The California Department of Finance recently announced that, based on the calculation method set forth in the Labor Code, the California minimum wage shall increase from $16.00 to $16.50 per hour effective January 1, 2025. Employers should plan ahead to ensure that their pay plans are sufficient to cover this increased rate by the beginning of the year, including ensuring that exempt employees’ salaries are at least double the California minimum wage ($68,640 per year or $5,720 per month) and that technicians who supply their own tools are compensated at an hourly rate of twice the minimum wage ($33 per hour).

An additional development related to the State minimum wage is Proposition 32, which will be on the ballot in this November’s elections. If passed, a stair-step minimum wage increase will be implemented so that the minimum wage will be $18.00 per hour for employers of all sizes by 2026. Specifically, for employers with 26 or more employees, the minimum wage would increase to $18 for 2025 and 2026, and for employers with 25 or fewer employees, the it would increase to $17 for 2025 and $18 for 2026. After 2026, further adjustments would occur in accordance with the Consumer Price Index. If Proposition 32 does not pass, existing law would continue through which the minimum wage will continue to increase based on inflation. Therefore, until the outcome of Proposition 32 is determined, employers will not know for certain what the new minimum wage rate will be for 2025, and should plan for either outcome.