On June 1, 2024, nearly all health care facilities in California will be required to increase the minimum wage paid to health care workers, ranging anywhere from $18 per hour up to $23 per hour depending on the type of health care facility. Below we address the key questions these facilities should be asking to evaluate their current and future compliance with this new law.

Is your entity a covered health care facility?

Almost all health care facilities in California are covered, including general acute care hospitals, psychiatric hospitals, integrated health care delivery systems, urgent care clinics, physician groups, skilled-nursing facilities that are owned, operated or controlled by a hospital or integrated health care delivery system, dialysis clinics, surgical clinics, outpatient clinics, and even a patient’s home when health care services are being provided by an entity owned or operated by a general acute care hospital or acute psychiatric hospital. There are very few health care facilities excluded from coverage. These include hospitals owned, controlled or operated by the Department of State Hospitals and certain tribal clinics.

Does your covered health care facility have employees subject to the new minimum wage?

Like a “covered health care facility,” a “covered health care employee” is also defined broadly and is not limited to employees performing patient care services. A person is a covered health care employee if they are an employee of a facility that provides patient care, health care services, or other services supporting the provision of health care. This includes not only patient care employees such as nurses, physicians, caregivers, medical residents, interns, and fellows, but also employees providing support services to the provision of health care, such as janitors, housekeepers, groundskeepers, guards, clerical workers, nonmanagerial administrative workers, food service workers, gift shop workers, technical and ancillary services workers, medical coding and medical billing personnel, schedulers, call center and warehouse workers, and laundry workers. Additionally, contracted and subcontracted workers and temporary service workers contracted through a temporary services employer may also be covered if the health care facility is controlling their wages, hours, or working conditions, or the worker is performing work primarily on the premises of the facility to provide health care services or services supporting the provision of health care. 

There are very few workers who are excluded from the definition of a covered health care employee. These include those employed as outside salespersons, those who perform work in the public sector where the primary duties performed are not health care services, those who perform delivery or waste collection work if certain requirements are met, and those who perform medical transportation services if certain requirements are met.

What is the new minimum wage for your covered health care employees?

Under the new law, health care facilities are divided into the following four categories: (1) health care facilities that employ 10,000 or more full-time employees; (2) hospitals with a high or elevated governmental payor mix, and rural independent health care facilities; (3) clinics; and (4) other health care facilities. The applicable minimum wage depends upon which type of health care facility employs the workers.

• With respect to health care facilities in the first category, covered health care employees must be paid at least $23/hour beginning on June 1, 2024. Thereafter, the minimum wage will increase by $1/hour annually, ultimately reaching $25/hour on June 1, 2026. Starting January 1, 2028, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.
• For health care facilities in the second category, beginning June 1, 2024, covered health care employees must be paid at least $18/hour. Thereafter, the minimum wage increases annually by 3.5%, reaching $25/hour on June 1, 2033. Starting January 1, 2035, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.
• With respect to health care facilities in the third category, beginning June 1, 2024, and continuing to May 31, 2026, covered health care employees must be paid at least $21/hour. Between June 1, 2026 and May 31, 2027, these employees must be paid at least $22/hour. And starting on June 1, 2027, these employees shall be paid at least $25/hour. Starting January 1, 2029, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.
• For health care facilities in the fourth category, beginning June 1, 2024, and continuing to May 31, 2026, covered health care employees must be paid at least $21/hour. Between June 1, 2026 and May 31, 2028, these employees must be paid at least $23/hour. And starting on June 1, 2028, these employees shall be paid at least $25/hour. Starting January 1, 2030, the minimum wage will increase annually at the lesser of 3.5% or the Consumer Price Index.

Health care facilities should review the Department of Health Care Access and Information page to determine which of the above categories applies to them. Importantly, health care facilities in the first category include both individual facilities with 10,000 or more full-time employees, as well as health care facilities that are part of a health care system that collectively employs 10,000 or more full-time employees. Those who believe they have been misclassified must file a request to be reclassified with the Department no later than January 31, 2025.

What if you have covered health care employees who are exempt, salaried workers?

Health care employees paid on a salary basis shall be paid a salary of no less than 150% of the applicable health care minimum wage, or 200% of the generally applicable state minimum wage per Labor Code Section 1182.12, whichever is greater. For health care facilities in the first category above, employees must make at least $71,760 annually (i.e., 1.5x health care minimum wage of $23/hour) to be considered exempt in 2024. On the other hand, health care facilities in the second, third and fourth categories must pay employees at least $66,560 annually (i.e., 2x the state minimum wage of $16/hour) to be considered exempt in 2024. It is important for health care employers to check this amount annually to ensure all exempt employees are satisfying the salary basis test.

What if a local government creates a higher minimum wage for covered health care employees?

SB 525 prevents a local government from passing a higher minimum wage for covered health care employees through January 1, 2034. However, a local government may pass a higher minimum wage that would apply uniformly to all employees (including non-health care employees) across all industries at any time, and that higher minimum wage would apply.

Can you seek a waiver from the new minimum wage?

Certain covered health care facilities may be able to seek a waiver of the minimum wage increase from the Department of Industrial Relations. However, the facility will be expected to demonstrate that compliance with the new law would raise doubts about its ability to continue to operate.

Takeaways

In light of this convoluted new law, health care employers should consult legal counsel to ensure that they are appropriately classifying themselves and their workers, as this determination will drive the type or category of minimum wage increase that will apply to them. Once it is determined which minimum wage increase applies, health care employers should continue to work with their counsel to implement a compliance plan as necessary before June 1, 2024. Health care employers may also consider whether they qualify for a waiver, and should be cognizant of the timing of each wage increase in the coming years.

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