Last fall, California enacted Senate Bill 525, which substantially raises the base minimum wage for health care workers over time to $25 per hour.  The first incremental increase above the general state minimum wage was scheduled to occur on June 1, 2024.  However, there were several delays and amendments to the law due to its impact on the California budget.  After the last delay in late June, health care employers did not have a clear answer to when they would be required to pay the higher minimum wages: the increase requirement could start as early as October 15, 2024, but no later than January 1, 2025.

On October 1, 2024, the California Department of Health Care Services (DHCS) took action that triggered October 16^th as the deadline for the first wage increase.  The rate of increase required on October 16th varies depending on the type of employer, its associations, and the number of employees it has.  As a part of this process, the California Department of Industrial Relations released FAQs to assist employer in complying with the increase. 

Which Heath Care Facilities Are Covered?

Covered employers include:

• Facilities or other work sites that are part of an integrated health care delivery system;
• Licensed general acute care hospitals;
• Licensed acute psychiatric hospitals;
• Special hospitals;
• Licensed skilled nursing facilities, if owned, operated, or controlled by a hospital or integrated health care delivery system or health care system;
• Patients’ homes when health care services are delivered by an entity owned or operated by a general acute care hospital or acute psychiatric hospital;
• Licensed home health agencies;
• Most clinics;
• Licensed residential care facilities 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 a general acute care hospital or acute psychiatric hospital;
• Psychiatric health facilities for those persons whose physical health needs can be met in an affiliated hospital or in outpatient settings;
• Mental health rehabilitation centers;
• Community clinics, intermittent clinics, or certain publicly operated clinics (except as exempted);
• Rural health clinics;
• Urgent care clinics;
• Ambulatory surgical centers;
• Physician groups;
• County correctional facilities that provide health care services; and
• County mental health facilities.

Notable Amendments from Original Law

The original law has undergone several amendments since it was initially enacted.  The following are notable changes:

• Initially, other than dialysis clinics, only those health care facilities that were required to report annual financial data to the Department of Health Care Access and Information and had 10,000 or more employees were included in the category of employers with accelerated wage increases.  The statute has been amended so that the accelerated schedule applies also to “any covered health care facility employer that does not report annual financial data to the Department of Health Care Access and Information, but had 10,000 or more full-time equivalent employees as of January 1, 2022.”
• The entities excluded from the minimum wage raises now include all state or state agency health care facilities (except for the University of California and health care districts).
• Contracted employees are covered only if more than half of their work time in a workweek is spent on the premises of a covered health care facility.  Also, the contracted employees shall be paid the applicable minimum wage only for those hours worked providing patient care, health care services, or services supporting the provision of health care.
• The waiver program for certain covered health care employers that believe they cannot comply with the law’s requirements has been completely revised; health care employers applying for a waiver must now submit parent and/or affiliated company financials as part of the waiver application. 

What Should Covered Employers Do Now?

• If they have not already done so, advise employees of the new rates by, among other potential methods, issuing Labor Code section 2810.5 Notices within seven days of the change if necessary.
• Provide management and human resources departments with talking points regarding the wage rate changes.
• Determine whether exempt employee salaries must be increased to meet new overtime salary exemption thresholds.
• Analyze whether other exemptions from overtime pay, including those applicable to workers governed by a collective bargaining agreement, remain applicable.
• Appeal or apply for a waiver, if needed.