California Salary Laws: Exempt Threshold, Overtime, and Final Pay

California salary laws are anchored by two numbers that reset each January: the statewide minimum wage, which rises to $16.90 per hour on January 1, 2026, and the exempt salary threshold, which climbs to $70,304 per year alongside it.¹ If you earn a salary in California, those figures determine whether you get overtime, when your employer must pay you, what your pay stub must show, and what happens when the job ends. Nearly every other rule in this area flows from them.

The Exempt Salary Threshold

A salaried worker is not automatically exempt from overtime. Under Labor Code Section 515, an exempt employee must earn a monthly salary equal to at least twice the state minimum wage for full-time work, meaning 40 hours per week.² At the 2026 minimum wage, that produces an annual floor of $70,304, calculated as $16.90 multiplied by 2 and then by 2,080 hours.¹

Fall a dollar below that number and exempt status disappears, regardless of duties or job title. The employer then owes overtime for every qualifying hour already worked. Because the state minimum wage adjusts annually based on the national Consumer Price Index for Urban Wage Earners and Clerical Workers, capped at 3.5 percent per year, the exempt threshold moves with it.³ Employers must verify their exempt salaries every January.

The Duties Test

Salary is only half the equation. The employee must also spend more than half of working time on duties that genuinely qualify as executive, administrative, or professional. An executive manages a department and regularly directs the work of at least two other employees. An administrative employee’s primary work involves business operations requiring independent judgment on significant matters. A professional performs work requiring advanced knowledge typically acquired through extended specialized education.²

Titles do not matter. Calling someone a “manager” while they spend most of the day doing the same tasks as hourly staff does not create an exemption.

Overtime for Salaried Non-Exempt Workers

If you’re salaried but don’t clear both tests, California’s overtime rules apply in full, and they’re more aggressive than federal law. Under Labor Code Section 510, work beyond eight hours in a single day must be paid at one and a half times the regular rate, and work beyond 12 hours in a day jumps to double time.⁴ Anything over 40 hours in a workweek also earns time and a half.

A separate rule governs the seventh consecutive day of work in a workweek. The first eight hours on that day pay at time and a half, and hours beyond eight pay at double time.⁴

Misclassification creates the biggest financial exposure here. An employer who mislabels a $60,000-a-year worker as exempt and never tracks hours can owe years of back overtime plus penalties. The daily trigger catches situations that would slip through a weekly-only analysis.

Meal and Rest Breaks

Non-exempt salaried employees get the same break protections as hourly workers. Under Labor Code Section 512, an employer cannot require someone to work more than five consecutive hours without providing an unpaid 30-minute meal break. A second 30-minute meal break is required once the workday exceeds 10 hours.⁵

Waivers are narrow. An employee working no more than six total hours can waive the first meal break by mutual agreement. The second meal break can be waived only if the total shift is no more than 12 hours and the first break was not waived.⁵

Rest breaks run on a separate clock: 10 paid minutes for every four hours worked, or major fraction of four hours. A six-hour shift means one break; eight hours means two. Miss a required meal break and the employer owes one extra hour of pay at the regular rate. The same one-hour premium applies to each missed rest break, and the two penalties can stack on the same day.

Paycheck Timing

Wages must be paid at least twice per calendar month on designated paydays. Work performed between the 1st and 15th of the month must be paid by the 26th of that month. Work performed between the 16th and the last day of the month must be paid by the 10th of the following month. Employers using weekly, biweekly, or other alternative schedules must deliver wages within seven calendar days after the close of the payroll period.⁶

What Your Pay Stub Must Show

Labor Code Section 226 requires a detailed written wage statement with every paycheck. Each stub must show gross wages earned, total hours worked for non-exempt employees, all deductions itemized (though employee-authorized deductions can be grouped), net wages earned, the start and end dates of the pay period, every hourly rate in effect during the period along with the hours worked at each, and identifying information for both the employee (name and the last four digits of Social Security number, or a separate ID) and the employer (legal name and address).⁷

Employers must keep copies on file for at least three years. Current and former employees can request to inspect their records, and the employer has 21 calendar days to comply.

Final Paychecks

When employment ends, California imposes deadlines much shorter than federal law.

Fired or laid off: all earned wages must be paid immediately at the time of discharge, with no grace period.⁸
Quit without notice: the employer has 72 hours to deliver all wages owed, and the employee can request payment by mail.⁹
Quit with at least 72 hours’ notice: all wages must be ready on the last day of work.⁹

Final pay includes the pro-rated salary and the cash value of all accrued, unused vacation or paid time off. California treats earned vacation as wages that cannot be forfeited.

