On October 13, 2023, California Governor Gavin Newsom signed into law Senate Bill 525, codifying Labor Code sections 1182.14 and 1182.15.  The new law establishes five separate minimum wage schedules for all health care employees that will become effective June 1, 2024.  The wage schedule departs from the general statewide $15.00 per hour minimum wage applicable to other hourly paid employees, except for restaurant workers who also recently received a minimum wage increase.

The law classifies covered health care employers as “covered health care facility employer with 10,000 or more full-time equivalent employees” or a “hospital with a high governmental payor mix,” among others, and applies different wage schedules to these classifications.  “Covered Health Care Facilities” includes the following:  facilities or work sites that are part of an integrated health care delivery system; acute care hospitals; acute psychiatric hospitals; licensed skilled nursing facilities if owned, operated or controlled by a hospital or integrated health care delivery system or health care system; licensed home health agencies; licensed rehab clinics; physician group practice offices who provide services to members of a group practice prepayment health care service plan; community clinics; rural health clinics; ambulatory surgical centers certified to participate in Medicare; and physician groups.

The minimum wage for health care employees working for a covered health care facility with 10,000 or more full-time equivalent employees or a covered healthcare facility part of an “integrated health care delivery system” will be $23.00 per hour starting June 1, 2024 to May 31, 2025, with an annual $1.00 raise, and ends at $25.00 per hour after June 1, 2026.  Whereas the minimum wage for a rural independent covered health care facility or a hospital with a “high governmental payor mix” will be $18.00 from June 1, 2024, with a 3.5% increase annually until June 1, 2033, when the wage increases to $25.00 an hour.  Further, the law applies not only to employees providing patient care but also covers janitors, housekeeping staff, clerical workers, food service workers, among others. 

SB 525 also modifies exemption requirements for salaried healthcare employees.  To qualify as exempt from minimum wage and overtime laws, the employee must earn the greater of at least 150% of the applicable health care worker minimum wage or 200% of the statewide minimum wage.

Health care employers should be aware that by January 31, 2024, the Department of Health Care Access and Information will publish on its website the classifications of covered health care facilities.  Health care facilities may file a request with the Department challenging their exclusion from the list of health care facilities subject to a lower wage schedule, i.e., a hospital with a high governmental payor mix, an independent hospital with an elevated governmental payor mix, or a rural independent covered health care facility.  The Department will no longer accept reclassification requests after January 31, 2025.

Certain covered health care facilities such free clinics, community clinics, rural health clinics, or urgent care clinics associated with a community or rural health clinic may apply for a waiver to the new wage schedules.  By March 1, 2024, the Department of Industrial Relations, in collaboration with the State Department of Health Care Services and the Department of Health Care Access and Information must develop a waiver program.