The California Department of Industrial Relations has announced that the state hourly minimum wage will increase to $16 per hour on Jan. 1, 2024. The new rate will apply to all employers, regardless of how many individuals they employ.
July 31, 2023: California announced a $16 minimum wage rate for 2024.
Jan. 1, 2024: Effective date for the new state minimum wage rate
California’s Minimum Wage Rate
As of Jan. 1, 2023, California’s minimum wage rate no longer depends on employer size and will be adjusted annually to account for the cost of inflation. New rates must be published by the Department by July 31 of each year.
Based on the U.S. consumer price index for the 12-month period from July 1, 2022, to June 30, 2023, the Department has determined that California’s minimum wage must increase by 3.5% to $16.00 per hour on Jan. 1, 2024.
Based on the U.S. consumer price index, California has determined that the state’s minimum wage must increase to $16 per hour on Jan. 1, 2024.
Overtime Exemption Thresholds
The state minimum wage rate also determines the salary requirements for exempt executive, administrative and professional (EAP) employees. Under Labor Code Section 515(a), EAP employees qualify for an overtime exemption if, among other things, they “earn a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.”
As a result, beginning Jan. 1, 2024, these employees must receive an annual salary of at least $66,560 ($5,546.67 monthly or $1,280 weekly).
Impact on Employers
California employers should update their payroll processes and procedures to comply with the new minimum wage rate by Jan. 1, 2024. Employers should also account for local ordinances that establish higher minimum wage rates for employees. However, higher local ordinance rates do not affect the state salary requirements for the EAP overtime pay exemption.
Do you need help maintaining compliance?
This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.