Update: On May 31, 2024, Governor Newsom passed S.B. 828, which delays implementation of S.B. 525, the health care minimum wage law signed by Governor Newsom on October 13, 2023. S.B. 828 delays all of the minimum wage adjustments in S.B. 525 by one month. This means that S.B. 525, which was set to take effect on June 1, 2024, will instead take effect on July 1, 2024. It further means that the minimum wage increases scheduled to take place after 2024 will take place on July 1, rather than June 1, of each year.

Seyfarth Synopsis: On September 14, 2023, the California legislature passed S.B. 525, which will raise minimum wages for health care workers across the state. The bill includes five separate minimum wage schedules for covered health care employees depending on the nature, size, and structure of the employer’s business. Unless Governor Newsom vetoes the bill (which is not expected), the bill will take effect on June 1, 2024.

Grey’s Anatomy might be set in Seattle, but now it’s all eyes on California’s health care workers. Starting June 1, 2024, S.B. 525 will raise minimum wages for health care workers across the state to a minimum of $18 per hour, or up to $23 per hour, depending on the applicable wage schedule, and based on the nature, size, and structure of an employer’s operations.

From Grey Sloan Memorial Hospital To The Denny Duquette Clinic – Most Health Care Employers Are Covered

The bill’s provisions will apply to “Covered Health Care Employers,” as that term is defined under the soon-to-be newly added Labor Code sections 1182.14 and 1182.15, including:  

  • Hospitals: licensed general acute care hospitals, licensed acute psychiatric hospitals, and other special hospitals.
  • Clinics: specialty care clinics, dialysis clinics, community clinics, psychology clinics, government run clinics, rural health clinics, and urgent care clinics.
  • Psychiatric and Mental Health Facilities: mental health rehabilitation centers, county mental health facilities, and psychiatric health facilities.
  • Licensed Skilled Nursing Facilities: including those that are owned, operated, or controlled by a hospital or integrated health care delivery system or health care system.
  • Home Health Care: including licensed 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 or acute psychiatric hospital.
  • Licensed Residential Care Facilities for the Elderly
  • Integrated Health Care Delivery System Work Sites
  • Ambulatory Surgical Centers Certified for Medicare Participation
  • Physician Groups
  • County Correctional Facilities Providing Health Care Services

The term “Covered Health Care Employers” expressly excludes: (1) hospitals owned, controlled, or operated by the State Department of State Hospitals; (2) tribal clinics exempt from licensure; and (3) outpatient settings conducted, maintained, or operated by a federally recognized Indian tribe, tribal organization, or urban Indian organization.

The Scrub Nurse, The Chief, And More Are Included

The term “covered health care employee” is also defined broadly under both the new Labor Code section 1182.14 and section 1182.15 to include employees who provide patient care, health care services, or services supporting the provision of health care. Examples span from nurses and physicians to clerical workers, gift shop workers, janitors, schedulers, and billing personnel.

Contracted and subcontracted employees are also included if they:

  1. Perform contracted or subcontracted work primarily on the premises of a health care facility to provide health care services or services supporting the provision of health care;
  2. Are employed by an employer that contracts with the health care facility employer, or with a contractor or subcontractor to the health care facility employer, to provide health care services, or services supporting the provision of health care; or
  3. Perform work for a health care facility employer that directly or indirectly, or through an agent or any other person, exercises control over the employee’s wages, hours or working conditions.

Covered Health Care Employees will be able to enforce their rights under this new law through civil action, in the same manner they can currently enforce other minimum wage requirements.

The Anatomy Of Employers’ Minimum Wage Obligations

The bill includes five separate minimum wage schedules, but the minimum wage rates set forth under two of these schedules are identical. Thus, Covered Health Care Employers will fall within one of the four following groups:

1. Group 1: Covered health care facilities with 10,000 or more full-time equivalent employees, covered health care facility employers that are part of an integrated health care delivery system or health care system with 10,000 or more full-time equivalent employees, covered dialysis clinics, and covered health facilities that are 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: $23 per hour.
  • June 1, 2025 to May 31, 2026: $24 per hour.
  • June 1, 2026 to August 1, 2027: $25 per hour.

2. Group 2: Covered hospitals with high populations of Medicare/Medicaid patients, covered rural independent health care facilities, and covered health care facilities that are 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: $18 per hour with 3.5 percent increases annually.
  • June 1, 2033 to August 1, 2034: $25 per hour.

3. Group 3: Covered primary care community or free clinics that are open for limited services of no more than 40 hours a week and that are not conducted or maintained by a government entity, covered community clinics along with any associated intermittent clinics exempt from licensure, covered rural health clinics, and covered urgent care clinics that are owned by or affiliated with a community clinic.

  • June 1, 2024 to May 31, 2026: $21 per hour.
  • June 1, 2026 to May 31, 2027: $22 per hour.
  • June 1, 2027 to August 1, 2028: $25 per hour.

4. Group 4: all other covered health care facilities

  • June 1, 2024 to May 31, 2026: $21 per hour.
  • June 1, 2026 to May 31, 2028: $23 per hour.
  • June 1, 2028 to August 1, 2029: $25 per hour.

Following these minimum wage increases, the Director of Finance will calculate an adjusted minimum wage on or before August 1 of the following year, and on or before each August 1 thereafter – seemingly in perpetuity. The calculation will increase the minimum wage by 3.5% or the rate of change in the averages for the U.S. Consumer Price Index for Urban Wage Earners and Clerical Workers, whichever is lower.

Even The New Residents Might Be Entitled To A Salary Increase

Notably, the minimum wage requirements summarized above will impact a Covered Health Care Employer’s exempt California employees as well, to the extent those employees qualify as Covered Health Care Employees. These employees will have to earn a monthly salary equivalent to no less than: (1) 150% of the applicable health care worker minimum wage or (2) 200% of the State’s generally-applicable minimum wage—whichever is greater—for full-time employment in order to qualify as exempt under California’s laws.

Any Other Changes Next Season?

In one small piece of consolation to employers, the new legislation provides that no city, county, city and county, including charter cities, charter counties, or charter cities and counties can enact any ordinance, regulation, or administrative action relating to wages or compensation for Covered Health Care Employees before January 1, 2034. So, at least local ordinances won’t be weighing Covered Health Care Employers down and requiring complicated and varied compliance.

Workplace Solutions

Health care employers should reach out to the authors or your favorite Seyfarth attorney for solutions and recommendations on addressing compliance with the new Labor Code sections 1182.14 and 1182.15 before June 1, 2024.

Edited by Cathy Feldman and Coby Turner