It wouldn’t be the start of a new year unless California’s minimum wage was increasing. As with many local jurisdictions, including Los Angeles, the minimum wage is now tied to the CPI and for the most part, increases annually. The state and many local minimum wages (mostly in Northern California) increase on January 1, while the remainder of the local minimum wages (more in Southern California, including Los Angeles) increase on July 1 of every year.
This year, the state minimum wage increased from $16 an hour to $16.50. All hours worked by your employees as of January 1, 2025, must be paid at least at this rate. However, as most of you know, if your employees are working in a jurisdiction that has a HIGHER minimum wage, you must pay the higher rate. The minimum wage (and other employment laws, such as sick leave) are governed by the location where your employee(s) perform WORK – NOT by where you or your corporate or main office may be located. If you have remote or field employees, you must know the rate and sick leave laws that apply where your employees perform their work. For example, if your main office is in the city limits of Beverly Hills, your new minimum wage there is $16.50. But if many of your employees work just a block up the street in West Hollywood, they will need to make at least $19.65 an hour. And moving a few more blocks east, if you have employees working in the city of Los Angeles, they will need to make $17.28. Additionally, ALL of those jurisdictions will have different sick leave/paid time off requirements.
I have included a chart below that reflects all the new local minimum wages that went into effect this year on January 1. I also have attached a handy chart put out by the California Employers Association that lists ALL the different minimum wages within California, and also notes if any of those jurisdictions have their own sick leave ordinances. But don’t forget, jurisdictions outside California also have their own minimum wages. Be sure you know where all your employees reside and work!
Minimum wage INCREASES within California:
Northern California:
- Belmont: $18.30/hour
- Burlingame: $17.43/hour
- Cupertino: $18.20/hour
- Daly City: $17.07/hour
- East Palo Alto: $17.45/hour
- El Cerrito: $18.34/hour
- Foster City: $17.39/hour
- Half Moon Bay: $17.47/hour
- Hayward: $17.36/hour (26 or more employees); $16.50/hour (25 or fewer employees)
- Los Altos: $18.20/hour
- Menlo Park: $17.10/hour
- Mountain View: $19.20/hour
- Novato: $17.27/hour (100 or more employees); $17.00/hour (26-99 employees); $16.42/hour (25 or fewer employees; however, employers must pay higher state minimum wage $16.50/hour)
- Oakland: $16.89/hour
- Oakland Hotels: $18.36/hour (with benefits); $24.98/hour (without benefits)
- Palo Alto: $18.20/hour
- Petaluma: $17.97/hour
- Redwood City: $18.20/hour
- Richmond: $17.77/hour
- San Carlos: $17.32/hour
- San Jose: $17.95/hour
- San Mateo (City): $17.95/hour
- San Mateo County: $17.46/hour
- Santa Clara: $18.20/hour
- Santa Rosa: $17.87/hour
- Sonoma (City): $18.02/hour (26 or more employees); $16.96/hour (25 or fewer employees)
- South San Francisco: $17.70/hour
- Sunnyvale: $19.00/hour
Southern California:
- San Diego (City): $17.25/hour
- West Hollywood: $19.65/hour
Once again, know where you and your employees are located! Their work location governs sick leave as well as minimum wage.
Increased Salary Tests – With the increase in minimum wage also comes the higher salary test required for exempt employees in California. Starting January 1, 2025, the annual minimum salary required for “white collar exemptions” (executive, administrative, and most professional employees) increased to $68,640 annually. The annual salary required for computer software professionals increased to $118,657.43. That equates to a minimum hourly rate of $56.97. It’s important to note that while most exempt employees MUST be compensated on a salary basis, exempt computer software employees may be paid hourly, so long as that hourly rate exceeds the state required rate. These are generally employees engaged in computer development work, NOT your IT employees. Again, employees must pass both the duties and salary tests to be exempt. Reach out if you have questions about this.
Just a reminder, paying someone at the salary, exempt level does not in of itself make an employee exempt. To be exempt from overtime and other legal requirements, an employee must meet both the salary and the duties test. Both tests are more stringent under California law.
New IRS Mileage Rate – The IRS mileage rate also increased in 2025 to 70 cents a mile. As a reminder to all California employers, California Labor Code Section 2802 REQUIRES that employees who drive for or during work must be reimbursed the reasonable out of pocket cost to operate their own vehicles. While California does not require that this rate be the same as the IRS rate, the state will presume that this is the reasonable reimbursement rate. Paying less per mile will expose an employer to liability, including a PAGA claim. Paying MORE per mile exceeds the IRS limit, which means that the extra compensation is subject to taxes and an argument that the additional money should be treated as “wages” for wage and hour purposes. I did a more comprehensive analysis of the above legal issues a few months back, so I will not go into it all here. However, the new salary test is an excellent excuse to make an adjustment to an employee’s classification. If you have not recently performed an assessment on your employee classifications, the start of the new year is an outstanding time to do so.
Indeed, the new year presents a good time to implement operational changes in general. Consequently, this is also a particularly opportune window to conduct that wage and hour audit I keep bringing up. Reach out if you want to schedule – January is getting crowded, but we can always work something in.
