California Minimum Wage (2026)

California does not allow a tip credit. All employees, including tipped workers, must receive the full minimum wage of $16.90/hour. Tips are on top of this base wage.

Outside salespersons, immediate family members of employer, certain licensed camps/programs

What California Business Owners Need to Know

• •California does not allow a tip credit — tipped employees receive the full state minimum wage
• •California requires daily overtime after 8 hours and double time after 12 hours
• •Many California cities have local minimum wages above the state rate, with Emeryville at $19.90 being the highest in the state
• •Fast food workers have a separate minimum wage of $20.00/hour under AB 1228
• •Healthcare workers have a phased minimum wage increase to $25.00/hour

How do you comply with California minimum wage law?

Minimum wage compliance is not just about paying the right hourly rate. There are record-keeping obligations, posting requirements, and overtime rules that trip up employers every year. Follow these five steps to stay in compliance and avoid costly wage claims.

1. Post the required workplace notices. California requires employers to display the current minimum wage poster in a location where all employees can see it, such as a break room or near the time clock. Federal law also requires a separate Fair Labor Standards Act (FLSA) poster. Both must be updated whenever rates change. The California Department of Industrial Relations — Division of Labor Standards Enforcement (DLSE) provides free downloadable posters on its website. Failing to post required notices can result in penalties even if you are paying the correct wage.
2. Track hours accurately for all non-exempt employees.Every non-exempt employee's hours must be recorded precisely. This includes start and end times, meal breaks, and any split shifts. Use a reliable time-tracking system — whether that is a digital time clock, payroll software, or even a manual time sheet — and make sure employees verify their hours each pay period. Rounding practices are allowed but must not systematically short employees. Inaccurate time records are one of the most common triggers for Department of Labor investigations.
3. Calculate overtime correctly on top of the minimum wage. Under California law, overtime is generally due at 1.5 times the employee's regular rate for hours worked beyond 40 hours/week and 8 hours/day. The overtime rate is based on the employee's actual regular rate of pay, not just the minimum wage. If an employee earns more than minimum wage, overtime is calculated on the higher amount. Some states also require daily overtime (for example, after 8 hours in a single day) — check whether California's overtime rules include a daily threshold.
4. Keep payroll records for at least three years. Federal law requires employers to retain payroll records — including hours worked, wages paid, deductions, and pay dates — for at least three years. California may have a longer retention requirement. These records must be available for inspection by the Department of Labor or the California Department of Industrial Relations — Division of Labor Standards Enforcement (DLSE) if a complaint or audit occurs. Store records securely, whether in paper or digital form, and ensure they include all required data fields.
5. Update pay rates whenever the minimum wage changes. California's minimum wage is indexed to inflation and adjusts automatically each year. When a rate increase takes effect, you must update your payroll system immediately — not at the next pay period, but starting from the effective date. Also review any salary-based exemptions, because the exempt salary threshold often rises in lockstep with minimum wage increases. Set a reminder for 30 days before known effective dates to audit your payroll.

What are the penalties for minimum wage violations in California?

Minimum wage violations carry serious financial and legal consequences. Both federal and state agencies actively enforce wage laws, and employees have the right to file complaints or lawsuits. Here is what employers face if they pay below the required minimum:

• •Back pay. Employers must pay the full difference between what the employee was paid and what they should have been paid, for every hour worked during the violation period. Back pay can be calculated going back two years (three years for willful violations) under federal law. California may allow an even longer look-back period under state law.
• •Liquidated damages. Under the FLSA, employees who win a wage claim are typically awarded liquidated damages equal to the amount of back pay owed — effectively doubling the employer's liability. California may impose additional or different liquidated damage formulas under state law, and some states allow treble (triple) damages for willful violations.
• •Attorney fees and court costs. If an employee sues and wins, the employer is generally required to pay the employee's reasonable attorney fees and litigation costs on top of the back pay and damages. This can add thousands or tens of thousands of dollars to the total liability, even for relatively small underpayments.
• •Civil penalties from the DOL. The U.S. Department of Labor's Wage and Hour Division can impose civil money penalties of up to $2,451 per violation for repeated or willful minimum wage violations. The California Department of Industrial Relations — Division of Labor Standards Enforcement (DLSE) may impose separate state-level penalties, which vary by jurisdiction.
• •Criminal prosecution. In extreme cases — particularly willful and repeated violations — employers can face criminal prosecution. Federal penalties include fines up to $10,000 and imprisonment for repeat offenders. State-level criminal penalties vary. While criminal charges are rare for small businesses, they do occur when violations are egregious or involve vulnerable workers.

The best defense against wage claims is proactive compliance: pay correctly, keep thorough records, and respond immediately to any employee concerns about pay. If you receive a complaint from the DOL or California Department of Industrial Relations — Division of Labor Standards Enforcement (DLSE), consult with an employment attorney promptly.

How do tip credit rules work in California?

Tip credits allow employers to pay tipped employees a lower base wage, as long as the employee's tips bring their total compensation up to at least the full minimum wage. However, the rules around tip credits are complex, and getting them wrong is one of the most common sources of wage claims in the restaurant and hospitality industries.

Tip pooling rules: Federal law allows mandatory tip pools among employees who customarily receive tips (servers, bartenders, bussers, hosts). If the employer does not take a tip credit, back-of-house employees (cooks, dishwashers) can also participate in the pool. Managers and supervisors are never permitted to participate in a tip pool. California may have additional restrictions on who can participate and how pools are structured.

Service charges are not tips.Mandatory service charges (such as automatic gratuities on large parties) are considered the employer's revenue, not the employee's tips. If the employer distributes service charges to employees, that amount is treated as wages — subject to payroll taxes and included in overtime calculations. Do not confuse service charges with voluntary tips when calculating tip credits.

What are the most common minimum wage mistakes in California?

Even well-intentioned employers make minimum wage errors. Here are the mistakes we see most often, along with how to avoid them.

• •Not updating for annual rate increases. California's minimum wage adjusts automatically each year based on the Consumer Price Index. The new rate takes effect January 1 (or July 1 in some states), and many employers miss the change because they do not monitor the announcement. Always check for rate changes at least once per quarter and update your payroll system before the new effective date.
• •Miscalculating tipped wages. Employers who take a tip credit must verify every pay period that the employee's tips plus the direct wage meet or exceed the full minimum wage. Many employers set the base rate at the start of employment and never check again. This is a violation waiting to happen — especially during slow seasons when tip income drops.
• •Misclassifying employees as exempt. To be exempt from overtime and minimum wage requirements, an employee must meet specific duties tests and earn above a minimum salary threshold. Simply giving someone a title like "manager" or paying them a salary does not make them exempt. The DOL regularly audits for misclassification, and the penalties include back overtime pay plus damages.
• •Not paying for training time, meetings, and setup. Under the FLSA, if attendance is mandatory and the activity benefits the employer, the time is compensable. Pre-shift meetings, required training sessions, and mandatory setup/cleanup time must all be paid at the employee's regular rate (at least minimum wage). Unpaid training is only allowed when it is voluntary, outside working hours, unrelated to the job, and the employee does no productive work during it.
• •Ignoring local minimum wages. California allows cities and counties to set their own minimum wages above the state rate. If your business operates in a city with a local ordinance, you must pay the higher local rate. Employers with locations in multiple jurisdictions may need to pay different rates at each location.

Frequently Asked Questions

Official California Resources

• CA DLSE Minimum Wage
• CA Wage Orders
• File a Wage Claim