Small Business Alert: 2026 Wage Hikes Create Massive Overtime Misclassification Risk

The Hidden Trap: Why a Properly Salaried Employee Becomes Non-Exempt Overnight

RENO, NV / ACCESS Newswire / December 18, 2025 / The price of neglecting payroll updates is about to go up. In 2026, many states are increasing their state and local minimum wages, which can create an accidental wave of worker misclassification for many businesses. LegalMatch.com, the nation’s preferred attorney-client matching service, is recommending that all businesses throughout the country complete employee classification audits. This increase will raise the minimum salary employees must earn to join salaried, non-overtime-eligible employees in being labeled exempt. Employers who ignore these changes may face costly wage-and-hour lawsuits.

This is a critical shift for states like California, which has a threshold that will climb to $70,304 because it is indexed to the minimum wage. Washington also has a threshold indexed to the minimum wage, and that state will see a rise to more than $80,000. This makes this issue particularly salient in those states.

An employee eligible for the exemption under the 2025 federal rule, but whose salary will drop below the new state salary threshold on January 1, 2026, is no longer exempt, and under state law is possibly entitled to back pay and overtime pay for hours worked over 40 in one week. For example, if a salaried employee of $60,000 annually in Nevada moves to California in 2026, they will have to be reclassified as non-exempt and go back to hourly, and will no longer be classified as exempt until wages exceed the threshold.

“The danger lies in the assumption that a salaried employee is always exempt. If they don’t meet the new high salary threshold, they are to be increased or reclassified with possible overtime owed to them, regardless of title or duties,” says Ken LaMance, LegalMatch’s General Counsel.

The reality of this situation is that businesses are going to have to conduct wage and hour audits, determine reclassification strategies, like whether to raise a salary or reclassify, for example, and get ahead of the risks before it’s too late. Businesses are urged to utilize online resources available, like LegalMatch.com. Individuals can submit their case questions to the confidential platform, receive matches with attorneys experienced in wage and hour laws, and pick the attorney who fits best.

About LegalMatch.com

LegalMatch is the nation’s oldest and largest online legal lead-generation service. Headquartered in Reno, Nevada, LegalMatch helps people find the right lawyer and helps attorneys find new clients. LegalMatch’s service is free to individuals and small businesses looking for legal help. For more information about LegalMatch, please visit our website or contact us directly.

Media Contact

Ken LaMance
press@legalmatch.com
(415) 946-0856

SOURCE: LegalMatch.com

View the original press release on ACCESS Newswire