California’s Minimum Wage is Increasing Again in 2025

Editor’s Note: California Farm Bureau has updated Increases in Minimum Wages; Increases in Minimum Salary of Exempt Executive, Administrative, or Professional Employees; Phase In of Overtime Thresholds for Non-Exempt Agricultural Employees found on the CAFB website as on August 20, 2024

On August 1, 2024, California’s Department of Finance Director officially certified that beginning January 1, 2025, California’s minimum wage will increase from $16 per hour to $16.50 per hour for all employers, regardless of size. Thers is also a pending ballot measure that could increase the minimum wage if it passes. Either way, the minimum wage is going up again.

Per the Labor Code, the California Director of Finance must determine on or before August 1 of each year whether to adjust the minimum wage for inflation and, if so, must calculate the increase. The Director calculates the increase by applying whichever of the following two options would result in the smaller increase: (1) a 3.5 percent increase; or (2) the actual rate of change per the U.S. Consumer Price Index (“CPI”). The department’s calculations showed the CPI increased by 3.18 percent, meaning the minimum wage will increase by 3.18% to $16.50 per hour.

This hourly increase also affects the minimum salary requirements for full-time exempt employees, which currently is $66,560 per year ($5,546.67 per month). Beginning January 1, 2025, the minimum salary for a full-time employee to qualify for the exemption from overtime will be $68,640 per year ($5,720 per month).

Employers should take note, however, that Proposition 32 is on the November 2024 ballot and is proposing a $2 increase to the state’s current minimum wage. Should the proposition pass, the minimum wage will increase to $17 per hour for the remainder of 2024 and $18 per hour starting in January 2025 for large employers. Small businesses with 25 or less employees would be required to start paying $17 per hour in 2025 and $18 per hour starting January 1, 2026. Then starting in 2027, the minimum wage would be adjusted according to inflation, using the currently set formula.

What This Means for Employers: Proposition 32 will be decided on November 5, 2024, if passed large employers will have to immediately implement a change in employees’ wages. If the proposition fails to gain majority support, California’s minimum wage will increase by fifty-cents to $16.50 per hour for all employers beginning January 1, 2025.

The goal of this article is to provide employers with current labor and employment law information. The contents should neither be interpreted as, nor construed as legal advice or opinion. The reader should consult with Barsamian & Moody at (559) 248-2360 for individual responses to questions or concerns regarding any given situation.