Effective January 1, 2023, the California minimum wage will increase to $15.50 per hour for all employers regardless of size. Although the state minimum wage for small employers (25 or less employees) was scheduled to increase to only $15 per hour to match the rate that has been in effect for larger employers, a provision of the statute requires the annual inflation adjustment to kick in early if the rate of inflation tops 7 percent. (Cal. Lab. Code § 1182.12(c)(3)(B).) Because the Department of Finance declared that the inflation rate from July 1, 2021 to June 30, 2022 increased by 7.9 percent, California’s minimum wage rate will increase by 3.5 percent to $15.50.

Employers should note that the state’s minimum wage increase also affects the salaries of exempt employees due to the requirement that exempt employees earn no less than two times the state’s (not local) minimum wage for full-time work. This means that, beginning January 1, 2023, exempt employees in California must earn an annual salary of no less than $64,480.

Employers must also consider local minimum wage increases imposed by cities or counties and pay employees the hourly rate that provides the greatest benefit to employees. For example, effective January 1, 2023, the City of San Jose will increase its minimum wage to $17 per hour, and the City of San Diego’s minimum wage will increase to $16.30 per hour. Therefore, employers operating within these cities must pay employees according to the higher local minimum wage.

Other local jurisdictions have implemented minimum wage increases for 2023; it is therefore important for employers to check the minimum wage requirement in the locations where their employees are working. The chart reflects some changes to local minimum wage rates in California’s major cities.

ǂ Applies to hotels with 60 or more rooms.