New California Law Will Raise Minimum Wage For Health Care Workers

​A new law signed by California Gov. Gavin Newsom on Oct. 13 will significantly impact California health care employers statewide by raising the minimum wage for nearly all health care employees—hourly and salaried—and providing employees a private right of action to enforce the minimum wage requirements. Here's what you need to know about SB 525, which will become effective on June 1, 2024.

Coverage under SB 525 is expansive, applying to most health care employees and facilities. A "covered health care employee" is defined as an employee of a facility that provides patient care, health care services, or other services supporting the provision of health care.

The new law doesn't just apply to nurses, physicians, caregivers, medical residents, interns, or fellows. It also applies to workers who provide tangential support to healthcare facilities. This includes janitors, housekeepers, groundskeepers, guards, clerical workers, nonmanagerial administrative workers, food service workers, gift shop workers, technical and ancillary services workers, medical coding and medical billing personnel, schedulers, call centers and warehouse workers, and laundry workers.

The law extends the definition of "employees" to include independent contractors. Independent contractors are covered if there is a contract with the health care facility to provide health care services or services supporting the provision of health care, and the health care facility directly or indirectly exercises control over the contractors' wages, hours, or working conditions.

There is no specific framework for determining when a health care facility exercises the requisite degree of control, but the law states that all contractors are considered covered employees if they perform work on the premises of the health care facility. This means independent contractors who work on-site and merely provide ancillary services to support health care facilities will likely be subject to the increased minimum wage.

However, the law does include carve outs for outside salespersons, public-sector workers whose primary duties are not health care, waste collection workers and workers providing medical transportation services.

Covered health care facilities include medical hospitals, psychiatric hospitals, skilled nursing facilities, home health agencies, and a patient's home when health care services are delivered by an entity owned or operated by a general acute care hospital.

New Minimum Wage Requirements

The employee minimum wage will increase annually, commencing June 1, 2024, according to various schedules, depending on the applicable thresholds for the covered healthcare facility. The minimum wage ranges from $18 to $25 per hour with all healthcare facilities reaching $25 per hour by June 1, 2028.

The increased minimum wages under SB 525 will undoubtedly impact covered employers financially. To address the potential financial concerns, the new bill requires the state Department of Industrial Relations to develop a waiver program that will allow employers to apply for a one-year temporary pause or alternative phase-in schedule of the minimum wage requirements.

Employers that wish to apply for a waiver would need to demonstrate that compliance with the minimum wage requirements would detrimentally affect the operations of their business. This determination will be based on various factors, including the actual or likely closure of the health care facility or patient services, the actual or likely loss of jobs, the nature of the health care facility, whether the closure of the facility would significantly impact access to services in the region, and whether the health care facility is in financial distress.

The waiver program will be developed by the Department of Industrial Relations no later than March 1, 2024.

On or before Jan. 31, 2024, the state Department of Health Care Access and Information will publish helpful information on the department's website. This information will include a list of all covered health care facility employers with 10,000 or more full-time equivalent employees and covered health care facility employers that are a part of an integrated delivery system or health care system with 10,000 or more full-time equivalent employees. It will also publish a list of all hospitals that qualify as a hospital with a high governmental payor mix, independent hospital with an elevated governmental payor mix, or a rural independent covered health care facility.

Once published, employers should review these lists to determine that they are accurately classified. This is especially important for qualifying hospitals that would be subject to the less stringent scheduling requirements. If a covered health care facility believes they were wrongly excluded from the list of qualifying hospitals, they can make a request with the Department of Health Care Access and Information to be properly classified. Such requests must be made before Jan. 31, 2025.

Main Takeaways

SB 525 will go into effect in June 2024, so you should consult with employment counsel to determine if the minimum wage requirements apply to your business, what workers are covered under the bill, and whether your business qualifies for a waiver.

You should also be prepared to revise applicable policies to ensure compliance with the new minimum wage requirements and review your wage-and-hour practices. With a higher minimum wage comes higher meal and rest period premiums, higher reporting time pay, higher split-shift premiums, and higher waiting time penalties.

Lastly, since SB 525 extends to independent contractors, employers should also review their service contracts to ensure independent contractors are paid in accordance with the increased minimum wage.

Hannah Sweiss is an attorney with Fisher Phillips in Los Angeles. Kiki Okpala is an attorney with Fisher Phillips in San Francisco. © 2023. All rights reserved. Reprinted with permission.