Paying Above Minimum Wage Does Not Automatically Protect An Exempt Classification
A common assumption among employers running salaried teams: paying well above the state minimum wage means exempt classifications are safe by a comfortable margin.
That margin shrinks every year California’s minimum wage rises, and it is about to shrink again. The statewide minimum wage increases to $17.40 per hour effective January 1, 2027, which pushes the minimum salary required for the executive, administrative, and professional exemptions, set at twice the state minimum wage, up to $72,384 per year.
The salary threshold works independently of an employee’s actual duties. Under Lab. Code § 515, an employee must satisfy both a duties test and a minimum salary test to qualify as exempt, and falling short on salary alone defeats the exemption even when the job itself is unquestionably managerial or professional in character.
Local minimum wage ordinances add another layer many employers overlook. Some California cities set hourly minimums well above the state floor, and where that is true, it does not change this particular salary threshold, since the exempt-salary calculation is tied to the state minimum wage specifically, not the local rate.
The practical move is straightforward. Pull the salary figures for every exempt employee now, compare them against $72,384 for 2027, and flag anyone who falls short before the calendar forces the issue.
If any of your salaried employees earn close to the current exempt-salary floor, the January increase can quietly knock them out of exempt status even though nothing about their job changed. That is worth walking through before you decide what to do next.
Contact Michael Trust Law, APC for a no-charge initial consultation. The facts determine what needs to be addressed – and how much of a conversation that takes.
This post shares general information based on common patterns I see in California workplaces. It is not legal advice, does not create an attorney-client relationship, and outcomes depend on specific facts – no lawyer can guarantee a result. Past results do not guarantee or predict future outcomes. AI may have been used to create this post. All content reviewed by a CA attorney before publication.