Good morning. The 2027 wage numbers are landing, and they set two costs on your books, not one. Here's the floor, the sleeper most owners miss, and the two things to square away before the new year.
Top story — California set its 2027 wage floor, and its exempt salary line moves with it
California's minimum wage goes to $17.40 an hour on January 1, 2027, up from $16.90. It's a formula, not a vote. The state's Department of Finance certified on July 31 that the average U.S. CPI-W over the 12 months from July 2025 to June 2026 ran 2.99% above the prior 12 months, so the wage rises 2.99%. State law caps any single year's raise at 3.5% (CA Dept. of Finance; CA DIR). Cities and counties can set higher local minimums, and where one applies, employers must pay it (CA DIR).
Other states index too, on different clocks. Washington compares CPI-W from August to August, and announced its 2027 rate, $17.73 an hour (up from $17.13), on September 30 (WA L&I). The August 2026 CPI-W is up 3.5% on the year (BLS) — the same August-over-August comparison L&I describes. The point for a shop owner: where a state indexes, your 2027 floor is being decided by public numbers right now. Washington's is already out; in other states, you may not have been handed the bill yet.
Quick hits
Federal is frozen — so your state and city set the raise. The federal minimum wage has sat at $7.25 since July 24, 2009 (U.S. DOL). For most shops the number that matters is your state's, or your city's, not Washington, D.C.'s — which is why two identical shops two states apart can run very different labor lines next year.
The sleeper: your "exempt" office staff. Federally, a salaried manager can be overtime-exempt at $684 a week — $35,568 a year (plus the duties tests). Courts vacated a 2024 rule that would have raised it in November 2024, and DOL formally restored the 2019 levels in a technical amendment effective May 15, 2026 (Federal Register; PayrollOrg). But some states tie the salary line to their own minimum wage. California's 2027 line is $72,384 a year: $17.40 × 2 × 40 hours × 52 weeks (CA DIR). Washington's 2027 line is $1,773 a week for employers with 51 or more employees (2.5 times the state minimum) and $1,595.70 a week for those with 50 or fewer (2.25 times), and L&I says the small-employer multiplier keeps rising toward 2.5 times by 2028 (WA L&I). A salaried dispatcher or estimator paid under your state's line doesn't meet the salary test, whatever the job title says.
Check your city, not just your state. California's DIR and Washington's L&I both note that local governments set higher minimums than the state — Seattle, SeaTac and Renton in Washington, for example. A shop with a job-site crew crossing city lines can face more than one number in the same week.
The Tip — reprice, and pull your exempt salaries, before January 1
Two jobs this quarter. First, reprice. Wherever your state's and city's 2027 floor lands, it changes what your hourly cost and billing rate should be — set your 2027 rates now, not after the first January payroll run. Second, run one report: the annual salary of every "exempt" office person — manager, dispatcher, estimator, bookkeeper — against your state's 2027 threshold (federal $35,568; California $72,384 from January 1; Washington $1,773 a week for 51-plus employees, $1,595.70 for 50 or fewer). Anyone under the line fails the salary test. Fix it before January 1: raise the salary above the line, or move them to hourly and start tracking the hours. Salary is the first test, not the only one — the job duties matter too, so loop in your payroll provider on the close calls.
Tool watch — [Not sponsored]
The U.S. Labor Department keeps a free state minimum wage table (updated July 1, 2026) at dol.gov, and its Fact Sheet #17A lays out the white-collar exemption tests. For your exact 2027 figures, go to your own state: California's Labor Commissioner (DIR) publishes the $17.40 and the exempt-salary math, and Washington's L&I publishes its $17.73 and its weekly exempt-salary lines. All free, all primary, and nobody's selling you a compliance package at the end of it.
That's the callout. See you next time.
The Callout — the business brief for the trades. We label every commercial placement: [Sponsor], [Affiliate], or [Not sponsored]. Today's Tool watch is our own honest read — no one paid for it, and the only things named are free government pages. 231J Ramparts Road, Te Anau 9600, New Zealand · Unsubscribe anytime. Nothing in The Callout is legal, tax, or payroll advice. Which minimum wage and which overtime-exemption rules apply to your specific shop and staff — and how you set pay and classify a given employee — is a decision for you and your own CPA or payroll provider. This issue describes general federal and state rules, not advice for your situation.
Sources
California Department of Finance — Minimum Wage Increase, Director of Finance Determination and Certification (July 31, 2026, signed Joe Stephenshaw: "the average U.S. CPI-W for the 12-month period from July 1, 2025 to June 30, 2026 increased by 2.99 percent compared to the 12-month period from July 1, 2024 to June 30, 2025 ... the minimum wage shall increase by 2.99 percent to $17.40 per hour ... January 1, 2027"; adjustment is "the lesser of 3.5 percent or" the CPI-W change; $16.90 from Jan 1, 2026). https://dof.ca.gov/media/docs/whats-new/Minimum-Wage-Increase-Notification-Governor-and-Legislative-Letter.pdf
California DIR — News release 2026-66, Aug 13, 2026 ("$17.40 x 2 x 40 hours per week x 52 weeks per year = $72,384 ... must also satisfy the duties and other requirements"; local rates higher than the state rate must be paid). https://www.dir.ca.gov/DIRNews/2026/2026-66.html
California DIR — Minimum Wage FAQ ($16.90 effective Jan 1, 2026; CPI-W indexing; "the highest raise allowed in any one year is 3.5 percent"). https://www.dir.ca.gov/dlse/faq_minimumwage.htm
California Labor Code §515(a) (exempt employee must earn "a monthly salary equivalent to no less than two times the state minimum wage for full-time employment"). https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=LAB§ionNum=515
U.S. DOL, Wage and Hour Division — Minimum Wage ("$7.25 per hour effective July 24, 2009"), Minimum Wage Laws in the States (updated July 1, 2026), Fact Sheet #17A ($684 per week). https://www.dol.gov/agencies/whd/minimum-wage · https://www.dol.gov/agencies/whd/minimum-wage/state · https://www.dol.gov/agencies/whd/fact-sheets/17a-overtime
Federal Register, 91 FR 27833 (May 15, 2026) — technical amendment implementing the court judgments vacating the 2024 rule; restores the 2019 text; $684/week = $35,568/yr; effective May 15, 2026. https://www.govinfo.gov/content/pkg/FR-2026-05-15/html/2026-09839.htm
PayrollOrg — FLSA White Collar Exemptions ($684/week, $35,568/yr; DOL "has applied the thresholds from the 2019 rule since the 2024 rule was vacated in November 2024"). https://payroll.org/compliance/compliance-overview/hot-topics/white-collar-exemptions
Washington L&I — Minimum Wage page and Changes to overtime rules page (read 19 Oct 2026: 2027 minimum wage $17.73 an hour effective Jan. 1, 2027; CPI-W basis; 2027 exempt-salary thresholds $1,595.70/week small employers (2.25×) and $1,773/week large employers (2.5×); Seattle, Bellingham, SeaTac, Tukwila and Renton higher). https://lni.wa.gov/workers-rights/wages/minimum-wage/ and https://www.lni.wa.gov/workers-rights/wages/overtime/changes-to-overtime-rules
U.S. BLS — Consumer Price Index — August 2026 (released Sept 11, 2026; CPI-U +3.4%, CPI-W +3.5% over 12 months, not seasonally adjusted). https://www.bls.gov/news.release/archives/cpi_09112026.htm
Pages read 28–30 September 2026 (US).