Seyfarth Synopsis: On April 28, 2020, Mayor London Breed announced a plan to allow employees working in San Francisco to use funds from the Healthcare Security Ordinance (“HCSO”) contributions to buy “necessary expenditures,” including food, rent, and utilities during the COVID-19 pandemic. Previously, use of these funds were limited to eligible health care expenses. Now, Mayor Breed’s announcement unlocks over $138 million for disbursement to employees who may now use the funds to meet their essential needs.

San Francisco’s Healthcare Security Ordinance

Employers with employees working in San Francisco likely are already aware of San Francisco’s many peculiarities, including the HCSO, which requires most employers to make healthcare expenditures on behalf of certain employees based on the number of hours the employee works in the City. As an alternative to contributing to health insurance coverage, employers may instead contribute healthcare expenditures to Medical Reimbursement Accounts (MRAs), through the SF City Option Program. Employees then can withdrawal funds from their MRA to cover medical expenses and other healthcare needs. According to the Mayor’s announcement, the MRAs currently have $138 million in available, unused funds that employers have contributed over the years.

Mayor Breed’s Plan To Expand Use Of MRA Funds To Pay For Basic Expenses

Citing the need to “protect public health” and “making sure people have enough to eat, have a roof over their head, and have the peace of mind that they’ll be able to pay their bills,” Mayor Breed’s declaration permits employees to withdraw funds deposited in their name to use for basic expenses, including food, rent and mortgage payments, and utilities during the COVID-19 pandemic.

Workplace Solutions

While the announcement says the SF City Option Program will contact eligible employees about how to withdraw funds, employers may also inform their employees that they may be eligible to request a disbursement of funds that were previously made in their name.  This can be done by providing a copy of the announcement, or pointing employees to the SF City Option’s website.

Regardless of how the expenditures may be used, the announcement nonetheless confirms the HCSO, along with every other San Francisco labor law, remains in effect during San Francisco’s shelter-in-place. Employers still must contribute the appropriate amount of healthcare expenditures on behalf of their covered employees. Likewise, employers are not likely to receive any leniency from the City in failing to make these expenditures during the emergency.

The HCSO is a particularly tricky ordinance to satisfy and there are a number of pitfalls that can trip up even the most diligent employer, leading to a costly audit and potential assessment of penalties from the Office of Labor Standards Enforcement. If you would like assistance with a review of your compliance with the HCSO or representation in audit proceedings, please feel free to contact one of Seyfarth’s attorneys.

Edited by Coby Turner