2026 Minimum Wage and Salary
Question: As a business owner, I normally update my staff hourly wages at the beginning of each year. Can you remind me of the minimum wage for 2026 and how it might impact non-hourly employees?
Answer: On January 1, 2026, California’s statewide minimum wage increased from $16.50 to $16.90 per hour. The increase applies to most employers regardless of size.
With the increase to the minimum wage rate, employers also need to ensure that the annual salary for their exempt employees meets the minimum salary requirements for an exempt employee. To satisfy the compensation prong of the exemption, most exempt employees must be paid a salary of at least two times the state minimum wage for full-time work. For 2026, this translates to a minimum annual salary of $70,304 (calculated as $16.90 × 2 × 40 hours/week x 52 weeks/year). Paying the salary threshold is only one part of the requirement. Employees must also pass the duties test to avoid misclassification issues involving overtime and mandatory meal-and-rest periods.
Certain exemptions have their own compensation floors that do not track with the general minimum wage. For example, California’s computer software employee exemption (a narrow exemption that depends heavily on the work actually performed) requires at least $58.85 per hour, or a minimum annual salary of $122,573.13, in 2026. Similarly, the licensed physicians and surgeons exemption requires a minimum rate of $107.17 per hour as of January 1, 2026. If an otherwise exempt employee’s salary falls below the minimum threshold, the exemption fails. The employee must be reclassified as a nonexempt employee, requiring time tracking, overtime compensation, and compliance with all applicable meal and rest break regulations.
Industry-specific minimum wages can complicate the analysis. Fast-food restaurants covered by the fast-food minimum wage law are subject to a separate, higher hourly minimum wage than the statewide rate. Moreover, health care employers may be subject to a separate wage schedule depending on the type of facility and role, and the number of employees the employer employs. If you operate in those industries (or contract into them), confirm which wage rules apply before you assume the statewide $16.90 rate controls your payroll planning.
Finally, keep in mind that many California cities and counties set local minimum wages above the state rate. Unlike state law, many localities increase the minimum wage every July. The rule is simple: an employer must pay the highest applicable minimum wage for the location where the employee works. A list of California city and county minimum wage rates maintained by University of California Berkely is available here: https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/#s-2.
After you implement wage changes, California also requires timely written notice of pay-rate changes under Labor Code section 2810.5. The Department of Industrial Relations publishes template notices and the updated minimum wage poster that employers must display in a visible, conspicuous location in the workplace. The “Notice to Employee” can be downloaded for use https://www.dir.ca.gov/dlse/dlse-publications.htm. The required minimum wage poster can be downloaded at https://www.dir.ca.gov/iwc/MW-2026.pdf.
California’s minimum wage rules are increasingly varied based on a variety of factors, including industry, employer size, and the location of the business and its employees. Employers are encouraged to review their payroll records to ensure compliance with the minimum wage increase, and any impact it has on exempt employees. with questions regarding the minimum wage increase or its impact on exempt employees should consult with their employment counsel.
Don’t Forget About New Guidelines on Harassment Prevention Heading Into 2026
Question: I heard that the California Civil Rights Department (“CRD”) published a Harassment Prevention Guide this year. Does this Guide change what I should be doing as an employer?
Answer: No, but you should use the guide to ensure your practices are legally compliant. The Guide does not create new laws, but it is a practical roadmap from the agency that enforces California’s Fair Employment and Housing Act (“FEHA”). FEHA prohibits discrimination, harassment, and retaliation, and it requires employers to take “reasonable steps” to prevent and correct unlawful conduct. The CRD published its 2025 Harassment Prevention Guide in March 2025. Written in a practical question-and-answer format, the Guide explains how the CRD interprets an employer’s obligation to take “reasonable steps” to prevent and correct harassment. It also highlights common, real-world pitfalls where employers often make mistakes.
The Guide points to three areas employers should prioritize: (1) policy and leadership; (2) reporting and investigations, and (3) remedial action and anti-retaliation. Below is a summary of the Guide’s discussion of these three areas.
Policy and leadership: The Guide highlights that employers must have a written anti-harassment policy. At a minimum, the policy should clearly explain how complaints are received, how they are investigated, and how the company will act promptly and fairly to correct misconduct.