Waiting Time Penalties

Under Labor Code Section 203, an employer who willfully misses these deadlines owes one day of the employee’s pay for each calendar day the wages go unpaid, up to 30 days. For a worker earning $70,000 a year, that cap alone runs to roughly $5,750 on top of the wages still owed.¹⁰ “Willfully” does not require bad intent. It means the employer deliberately chose not to pay, even if they believed they had a reason.

Pay Transparency and Equal Pay

Labor Code Section 432.3, expanded by Senate Bill 1162, requires employers with 15 or more employees to include a pay scale in every job posting reflecting the salary or hourly range they genuinely expect to pay. When a third party posts the job on the employer’s behalf, the employer must provide the range and the third party must include it.¹¹

Smaller employers face a related duty. Any employer, regardless of size, must provide a pay scale to an applicant who requests one during the hiring process, and current employees can request the pay range for their existing position at any time.¹² Employers must maintain records of each employee’s job title and wage rate history for the length of employment plus three years after separation. Violations carry civil penalties between $100 and $10,000 per offense.

The California Equal Pay Act, at Labor Code Section 1197.5, bars paying workers of one sex less than workers of another sex for substantially similar work, and the same protection extends to race and ethnicity.¹³ “Substantially similar” looks at the combined skill, effort, and responsibility a job demands under similar working conditions.

Pay differences can be justified only through a seniority system, a merit system, a system that measures output by quantity or quality, or another legitimate business factor such as education or training. Even then, the factor cannot be rooted in a prior pay gap, and it must explain the entire difference. The burden falls on the employer.¹³ Prior salary cannot justify any disparity, and California separately bans asking applicants about salary history.

Expense Reimbursement

Labor Code Section 2802 requires employers to reimburse employees for all necessary expenses incurred while doing their jobs, including any cost that is a direct consequence of carrying out work duties or following the employer’s instructions.¹⁴ Common categories include personal cell phone use for work calls, mileage for required driving, home internet costs for remote workers, and tools or supplies the employer does not provide.

The obligation applies whether you’re salaried or hourly, exempt or non-exempt. Unpaid reimbursement awards carry interest from the date the expense was incurred, and employees who sue to collect can recover attorney’s fees.

Are You Actually an Employee? AB 5 and the ABC Test

Every rule above depends on one threshold question: whether the worker is an employee. California’s AB 5 codified the ABC test, which presumes employee status unless the hiring company proves all three prongs:

A. The worker is free from the company’s control over how the work is performed, both in the contract and in practice.
B. The work falls outside the company’s usual course of business.
C. The worker has an independently established trade or business of the same type as the work being performed, and that business must already exist at the time of the engagement.

All three must be satisfied, and the burden falls entirely on the hiring entity.¹⁵ Prong B trips up the most companies. A delivery company that hires drivers as independent contractors will struggle to argue driving is outside its usual business, and a marketing firm that hires freelance marketers faces the same problem.

Getting classification wrong exposes an employer to unpaid overtime, missed meal and rest break premiums, unreimbursed expenses, and penalties for every pay period the worker was misclassified. Those costs compound quickly.

1
Department of Industrial Relations. California Minimum Wage Set to Increase to $16.90 Per Hour
2
California Legislative Information. California Code LAB 515 – Compensation for Overtime
3
California Legislative Information. California Code LAB 1182.12 – Minimum Wage
4
California Legislative Information. California Code LAB 510 – Overtime
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California Legislative Information. California Code LAB 512 – Meal Periods
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California Legislative Information. California Code LAB 204 – Payment of Wages
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California Legislative Information. California Code LAB 226 – Itemized Wage Statements
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California Legislative Information. California Code LAB 201 – Payment of Wages
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California Legislative Information. California Code LAB 202 – Payment of Wages Upon Resignation
10
Department of Industrial Relations. Waiting Time Penalty
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California Legislative Information. California Code LAB 432.3 – Contracts and Applications for Employment
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California Legislative Information. Senate Bill No. 1162 – Employment Salaries and Wages
13
California Legislative Information. California Code LAB 1197.5 – Wages
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California Legislative Information. California Code LAB 2802 – Employer Reimbursement of Employee Expenditures
15
California Labor and Workforce Development Agency. ABC Test