Depending upon many different factors, a state-wide minimum wage has been established for healthcare workers in California which will be phased in over time. On October 13, 2023, Governor Newsom signed Senate Bill (SB) 525, which enacts a multi-tiered statewide minimum wage schedule for health care workers employed by certain covered healthcare facilities. The new law established 5 different minimum wage schedules depending upon the nature of the employer.

This follows several California cities attempting to implement healthcare worker minimum wages. Additionally, the City of Inglewood has enacted a city-wide healthcare minimum wage law.

Categories of Employers

Senate Bill 525 establishes a comprehensive minimum wage schedule for “covered health care employees,” outlining schedules depending on how a facility is classified.   A hospital’s classification is determined by facility size, type, location, and governmental payor mix percentage.  SB 525’s definition of “covered health facility” applies to nearly every type of health care facility except those owned, controlled, or operated by the California Department of State Hospitals, tribal clinics exempt from licensure, and outpatient settings operated by federally recognized Indian tribes.

The law applies to “covered health care employee,” which also encompasses a broad array of positions, from patient care roles like nurses and physicians to support positions such as janitors and clerical workers. The law’s coverage extends to contracted or subcontracted employees when the healthcare facility has control over their wages, hours, or working conditions.

The law, however, excludes outside salespersons, public sector employees not primarily involved in healthcare, and delivery or waste collection workers not directly employed by the healthcare facility.   

In the context of this legislation, the focus is less on whether a healthcare facility is “covered,” as most are, and more on how a facility is classified for the purpose of implementing the phased minimum wage schedules.  SB 525 creates the following four classifications of healthcare employers:

1. Large Employers and Integrated Health Systems: Covered healthcare facilities that: (1) have 10,000 or more full-time equivalent employees (FTEs); (2) are part of an integrated healthcare delivery system; and, (3) are county healthcare systems with 10,000 or more FTEs or operated by a county with a population of 5,000,000 or more, or (4) that is a dialysis clinic.   

Minimum Wage Schedule

• From June 1, 2024, to May 31, 2025: $23 per hour
• From June 1, 2025, to May 31, 2026: $24 per hour
• From June 1, 2026, until indexed to the lower of inflation or 3.5%: $25 per hour

2. Hospitals with High Government Payer Mix, Rural Independent Facilities, or County Run Facilities in Low Population Counties: Independent hospitals with elevated governmental payer mix (75% or more), hospitals with a very high governmental payor mix (90% or more), rural independent covered health care facility, or covered health care facilities owned, affiliated, or operated by a county with a population of 250,000 or less.

Minimum Wage Schedule

• From June 1, 2024, to May 31, 2033: $18 per hour, with 3.5% increases annually.
• From June 1, 2033, until indexed to the lower of inflation or 3.5%: $25 per hour
• Primary Care, Free, Community, and Rural Clinics: Primary care clinics, Free clinics not run by governmental entities, community clinics along with their associated intermittent clinics, rural health clinics, and urgent care clinics owned and operated by primary care clinics.

Minimum Wage Schedule

• From June 1, 2024, to May 31, 2026: $21 per hour
• From June 1, 2026, to May 31, 2027: $22 per hour
• From June 1, 2027, until indexed to the lower of inflation or 3.5%: $25 per hour

4. Other Covered Health Care Facilities: All other covered health care facility employers that don’t fall into the above three categories, including hospitals, skilled nursing facilities as specified, integrated delivery systems, ambulatory surgical centers, urgent care clinics, medical groups, medical foundations, county mental health facilities, and county correctional health facilities.

Minimum Wage Schedule

• From June 1, 2024, to May 31, 2026: $21 per hour
• From June 1, 2026, to May 31, 2028: $23 per hour
• From June 1, 2028, until indexed to the lower of inflation or 3.5%: $25 per hour

Appeals and Waiver Program

For a limited period of time before January 1, 2025, employers will have the ability to challenge the accuracy of the classification of covered health care employers according to the numbers of full-time equivalent employees, system affiliation, payor mix, and any other relevant information with the California Department of Health Care Access and Information.

The Department of Industrial Relations, in consultation with relevant healthcare departments, will also offer waivers to certain healthcare facilities. To be eligible for this waiver, the healthcare facility must prove that compliance with the new wage laws would put its continued operations in jeopardy. Facilities can renew their waivers 180 days before the current one expires.

State Preemption

The bill preempts local ordinances, regulations, or administrative actions that relate to wages, salary, or compensation for covered health care facility employees. Any such local laws enacted after September 6, 2023, are void and cannot be enforced.