The 12 Days of California Labor and Employment Series – Day 3 "Healthcare Workers and a New Minimum Wage Structure"

In the spirit of the season, we are using our annual "12 Days of California Labor and Employment" blog series to address new California laws and their impact on California employers. On the third day of the holidays, my labor and employment attorney gave to me three french hens and SB 525.

While the minimum wage may differ depending on the city in which you live, the current minimum wage is generally $15/hour. When the pandemic was ongoing, the importance of healthcare workers soared, and the realization of how much healthcare workers were needed and the shortage of healthcare workers hit an all-time high.  

To no surprise, specific cities attempted to increase healthcare workers' wages to assist during the pandemic. While some of those laws passed, others did not. This paved the way for SB 525, which creates a different minimum wage schedule, specifically a higher minimum wage schedule, for various categories of covered healthcare employees.

This post was updated on April 30, 2024, to note that SB 525 was amended to exempt medical group practices of 24 or fewer physicians and IPAs.

Definitions

Covered Health Care Employee

SB 525 defines a "covered health care employee" as an employee of a healthcare facility employer who provides patient care, healthcare services, or services supporting the provision of healthcare, which includes, but is not limited to, the following occupations regardless of formal job title:

• nurse,
• physician,
• caregiver,
• medical resident, intern, or fellow,
• patient care technician,
• janitor,
• housekeeping staff person,
• grounds keeper,
• guard,
• clerical worker,
• nonmanagerial administrative worker,
• food service worker,
• gift shop worker,
• technical and ancillary services worker,
• medical coding and medical billing personnel,
• scheduler,
• call center and warehouse worker,
• and laundry worker

This list may also include contracted or subcontracted employees.

A "covered healthcare employee" does not include an outside salesperson, work performed in the public sector when the prevalent duties performed are not healthcare services, delivery or waste collection work on the premises of a covered healthcare facility, or medical transportation services in and out of a covered healthcare facility.

Covered Healthcare Facility

A "covered healthcare facility" means any of the following: 

• a facility or other worksite that is part of an integrated healthcare delivery system
• a licensed general acute care hospital,
• a licensed acute psychiatric hospital,
• a special hospital,
• a licensed skilled nursing facility,
• a patient's home when healthcare services are delivered by an entity owned or operated by a general acute care hospital or acute psychiatric hospital,
• a licensed home health agency,
• a clinic, including a specialty care clinic or a dialysis clinic,
• psychology clinic,
• a licensed residential care facility for the elderly if affiliated with an acute care provider or owned, operated, or controlled by a general acute care hospital, acute psychiatric hospital, or the parent entity of the general acute care hospital or acute psychiatric hospital,
• a psychiatric health facility,
• a mental health rehabilitation center,
• a community clinic,
• a rural health clinic,
• an urgent care clinic,
• an ambulatory surgical center that participates in the Medicare program,
• a physician group,
• a County correctional facility providing healthcare services, and
• a County mental health facility.

A hospital that is owned, controlled, or operated by the state department of state hospitals or a tribal clinic exempt from licensure will not be included in any of the above definitions to meet the criteria of a covered healthcare facility.