The Guide emphasizes “buy-in from the top.” This means that leadership should model appropriate behavior and consistently reinforce expectations. Also, training is essential. California law requires two hours of sexual harassment prevention training every two years for supervisors and one hour every two years for non-supervisory employees.
Reporting and investigations: The Guide encourages employers to prioritize reports of unlawful or inappropriate conduct. The first step is to determine whether the reported conduct violates company policy (or the law) and is serious enough to merit a formal investigation. If so, the employer should investigate to determine what happened. During the investigative process, the employer should be even-handed, timely, and thorough.
Investigators should make findings based on the “preponderance of the evidence” standard. This standard is also referred to as the “more likely than not” standard. In other words, the investigator makes a finding of whether it is more likely than not that the alleged conduct did or did not occur.
The Guide also addresses common investigation issues. These issues include confidentiality limits, how quickly to start and finish, and recommended practices such as impartial investigators, trained interviewers, credibility assessments when facts conflict, and documenting steps taken and findings made.
Remote work is not an exception. The Guide stresses that policies and reporting procedures should clearly cover remote and virtual conduct, including how employees report behavior that crosses the line.
Remedial action and anti-retaliation: The Guide encourages employers to address misconduct even when it does not rise to a legal violation, because early intervention can prevent escalation. Remedial measures should fit the severity and should be consistent with how the company handled similar situations in the past.
The Guide also emphasizes investigating anonymous complaints (anonymity is not a reason to ignore a report) and actively preventing retaliation. Retaliation may appear as a termination, demotion, negative reviews, workload changes, reassignment, or ostracizing an employee.
Employers are advised to review the entire Guide for further details. The Guide can be downloaded at https://calcivilrights.ca.gov/posters/.
New California Rules on Artificial Intelligence in Hiring for Employers
Question: I heard California adopted new rules for artificial intelligence in employment. Is this true and what impact might it have on employers?
Answer: Yes, there are new rules that regulate a California employer’s use of artificial intelligence. The California Civil Rights Department recently approved a final version of these regulations, and they are effective October 1. The new rules are not a ban on artificial intelligence. Instead, the regulations require employers to ensure that their use of artificial intelligence tools comply with state anti-discrimination laws.
These new regulations cover any “automated decision system” (ADS) that makes or assists in making employment decisions, such as hiring, promotions, selection for training programs, or similar activities. The regulations apply beyond “machine learning” artificial intelligence and cover systems that involve the use of “selection criteria.” These broad definitions mean that common tools such as resume screeners, video interview scoring, chatbots, and scheduling filters cannot result in discrimination based on protected characteristics.
Employers must also ensure that the use of an ADS does not interfere with the employer’s obligation to provide a reasonable accommodation. For example, if an employer uses an ADS tool for a certain skill test during the application process, the employer should implement a measures to allow an applicant to request a reasonable accommodation. If an automated tool causes unlawful screening or adverse impact to job candidates or employees, the employer can be held liable. In some cases, vendors that develop and distribute ADS can also share liability.
Although the new regulations are complex, employers should start by focusing on three main areas: notice/disclosure, auditing, and mitigation.
- Notice and Disclosure: Employers should tell employees, job applicants, and other affected individuals when automated tools are being used. The notice should explain what the tool does, what data it uses, and whether a person will be involved in reviewing the outcome. While this is technically not required by the regulations, it is a best practice.
- Proactive Bias Auditing: Employers must test these systems for potential discriminatory impact on protected groups under California law, including age, race, and disability. The rules require that the criteria used must relate to the job and meet business needs, and that less discriminatory methods be adopted if available.
- Mitigation and Oversight: Employers must address audit results. If a tool shows bias, it must be adjusted or removed. Employers should require vendors to provide documentation of bias testing and legal compliance and include those terms in contracts.
The regulations also require employers to collect and retain certain information related to their use of ADS in employment. Employers must preserve ADS-related records, including dataset descriptors, scoring outputs, and audit findings, for four years. It is crucial that employers comply with these requirements—if someone alleged an employer violated the regulations, these records could be key evidence to support an employer’s compliance.
Employers who wish to comply with these new regulations should consider taking the following steps now:
- Review current use of automated hiring or management systems.
- Create internal procedures for audits and document retention for at least four years.
- Provide notices to applicants and employees.
