On January 1, 2027, California’s minimum wage rises to $17.40 per hour, and the minimum salary for executive, administrative, and professional exemptions climbs to $72,384 per year. Exempt computer software professionals must now earn at least $127,108.34 annually, or $61.03 per hour. Reporting and enforcement are also tightening.
Statewide Minimum Wage & Salary Exemption Increases
The New Hourly Baseline & Local Ordinances You Might Miss
Starting January 1, 2027, California’s minimum wage increases from $16.90 to $17.40 per hour for all employers, regardless of size. The state rate is only a floor.
If a city or county sets a higher minimum, you must pay the higher rate for work performed there.
In San Jose, the minimum wage rises to $19.00 per hour in 2027. San Francisco, Oakland, Berkeley, Fremont, and Cupertino also have their own ordinances that exceed the state rate. You owe the highest rate that applies where the employee works, including employees who travel between job sites or work remotely from another city.
Fast food, healthcare, and certain agricultural employers face separate industry rates, including a new $19.75 hourly minimum for specified H-2A workers under AB 2646. Our attorneys can review your pay rates by work location and flag employees paid below the local minimum before your first 2027 payroll.
The New Exempt Salary Threshold: Don't Get Caught Misclassifying
Executive, administrative, and professional employees must earn at least $72,384 per year ($6,032 per month) in 2027 to qualify as exempt. You can’t prorate this salary for part-time employees, and local minimum wages don’t change it.
Salary alone doesn’t make an employee exempt. The employee must also spend more than half of their working time on exempt duties, regardless of job title. Misclassified employees can recover unpaid overtime, break premiums, and penalties, often through class actions or PAGA claims.
We can compare your job descriptions against employees’ actual duties and advise whether to adjust pay or reclassify.
Separate Rules for Computer Software Professionals
Silicon Valley technology companies, startups, and enterprise employers frequently make the mistake of applying the white-collar salary threshold to their development teams. Under Labor Code 515.5, the 2027 exemption for computer software professionals requires a minimum annual salary of $127,108.34, or $61.03 per hour.
Paying an engineer $130,000 doesn’t automatically classify them as exempt. They must be highly skilled and primarily engaged in intellectual or creative work that requires discretion and independent judgment. Junior developers, IT support staff, and help-desk workers often fail this rigid duties test regardless of their compensation level.
Our lawyers understand the nuanced compensation structures unique to the tech industry. We help employers analyze engineering roles to properly apply this specific tech exemption and avoid misclassification traps.
Pay-Data Reporting Gets Expensive: SB 464, SB 1237, & the $1,000 Penalty
Private employers with 100 or more employees must file annual pay-data reports. Under SB 464’s expanded job categories, the report due May 12, 2027 must sort employees into 23 occupational categories instead of 10.
Under SB 1237, repeat failures to file can now result in penalties of up to $1,000 per employee. We encourage you to start mapping roles in your HRIS now, and our lawyers can review your category assignments before you file.
Stronger Labor Commissioner Enforcement Under SB 1316
Under SB 1316, employers that don’t produce requested payroll or time records on time may be barred from using those records in certain Labor Commissioner proceedings. The law also lets the Labor Commissioner renew liens on an employer’s real property when wage judgments go unpaid. We can help you proactively implement a response process before a request arrives.
Repayment Clauses: New Limits on Stay-or-Pay Agreements
The state now restricts “stay-or-pay” provisions, which require workers to repay money if they leave a job. Under AB 692 (as amended by AB 1697), contracts entered on or after January 1, 2027 generally can’t require repayment of training costs, signing bonuses, or retention bonuses when employment ends.
Limited exceptions apply, such as certain qualifying bonus arrangements and advanced paid time off. Employers who violate the law may be liable for actual damages or $5,000 per worker, whichever is greater.
2027 Wage & Hour Compliance Checklist for Employers
Payroll changes that take effect January 1 need to be in place before your first 2027 pay period closes. Fixing them afterward can mean back pay, penalties, and misclassification claims, including costly PAGA actions.
A focused Q4 review lets your HR, payroll, and leadership teams make changes on your timeline rather than in response to a claim. Below are some key steps to take:
- Pay the highest applicable minimum wage. The state minimum rises to $17.40 per hour, but some cities set higher rates. Pay non-exempt employees based on where they work.
- Recheck exempt classifications. Executive, administrative, and professional employees must earn at least $72,384 and spend more than half their working time on exempt duties.
- Review software professionals separately. Employees exempt under Labor Code 515.5 must earn at least $127,108.34 per year in 2027.
- Update pay-data reporting (SB 464). Work with your payroll provider to map every position into the 23 new occupational categories before the filing deadline.
- Prepare to produce wage records quickly (SB 1316). Confirm who retrieves payroll records and how fast your team can respond to a request.
Defending Your Bottom Line Against New 2027 Wage Mandates
California’s 2027 changes reach every part of your payroll, from hourly rates and exempt salaries to pay-data filings and offer letters. Our founding partners bring extensive backgrounds in business, accounting, and banking in Silicon Valley, allowing us to review compensation decisions with an eye on both compliance and cost.
By guiding management teams through compensation audits, modernizing internal policies, and vigorously defending against misclassification and wage claims, our firm works to protect your workforce operations so you can stay focused on scaling your business, not fighting compliance battles.
Don’t leave your 2027 compliance to chance. Call (408) 478-4104 to schedule a consultation with our dedicated attorneys. We exclusively represent employers in employment matters and are committed to safeguarding your reputation, talent, and bottom line.