CA Exempt Salary 2025: Minimum Wage and Exemption Updates for California Employers

California’s 2025 exempt salary threshold increases to $68,640 annually, with minimum wage rising to $16.50 statewide. New laws also impact sick leave, union exemptions, captive audience meetings, and driver’s license requirements for job postings.

By Douglas Wade, Attorney

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Table of Contents

1. Introduction

2. Minimum Wage

3. Paid Family Leave

4. Extension of Sick Leave

5. Meetings with Captive Audiences

6. Limitations on the Need for Driver’s Licenses for Employment Positions

Introduction

When it involves passing new legislation affecting California employers, the legislature is rarely idle. Although there aren’t as many statutes this year as in previous years, there are nevertheless some significant new revisions that all California companies need to be aware of. The main changes are outlined below.

Minimum Wage

Proposition 32 was narrowly defeated by California voters last week. It would have raised the state wage rate to $18 per hour for big and medium-sized companies and $17 per hour for small businesses with twenty-five or fewer workers.

This does not imply, however, that the state’s minimum wage will remain stagnant until 2025. As an alternative, the minimum wage will rise in accordance with the CPI (consumer price index). The newly established state-level minimum wage will rise from $16 an hour to $16.50 an hour starting in 2025.

Additionally, the CA exempt salary 2025 threshold for the 3 main overtime exemptions (executive, administrative, & professional) is raised by 50 cents to $68,640 a year or $5720 a month. Beginning on 1^st January 2025, your employees who are exempt and who meet the requirements of these exemptions will no longer be considered exempt if they are not paid a minimum salary of this amount.

To guarantee compliance with the CA exempt salary 2025 rules, California firms should verify the pay of their paid administrative staff and exempt middle management. It’s also critical to keep in mind that this wage test is applicable to part-time exempt employees.

Furthermore, a large number of unionized California companies utilize specific exemptions from overtime regulations, sick leave policies, and additional wage and hour rules that are exclusive to unionized employers. Among other requirements, the majority of these exemptions stipulate that workers covered by the relevant collective bargaining exemption must have clauses stating that they receive at least 1.3 times the state’s minimum wage.

Therefore, starting on 1^st January 2025, any California businesses that are interested in using any of the relevant wage and hour exemptions under collective bargaining agreements (CBAs) must make sure that their CBAs pay workers at least $21.45 per hour. If not, the state might conclude that the exemption does not apply and that the CBA-covered employees must be paid strictly in line with the CA exempt salary 2025 guidelines.

Remember that California’s standard minimum wage of $16.50 is just half the story. According to the state rule that went into effect the previous year, some fast-food employees are required to be compensated $20 per hour. Despite having the power to increase the minimum wage for fast food starting on 1^st January 2025, the state’s Fast Food Council has not yet taken any action.

A state law that went into effect last month mandates that certain workers in the healthcare sector be paid at least $23 an hour through 30^th June 2025, after which they will be paid $24 an hour. On 1^st July 2026, the minimum wage for healthcare will rise by an additional dollar to $25 an hour.

Furthermore, a number of local laws mandate greater minimum pay for workers in such districts. All employees within the jurisdiction are subject to some of the local minimum wage rules. Others are exclusive to workers in particular sectors or occupational categories. Since many of the local rules are based on inflation, they will automatically increase in 2025.

Employers in California are encouraged to audit payroll records to make sure they meet all of the new minimum wage regulations, both local and state-specific, for their respective industries and regions. All California companies should also make sure that their CBAs that utilize the various exemptions from the California wage & hour legislation meet the updated CA exempt salary 2025 requirements and that their exempt employees remain exempt according to the updated wage basis minimum.

Paid Family Leave

AB 2123, which goes into effect on 1^st January 2025, prohibits California companies from requiring their workers to use a maximum of two weeks of vacation time off before they are eligible to receive Paid Family Leave payments under the paid family leave policy of EDD.

Extension of Sick Leave

Employees in California will be able to use sick time to support any family members who are victims of certain violent incidents and threats of violence beginning next year, thanks to AB 2123. Employers in California should modify their sick leave rules and regulations and notify their staff of this change. Employers in California should also think about educating their management and HR staff about these new regulations and the fact that leave is no longer restricted to victims of sexual assault, domestic abuse, or stalking.

Meetings with Captive Audiences

California joins a number of other states in prohibiting obligatory captive audience meetings under AB 399. With effect from January 1, 2025, California employers are prohibited by the California Worker Freedom from Employer Intimidation Act from firing, discriminating against, retaliating against, or threatening to do so because a worker declined to attend a meeting sponsored by the employer that was about political, religious, or labor union/organization issues. This law complements the CA exempt salary 2025 landscape, which is moving toward more equitable and inclusive hiring standards.

Limitations on the Need for Driver’s Licenses for Employment Positions

SB 1100, which goes into effect on January 1, 2025, forbids California employers from stating in job postings, applications, or other hiring materials that a candidate must have a valid license to drive unless they can demonstrate that they: (1) reasonably believe that driving is one of the essential functions of the position in question; and (2) fairly believe that using a non-driver’s license alternative form of transport (such as bicycling, public transportation, etc.) would not be comparable in terms of travel time or expense to the employer.

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CA Exempt Salary 2025: Minimum Wage and Exemption Updates for California Employers

Introduction

Minimum Wage

Paid Family Leave

Extension of Sick Leave

Meetings with Captive Audiences

Limitations on the Need for Driver’s Licenses for Employment Positions

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