Seyfarth Synopsis: Businesses at the San Francisco International Airport (SFO) may need to make significant changes to employee health benefits under San Francisco’s Healthy Airport Ordinance by April 1, 2021. These FAQs cover employers’ most-pressing questions regarding the Ordinance and its implications for employers.

The seatbelt sign has been on for San Francisco employers for quite some time. Loyal readers know the City of San Francisco’s long and storied history of passing peculiar ordinances imposing obligations upon employers that neither federal nor state laws mandate.

Even though SFO is beyond the boundaries of the City and County of San Francisco (fun fact: SFO is located in San Mateo County), geographical realities have not stopped the City from making the trip bumpy for employers with SFO workforces. For example, San Francisco’s longstanding Health Care Accountability Ordinance (HCAO) requires most employers to make healthcare expenditures on behalf of certain employees who work in the City and at SFO.

On November 10, 2020, San Francisco’s Board of Supervisors shook things up again by unanimously passing yet another COVID-related ordinance: the Healthy Airport Ordinance. This Ordinance amends the HCAO to require employers of employees covered by the Quality Standards Program at SFO to either (a) provide family health insurance at no cost to those employees or (b) contribute to a Medical Reimbursement Account at the City on the employees’ behalf at a rate of $9.50 per hour worked.

Compliance with this new Ordinance will not be a smooth ride. Providing the benefits under the Ordinance is expected to result in significant administrative complications associated with employee health benefits and major cost increases, adding another layer of complexity and costs for managing employees working at SFO. Below we hope to answer some questions that might be flying through your head.

Which employees are covered under the Ordinance?

The Healthy Airport Ordinance applies to employees covered by SFO’s Quality Standards Program (QSP). This Resolution required the implementation of minimum standards for hiring, training, performance management, and compensation and benefits for employees covered by the QSP.

QSP-covered employees are those who either (1) require Airport Badge issuance with Airfield Operations Area (AOA) access, and work in and around the AOA to perform their job duties or (2) are directly involved in passenger and facility security or safety (e.g., checkpoint screenings, passenger check-ins, and skycap and baggage check-in and handling).

What health care benefits must employers provide to covered employees?

Employers of QSP-covered employees must choose to either provide them with no-cost family health insurance (including coverage for their dependents) or pay $9.50 per hour (up to $380 per week) on behalf of the employee to the City Option Program.

To comply with the family health insurance requirement, benefits must (1) be offered at no cost to the covered employee, (2) be actuarially equivalent to at least 90% of the full actuarial value of the benefits provided, (3) include all benefits listed in California’s Essential Health Benefit Benchmark Plan, and (4) be offered to covered employees within 30 days of their start date.

Can compliance requirements be waived?

A covered employee may voluntarily waive an offer of health plan benefits by providing proof of a current health plan coverage, including coverage for their dependents, and completing the Voluntary Waiver Form.

Compliance requirements cannot be waived in a collective bargaining agreement. It will be important for unionized employers to carefully consider whether they can unilaterally impose changes to comply with the Ordinance without bargaining with their unions. Employers also may want to consider whether they can avail themselves of any labor law-related preemption arguments with respect to their labor contracts.

When must employers begin to comply with the Ordinance?

Originally, employers had to either provide family health insurance by March 21, 2021 or contribute to the City Option Program by April 15, 2021. A proposed amendment to the ordinance delays the deadline for health insurance coverage to April 1, 2021.

How would the ordinance change if the proposed amendment is enacted?

Supervisor Rafael Mandelman’s proposed amendment would (i) delay health benefit requirements until April 1, 2021, (ii) allow employers offering multiple health benefit plans to charge a limited share of premium costs on more expensive plans, and (iii) clarify who must be covered by the family health benefits offered under the ordinance.

Pending enactment, the San Francisco Office of Labor Standards Enforcement (OLSE)—the agency that enforces labor laws—does not intend to take enforcement action regarding health plans that are consistent with this proposed amendment (e.g., employers complying by April 1).

What is the penalty for non-compliance?

The OLSE has the right to charge an employer the amount owed plus annual interest of 10% from the date payment was due and liquidated damages, in addition to any other rights or remedies available under the terms of any employer agreement or applicable law.

Workplace Solutions

To ensure safe landings in an atmosphere featuring potentially turbulent penalties, employers with SFO workforces should review their benefit plans immediately to create a compliance plan. If you need help complying with the Healthy Airport Ordinance or any other ordinance affecting employers in San Francisco or at SFO, or in responding to an OLSE audit, please feel free to contact a Seyfarth attorney.

Edited by Michael Wahlander