employers must comply with the local rate.
Minimum Wage Requirements for Health Care Facilities
If you are an employer in the health care industry, it is essential to stay informed about the minimum wage requirements specific to healthcare facilities.
Under the Health Care Worker Minimum Wage Law, covered health care employers are subject to varying minimum wages of $18.00, $21.00 or $23.00 per hour as of October 16, 2024. Employers must review the law and relevant schedules to ensure compliance with California law.
Other Things to Note
The January 1, 2025, minimum wage increase will also require employers to review additional employee payments, including but not limited to overtime laws and exempt employee salaries.
Overtime Laws
The minimum wage increase directly impacts overtime rates. As of January 1, 2025, employers must pay overtime-eligible work at a minimum of:
- $24.75 per hour (time and one-half) or
- $33 per hour (double time)
Note that this amount may be higher if the employee is covered by local ordinances or the fast food and health care minimum wage laws.
Increased Minimum Pay for Exempt Employees
Employers should consider the direct impact of the January 2025 state minimum wage increase on exempt classifications and ensure employees meet the salary basis test for the claimed exemption. As California’s minimum wage rises to $16.50 per hour, the minimum salary threshold for exempt employees will also increase to $5,720 per month or $68,640 per year.
If you have any questions please feel free to reach out to one of our seasoned Employment Attorneys at www.Berliner.Com or our Department Chair Christine.Long@berliner.com.