Compliance Matters TM

California Passes Bill to Raise Minimum Wages for Healthcare Workers

In a move that has significant implications for the healthcare industry in California, Governor Newsom has signed into law Senate Bill 525 (S.B. 525). This bill establishes five separate minimum wage schedules for covered healthcare employees, as defined, depending on the nature of the employer. Healthcare employers need to be aware of these changes and prepare for their implementation.

Covered Employers

The Legislature has identified various healthcare facilities and work sites that fall under the purview of Senate Bill 525 (S.B. 525). These include:

Integrated health care delivery system sites
General acute care hospitals (including distinct parts)Acute psychiatric hospitals (including distinct parts)
Special hospitals
Skilled nursing facilities associated with hospital systems
Patient homes served by hospital-owned entities
Home health agencies
Various types of clinics (including specialty care, dialysis, psychology, and community clinics)

Residential care facilities for the elderly linked to acute care providers
Psychiatric health facilities
Mental health rehabilitation centers
State-operated clinics
Rural health clinics
Urgent care clinics
Certified ambulatory surgical centers
Physician groups
County correctional facilities offering healthcare services
County mental health facilities

The Legislature expressly exempted certain entities, such as state-operated hospitals, tribal clinics, and specific outpatient settings.

Covered Employees

S.B. 525 broadly defines a "covered health care employee" as an employee of a healthcare facility employer engaged in patient care, healthcare services, or related activities. This includes roles such as nurses, physicians, caregivers, janitors, clerical workers, administrative staff, food service workers, and more, irrespective of their job title.

The category of “covered health care employee” may also include subcontracted or contracted workers if the following conditions are met: the worker’s employer has a contract with the healthcare facility employer, and the healthcare facility employer, either directly or indirectly, controls the worker's wages, hours, or working conditions. This definition also encompasses all employees who primarily work on the premises of a healthcare facility to provide healthcare services or support.

Minimum Wage Increase Schedule

S.B. 525 will introduce substantial increases in minimum wages for healthcare workers in California, ranging from $18 to $25 per hour. These rates will be determined by factors such as the employer's size, nature, and structure according to the following schedule:

Covered Facilities and Criteria

Scheduled Period

Minimum Wage

Group 1

- Covered health care facilities with 10,000 or more full-time equivalent employees.

- Covered health care facility employers’ part of an integrated health care delivery system or health care system with 10,000 or more full-time equivalent employees.

- Covered dialysis clinics.

- Covered health

facilities owned, affiliated, or operated by a county with a population of more than 5,000,000 as of January 1, 2023.

June 1, 2024

to May 31, 2025

_________________

June 1, 2025

to May 31, 2026

________________

June 1, 2026

to August 1, 2027

$23/hour

__________________

$24/hour

___________________

$25/hour

Group 2

- Covered hospitals with high populations of Medicare/Medicaid patients.

- Covered rural independent health care facilities.

- Covered health care facilities owned, affiliated, or operated by a county with a population of less than 250,000 as of January 1, 2023.

June 1, 2024

to May 31, 2033

___________________

June 1, 2033

to August 1, 2034

$18/hour with 3.5% annual increases

__________________

$25/hour

Group 3

- Covered primary care community or free clinics open for limited services (up to 40 hours a week) and not conducted or maintained by a government entity.

- Covered community clinics, including associated intermittent clinics exempt from licensure.

- Covered rural health clinics.

- Covered urgent care clinics owned by or affiliated with a community clinic.

June 1, 2024

to May 31, 2026

________________

June 1, 2026

to May 31, 2027

___________________

June 1, 2027

to August 1, 2028

$21/hour

_________________

$22/hour

___________________

$25/hour

Group 4

- All other covered health care facilities.

June 1, 2024

to May 31, 2026

__________________

June 1, 2026

to May 31, 2028

_________________

June 1, 2028

to August 1, 2029

$21/hour

___________________

$23/hour

___________________

$25/hour

Impact on Exempt Employees

The bill also has implications for exempt employees. To maintain their exempt status, these employees must earn a monthly salary equivalent to no less than either 150% of the applicable health care worker minimum wage or 200% of the State's generally applicable minimum wage—whichever is greater—for full-time employment.

Publication Requirement

The Department of Health Care Access and Information must publish lists of large health care employers and specific hospital classifications by January 31, 2024. If a health care facility believes it should be reclassified, it can request this by providing relevant information until January 31, 2025. The department will consider stakeholder input, including from employees and employers, to ensure accurate classifications. Emergency regulations may be used for implementation until January 1, 2025, with stakeholder involvement.

Application of S.B. 525

Liability: Employees covered by S.B. 525 will have the right to enforce their wage rights through civil action, similar to the enforcement mechanisms for existing minimum wage requirements.

Financial Viability Waivers: By March 1, 2024, the Department of Industrial Relations, in collaboration with other departments, is directed to establish a waiver program for certain healthcare facilities. This program will allow eligible facilities to request a temporary pause or alternative schedule for healthcare minimum wage requirements due to financial viability concerns. Waivers are initially one year and may be renewed.

Local Ordinance Limitations: Local governments are prohibited from enacting ordinances related to healthcare worker wages until January 1, 2034. This provision aims to provide consistency in wage regulations across the state.

Next Steps to Consider

Healthcare employees impacted by S.B. 525 are encouraged to take specific actions to navigate this new framework successfully. Employers who believe they may be impacted may want to consider conducting internal audits to assess workforce, wages, and classifications, adjusting budgets for rising labor costs, reviewing exempt employees' salaries, communicating wage changes to staff, updating policies, or providing compliance training to HR and management for a seamless transition.

If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at 818-508-3700 or visit us online at www.brgslaw.com.

Sincerely,

Katherine A. Hren

Matthew B. Golper

Olga G. Peña

www.brgslaw.com