California's minimum wage will increase to $17.40 per hour effective January 1, 2027, up from the current $16.90 per hour. California law requires the minimum wage to be adjusted annually for inflation under Labor Code section 1182.12, based on the lesser of 3.5% or the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Impacts on Union Construction Employment Compliance
Several statutory exceptions available to signatory contractors depend on employees receiving a wage premium above the state minimum wage. Effective January 1, 2027, a requirement of 30% above the state minimum wage will equal $22.62/hour, and twice the state minimum wage will equal $34.80/hour.
Key areas that may be affected:
- Collective Bargaining Agreements: Hours and Days of Work: Under IWC Wage Order 16, contractors and unions may negotiate different hours/days of work when employees are covered by a qualifying CBA and earn at least 30% above minimum wage — $22.62/hour beginning January 1, 2027.
- California Paid Sick Leave: Construction employers may qualify for an exemption under Labor Code section 245.5 when the CBA provides a regular hourly rate of at least 30% above minimum wage — $22.62/hour beginning January 1, 2027.
- Private Attorneys General Act (PAGA): A PAGA exemption is available for certain CBA-covered employees earning at least 30% above minimum wage, with a clear PAGA waiver and grievance/arbitration procedures — $22.62/hour beginning January 1, 2027.
- Tools and Equipment: Under Wage Order 16, employers may require employees to provide their own hand tools when wages (including fringe benefits) are at least twice the state minimum wage — $34.80/hour beginning January 1, 2027.
Minimum Wage Thresholds at a Glance
| Requirement | 2026 | Effective Jan. 1, 2027 |
|---|---|---|
| California Minimum Wage | $16.90/hour | $17.40/hour |
| 30% Above Minimum Wage | $21.97/hour | $22.62/hour |
| Twice Minimum Wage | $33.80/hour | $34.80/hour |
Bottom Line
Review the CBA and current wage rates now, before January 1, 2027, to confirm you'll still meet the minimum-wage-based thresholds these exemptions and exceptions depend on. You can find these through the Resources page.
Questions?
Contact NCAT at info@alliedtrades.org or 510-428-9486.