With the new year comes new changes to California’s ever-evolving wage and employment regulations.

Though voters rejected the Proposition 32 ballot measure earlier this year, 2025 will see the minimum wage law in California increase per the U.S. Consumer Price Index (CPI) to $16.50 (up from $16.00), regardless of employer size.

However, it is important for all employers to note that this is the floor—not the ceiling. While all employers should ensure their payroll systems are adjusted to accurately reflect this change, many will need to consider other factors such as their geographic locality and specific industry. Many city and county ordinances require an even higher minimum wage, and certain special wage rates apply to workers in California’s health care industry (currently ranging from $18 - $23 per hour and increasing to $24 mid-year) and fast-food sectors ($20 per hour), which either will or have already gone into effect.

Employers should also note that the half dollar increase to the state minimum wage will of course affect overtime exemptions and the salary thresholds employers use to determine those exemptions. With the change, the minimum salary test for primary overtime exemptions (administrative, executive, and professional) will shift to $68,640 annually or $5,720 monthly. Employers should also note that these changes will affect certain types of employees in additional ways, such as commissioned salespersons, who can be exempt from overtime pay should their regular rate of compensation exceed 1.5 times the (new) state minimum wage and over 50% of their total earnings come from commissions, Moreover, employees who provide their own tools of the trade in order to perform their duties, such as technicians, must be compensated at least double the California minimum wage for all hours worked.

In light of these changes, employers should audit and update their payroll rates, pay calculators and compensation agreements to ensure compliance.