Original Publish Date: January 16, 2024
Governor Gavin Newsom signed California Senate Bill 525 (CA SB 525) on October 13, 2023, rolling out a new minimum wage standard for health care workers. CA SB 525 impacts most California health care employees and facilities, setting the new standard at $25 per hour, increasing wages up to 30% beginning June 1, 2024.
Impacted Health Care Employees—and Employers
CA SB 525 sets a new salary threshold for exempt health care employees. This legislation will have broad-reaching impacts on California health care employers, whether or not they’re directly subject to these requirements, as salary expectations will increase for the entire market.
Covered employees, per CA SB 525, are those providing patient care and services supporting providing health care, or members of a health care team including certified nursing assistants, technicians, patient aides, food service workers, housekeeping, medical coders and billers, schedulers, laundry workers, and more—including contract workers. The expansive definition is designed to combat the shortage of health care workers in the state of California.
Employees Not Covered
Outside salespeople, public sector employees who don’t perform health care services, delivery or waste collectors not covered by a health care facility, and medical transport service workers who aren’t employed by a covered health care facility are among workers who don’t qualify.
Impact on Employers
Nearly all health care employers will be required to implement these new minimum wage standards except hospitals controlled by the California Department of State Hospitals, Tribal clinics exempt from licensure, and outpatient settings operated by Tribal organizations.
This law also limits a health care employer’s ability to meet the salary threshold required for most exemptions from overtime pay and minimum wage. Employers can avoid paying the new minimum wage and overtime to salaried employees earning a monthly salary that’s no less than 150% of the health care worker minimum wage or 200% of the applicable minimum wage, whichever is greater, for full-time employment.
By June 2026, most salaried health care employees must be making $78,000 annually to be exempt from the new minimum wage and overtime pay requirements.
The California Department of Health Care Access and Information will publish a list of all covered employers in January 2024. If employers believe they are erroneously listed, they can appeal or apply for a waiver.
Covered Health Care Employers
Integrated Health Care Delivery Systems and Hospitals
Integrated delivery or health care systems with 10,000 or more full-time equivalent employees as of January 1, 2023, will increase the minimum wage in stages starting at $23 per hour in June 2024, graduating to $25 per hour by 2026. After 2026, the minimum wage will increase according to the rate of inflation or 3.5%, whichever is lower.
Facilities Where Increase Applies
Rural or Independent Hospitals, Clinics, and County-Run Facilities
Rural and independent hospitals with a high or elevated governmental payor mix, or entities operated by counties with less than 250,000 residents as of January 1, 2023, will see a longer process. These employees will have a new minimum wage starting at $18 per hour in 2024. Every year, this minimum wage will increase by 3.5% yearly until it reaches $25 per hour in 2033. This applies to psychology clinics, specialty care clinics, and dialysis clinics.
Covered facilities that are owned, affiliated, or operated by a county will be required to start complying with the minimum wage schedule beginning January 2025.
SNFs, Home Health Care Services, and Others
For other health care facilities that don’t fall in the above categories, including licensed SNFs owned, operated, or controlled by a hospital or health care system, the new minimum wage will start at $21 per hour in 2024, increasing to $23 per hour in 2026, until it reaches $25 per hour on June 1, 2028.
Waivers and Alternative Phase-in Schedules
Health care employers seeking a waiver or requesting an alternative phase-in schedule need to demonstrate that compliance with these standards would raise considerable doubts about the covered health care facility’s ability to continue as a going concern under generally accepted accounting principles (GAAP).
This includes documenting the covered health care facility’s financial condition, the condition of any parent or affiliated entity, and evidence of the actual or potential direct financial impact of compliance.
The following must also be specifically addressed when requesting a waiver regarding the covered facility or affiliated entities:
Factors to consider in determining financial distress include, covered health care facility’s prior and projected performance on financial metrics, like cash on hand, or if the covered health care facility has, or is, projected to experience negative operating margins.
Minimum Wage Requirements Effective Dates
Georgia has worked in the health care industry since 2011. She provides consulting services to health care providers and payers. She helps clients evaluate and integrate value-based care models, including the Medicare Shared Savings Program. Georgia’s experience includes strategic analysis, program design, budgeting, contracting, waiver development, training, compliance, quality reporting, and performance improvement.
Pat Oungpasuk has worked in both hospital consulting and health policy. She can be reached at firstname.lastname@example.org or (925) 952-2528.
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