New California Minimum Wage
By VICKY BROWN
You Might Not Care About $16.90 – But You Should
Let’s talk about the one number that might quietly disrupt your entire compensation structure: $16.90.
That’s the new California minimum wage for 2026. And no, it’s not a proposal. It’s not up for debate. It’s done. Starting January 1, 2026, that’s the base hourly rate for every employer across the state – no more special rules for businesses with fewer than 26 employees.
And I get it – if you’re already paying your team more than that, it’s tempting to brush this off as “not for you.” But that’s where most small business owners get blindsided. Because the minimum wage isn’t just a number – it’s a lever. And when it moves, everything else connected to it moves too.
When the Floor Moves, So Does Everything Above It
Let’s say your entry-level role is at $17/hour. You might feel like you’ve created a nice buffer. But once the minimum jumps to $16.90, that cushion nearly disappears. Suddenly there’s no real gap between someone just starting out and someone who’s taken on more responsibility.
That’s called wage compression, and it’s not just a numbers issue – it’s a culture issue. When your team doesn’t see a difference between roles, they start to feel stuck. Underpaid. Unappreciated. And that’s when retention problems sneak in.
Your best people don’t always quit with a dramatic exit. Sometimes they just quietly disengage while they scroll job listings on their lunch break.
“…if your wage reviews are once-a-year events, you’re probably already playing catch-up without knowing it.“
The Bigger Problem Is Hiding in Your Salary Roles
Here’s where things really escalate.
California uses the minimum wage to calculate the salary threshold for exempt employees – you know, the folks who don’t get overtime. That threshold is set at twice the minimum wage, based on a full-time schedule. So when the base rate increases, the exempt salary bar climbs too.
Starting January 1, 2026, your exempt employees need to earn at least $70,304 per year, or $1,352 per week.
If they don’t – and if you keep treating them as exempt – you’re out of compliance. That’s not just a technicality. It’s a potential lawsuit, back pay claim, and a DOL audit waiting to happen. And California does not play when it comes to wage violations.
Size Doesn’t Protect You Anymore
This law doesn’t care whether you’re a five-person team in Culver City or a startup in Sacramento. There’s no small business exception. No grace period. No “but we’ve always done it this way” clause.
If you’ve got even one exempt employee – even if they’re your right hand, even if they’ve been with you for years – and they’re under that salary threshold, you’re at risk.
And by the way, this new hourly minimum wage is just the state rate.
Cities like San Francisco, West Hollywood, and Los Angeles have their own local minimum wage laws – and many are already higher than $16.90. They also tend to reset in July, not January. So if your wage reviews are once-a-year events, you’re probably already playing catch-up without knowing it.
Whether you’re an entrepreneur jumping into a leadership role, a seasoned business pro with new HR responsibilities, or just starting your HR career – we’ve got the right path to guide you through your HR hurdles.
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So What Do You Do Now (Before This Blows Up on You)?
You start with a pay audit. Not a vague glance at your payroll report. I mean a real review. Ask yourself:
- Are my lowest-paid roles staying above both state and local minimums?
- Is there meaningful spacing between pay levels – or have we drifted into compression?
- Do my exempt employees meet both the salary and duties test?
- Is my structure still aligned with how we operate today – not how we started three years ago?
If the answer to any of those questions is “I’m not sure” – that’s your sign.
From there, make the adjustments you need to stay compliant, and lead with integrity. And while you’re at it, talk to your team. Even if you’re just adjusting a few dollars here and there, explain why.
“This is part of how we keep our workplace fair, competitive, and professional. We’re not waiting for a problem. We’re staying ahead of the game.”
That kind of transparency builds trust – and trust builds stability.
This Isn’t Just a Payroll Update – It’s a Leadership Moment
Let’s be honest. Compliance isn’t sexy. No one’s waking up excited to restructure pay bands or recalculate overtime eligibility. But these are the moments that quietly define your leadership.
Will you handle it last-minute, when you’re already knee-deep in year-end chaos? Or will you take a breath now, get ahead of it, and lead from a place of calm, clarity, and confidence?
Because your team is paying attention. How you respond to changes like this tells them what kind of leader you are – reactive or proactive, scattered or steady, confused or clear.
Choose the version of yourself you want them to see.
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