Classifications

1. Any covered healthcare facility with 10,000 or more full-time equivalent employees, any healthcare facility employer that is part of an integrated healthcare delivery system or healthcare system with 10,000 or more full-time equivalent employees, a covered healthcare facility employer that is a dialysis clinic or is a person owns, controls, or operates a dialysis clinic, or a covered health facility owned, affiliated, or operated by County with a population of more than 5 million as of January 1, 2023, must pay their covered healthcare employees $23 per hour from June 1, 2024, to May 31, 2025, $24 per hour from June 1, 2025, to May 31, 2026, and $25 per hour from June 1, 2026, until as adjusted as specified.
2. For hospitals with a high governmental payor mix, an independent hospital with an elevated governmental payor mix, a rural independent covered healthcare facility, or a covered healthcare facility that is owned, affiliated, or operated by a County with a population of less than 250,000 as of January 1, 2023, will owe minimum wage of $18 per hour from June 1, 2024, to May 31, 2033 and $25 per hour from June 1, 2033 until as adjusted as specified.
3. Prespecified clinics, including a clinic per Section 1206(h) of the Health and Safety Code, a community clinic, a rural health clinic, and an urgent care clinic, will see the minimum wage increase to $21 per hour from June 1, 2024, to May 31, 2026, and $22 per hour from June 1, 2026 to May 31, 2027, and then from $25 an hour from June 1, 2027 until as adjusted as specified.
4. All other covered healthcare facility employers must increase the minimum wage for healthcare employees to $21 per hour from June 1, 2024, to May 31, 2026, and $23 per hour from June 1, 2026, to May 31, 2028, and then from $25 per hour from June 1, 2028, until as adjusted as specified.
5. A licensed skilled nursing facility must increase the minimum wage to $21 per hour from June 1, 2024, to May 31, 2026, $23 per hour from June 1, 2026, to May 31, 2028, and $25 per hour from June 1, 2028 until as adjusted as specified. This is only effective when the patient care minimum spending requirement applicable to skilled nursing facilities is in effect.

Exceptions/Caveats

Any covered healthcare facility that is County-owned, affiliated, or operated must implement the appropriate minimum wage schedule as noted in the classification section above beginning on January 1, 2025.

1. For any covered healthcare employee who is paid on a salary basis, the employee must earn a monthly salary equivalent of no less than 150% of the healthcare worker's minimum wage or 200% of the applicable minimum wage, whichever is greater, for full-time employment to qualify as exempt from the payment of minimum wage and overtime per SB 525.
2. SB 525 provides a process for developing a waiver program that would allow a covered healthcare facility to apply for and receive a temporary pause or alternative phase in a schedule of the minimum wage requirements detailed in SB 525. This process must be developed by March 1, 2024. To obtain a waiver, healthcare facilities must demonstrate that compliance with the minimum wage requirements would raise doubts about the covered healthcare facility's ability to continue as a going concern.
3. A waiver would be solely and exclusively within the authority of the Department of Industrial Relations. Determining whether an entity demonstrates the inability to continue as a going concern is solely and exclusively within the authority of the State Department of Health Care Services.

Factors that will be considered to determine a covered healthcare facility's ability to continue as a going concern shall include the actual or likely closure of the facility, the actual or likely closure of patient services or programs, the actual or likely loss of jobs, whether the covered healthcare facility is small, rural, frontier or serves as a rural catchment area, whether closure of the covered healthcare facility would significantly impact access to services in the region or service area.

And whether the covered healthcare facility is in financial distress that results or is likely to result in the closure of the covered healthcare facility, closure of patient services or programs, or loss of jobs. All requests for waiver must be submitted in writing to the Department of Industrial Relations.

SB 525 also provides a process for the renewal of the waiver.

Governance

SB 525 would constitute the state minimum wage for covered healthcare employment under the Labor Code and Wage Orders of the Industrial Welfare Commission. The Labor Commissioner would enforce through the same means and with the same relief available for violating any other state minimum wage requirements as it currently does. 

The Department of Healthcare Access and Information will publish specific information on or before January 31, 2024, and place it on its website, including a list of hospitals that qualify under certain classifications.

Best Practices

If you are an employer in the healthcare industry, the first step is determining whether you qualify as a covered healthcare facility under SB 525. If so, you must determine which classification the facility falls under to determine the appropriate minimum wage for your employees.

The new minimum wage laws for healthcare industry employees are effective for all categories, except County-owned, on June 1, 2024. If a waiver is deemed necessary, it is important to begin collecting documentation and/or information that supports the position that a waiver is necessary so that when the Department of Industrial Relations develops the waiver program (no later than March 1, 2024), there is no delay in submitting and requesting the needed waiver.