- Require vendors to certify compliance.
- Train staff on reviewing system outputs and on new regulations.
Businesses are encouraged to stay up-to-date on the changing legal landscape. Employers with questions about these new regulations should contact their labor counsel.
Workplace Law – Is a High Salary Enough to Classify an Employee as “Exempt” in California?
Question: I’m going to hire a new employee soon. I want this person to be exempt from the normal overtime and meal and rest period rules. Can I make this person exempt by paying them a higher salary?
Answer: Not necessarily. A high salary alone does not automatically make an employee “exempt” for purposes of overtime, minimum wage, and meal and rest periods. In California, an employee needs to satisfy both a salary test and a duties test to be classified as an “exempt” employee. If an employee cannot satisfy either test, the employee should be classified as a “non-exempt” employee instead.
It is important for an employer to first understand the difference between an “exempt” employee and a “non-exempt” employee. An “Exempt” employee is generally paid a salary and is not entitled to overtime pay or meal or rest periods. This employee generally has decision-making authority, and, given the exemption, does not need to complete a timesheet. On the other hand, a “non-exempt” employee generally must track all time worked and is entitled to overtime pay, meal and rest periods, and other wage-and-hour protections. For most employees to properly be classified as “exempt,” they must satisfy both “salary test” and the “duties test.”
The “salary test” in California requires that an employee earn at least twice the state’s minimum wage for full-time work (i.e. 40 hours per week). For 2025, the salary test is a minimum annual salary of $68,640. Because the test is connected to the state’s minimum wage, it changes each time the state minimum wage changes.
The “duties test” is equally important and sometimes overlooked. To satisfy the “duties test,” an employee generally needs to meet the requirements of an administrative, executive, or professional exemption as outlined by the California Labor Code and applicable Industrial Welfare Commission (IWC) Wage Order. The administrative exemption focuses on employees who perform non-manual work related to management or general business operations. The executive exemption focuses on employees who manage part of the business, including supervision of other employees and authority to hire and fire employees. The professional exemption focuses on employees who perform work that requires advanced knowledge in a recognized field. Each exemption generally requires the employee to customarily and regularly exercise discretion and independent judgment. Employers should keep in mind that the law focuses on the employee’s actual job duties—not only the employee’s job description.
In addition to the administrative, executive, and professional exemptions, there are a few other specific exemptions. These include outside salespersons, computer software professionals, and physicians. Different tests that apply to these exemptions. Also, employers in certain fields, such as healthcare or fast food, must keep in mind that those industries have specific minimum wage rules that could impact that salary test.
Misclassifying an employee as exempt when they should be non-exempt can have costly consequences for employers. Employers may be held liable for unpaid overtime wages, missed meal and rest break premiums, penalties, interest, and attorneys’ fees. California also imposes additional penalties for willful misclassification.
Before classifying any employee as exempt, employers should carefully analyze the actual duties and responsibilities of the positions. Written job descriptions should accurately reflect day-to-day work. Employers should regularly review employee classifications, especially when roles change. When in doubt, an employer may consult with their legal counsel.
Reminder On Workplace Violence Prevention
Question: I run a small non-profit. Last year, we implemented our workplace violence prevention plan and did comprehensive training for employees. Are there any periodic requirements we need to satisfy?
Answer: Yes. California’s workplace violence prevention standards (general industry) went into effect back in July of 2024. Other than a few limited exceptions, the new workplace violence prevention requirements apply to all employers in California. The new standards required covered employers to complete three essential tasks: (1) establish the written workplace violence prevention plan; (2) train employees on workplace violence; and (3) maintain a log of all workplace violence incidents.
Covered employers are also required to review their plans, update them if needed, and train employees on an annual basis. Employers who implemented their plans and training employees in July of 2024 must complete these annual requirements soon.
Employers should keep in mind that the workplace violence prevention plan and the related training must be specific to the employer and the workplace. Although a model template is available through Cal/OSHA, there is not a one-size-fits-all plan, and employers must substantively build on the template with information and procedures specific to their workplace. A worksite inspection and a review of the current plan are likely necessary to determine what, if any, updates are needed.
The annual workplace violence training must be provided to all employees, including managers and supervisors. At a minimum, the training should cover:
- Familiarizing employees with the plan (such as how to obtain a copy, how to participate in its development/implementation);
- The definitions of key terms and the requirements of the new law;
- How to report workplace violence incidents without fear of retaliation;
- Understanding the job-specific violence hazards and the preventative and corrective measures in place. For example, a review of emergency exit locations and a discussion of the systems in place at the worksite to notify employees of emergencies.
- The purpose of the violent incident log; and
- Opportunities for interactive discussions with someone knowledgeable about the written plan. This includes employee questions and feedback.
Training sessions do not need to be overly formal, and employers do not need to hire a vendor to conduct the training. The training can be conducted by anyone with knowledge of the employer’s written plan, such as the plan administrator or a member of Human Resources. The key is that the training be interactive and provide opportunities for meaningful questions, answers, and feedback relating to the written plan and the employer’s procedures.
Employers must also provide further training when a new or previously unrecognized workplace violence hazard has been identified and when changes are made to the written plan. Unlike the initial and annual training, this additional training can be limited to the new hazard or change to the plan. Records related to employee training must be kept for at least five years and provided to employees for free upon request.
These annual plan reviews and training require substantial planning and effort. Accordingly, employers who implemented their plans last year should start on these new requirements now, if they haven’t already. Employers with questions regarding workplace violence training or other requirements are encouraged to contact their labor counsel.
New Law Regulates Use of Generative Artificial Intelligence in Healthcare
Question: I heard there is a new California law that regulates the use of artificial intelligence in the healthcare industry. Is this true?
Answer: Yes. On January 1, California’s Assembly Bill 3030 (“AB 3030”) became effective,
marking a significant step in California’s regulation of generative artificial intelligence (known as “GenAI”). In general, AB 3030 requires providers in the healthcare industry to notify patients when they utilize GenAI to generate written or verbal communications with the patient. To understand this new law, a brief overview of GenAI is helpful.
GenAI is a type of artificial intelligence that is capable of creating new digital content, including text, audio, images, and video, by analyzing vast amounts of data. In healthcare, this technology has transformative potential and can significantly enhance medical research, diagnostics, and patient care. However, its use also raises ethical and practical concerns about transparency, accountability, and data accuracy. AB 3030 addresses these concerns by requiring healthcare providers to disclose their use of GenAI in creating patient communications.
AB 3030 covers health facilities, clinics, physician’s offices, and group practices that use GenAI technology to create verbal or written communications about a “patient’s clinical information.” Under AB 3030, “patient clinical information” means information relating to the health status of a patient, as errors in care-related communications have potential to cause greater patient harm.
Examples of covered communications include automated emails explaining test results, AI-generated summaries of diagnoses, or audio recordings providing treatment instructions. Businesses that fall under this category must include two important disclosures in their communications with patients.
First, the covered business must include a disclaimer stating that the communication was generated using GenAI. For written communications involving physical and digital media (e.g., letters and emails), the disclaimer must appear at the beginning of each communication. For written communications involving continuous online interactions (e.g., chat-based telehealth), the disclaimer must be displayed throughout the interaction. For audio communications, the disclaimer must be provided verbally at the start and end of the interaction. For video communications, the disclaimer must be displayed throughout the video.
Second, the covered business must provide clear instructions on how patients can contact a licensed or certified healthcare provider or a human employee of the business. This ensures that patients have access to someone who can clarify or expand on the information provided.
AB 3030 includes a significant exception. Under the law, a covered business does not need to provide these two disclosures if the communication has been reviewed and approved by a licensed or certified healthcare provider. Moreover, because the law only applies to communications about a “patient’s clinical information,” the disclosure is not required for communications pertaining to administrative and business matters, such as appointment scheduling, check-up reminders, and billing.
AB 3030 includes significant enforcement measures. Health facilities and clinics that fail to comply will be subject to penalties, including fines and licensure actions. Similarly, physicians who violate AB 3030 may be subject to disciplinary action against their licenses. Covered businesses can avoid these penalties by being proactive in the areas of communication templates, staff training, and revised policies and procedures.
Though AB 3030 is currently focused on the healthcare industry, it represents California’s broader effort to regulate and mitigate the potential risks of GenAI in numerous settings. Businesses are encouraged stay up-to-date on the changing legal landscape and may contact their legal counsel with questions about AB 3030 or similar laws.