As we previously reported here, nearly all health care facilities in California will soon 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. The increased health care minimum wage was set to go into effect on June 1, 2024; however, on May 31, 2024, Governor Newsom signed SB 828, which provided for a one month delay, to July 1, 2024. Now, there is a further delay after Governor Newsom and state legislators came to an agreement to delay implementation of the increased health care minimum wage until October 15, 2024 (possibly until January 1, 2025) upon passage of AB 159.
On June 29, 2024, Governor Newsom signed AB 159, which indicates the increased health care minimum wage would go into effect on October 15, 2024, contingent on the state bringing in at least 3% more revenue from July 1, 2024 through September 30, 2024 than the Newsom administration expected at the time of the enactment of the 2024 Budget Act. If the state does not reach that benchmark, the wage increases will take effect the sooner of January 1, 2025 or 15 days after the Department of Health Care Services has notified the Legislature that it initiated the data retrieval necessary to implement an increase to hospital quality assurance fee revenues for the program period beginning on January 1, 2025 (the “notification date”). The California Division of Labor Standards Enforcement recently released FAQs, which provide further information, including which health care employers and employees may be affected by the health care minimum wage increase.
Pursuant to AB 159, each wage increase will occur as follows:
- Health care facilities that employ 10,000 or more full-time employees: Covered health care employees must be paid at least $23/hour beginning on October 15, 2024, or the sooner of January 1, 2025 or 15 days after the notification date (depending on what transpires with revenue and funding as noted above). Thereafter, the minimum wage will increase by $1/hour on July 1 each year, ultimately reaching $25/hour on July 1, 2026. Starting January 1, 2028, the minimum wage will increase annually (on January 1) at the lesser of 3.5% or the Consumer Price Index.
- Hospitals with a high or elevated governmental payor mix, and rural independent health care facilities: Beginning on October 15, 2024, or the sooner of January 1, 2025 or 15 days after the notification date (again, depending on what occurs with revenue and funding), covered health care employees must be paid at least $18/hour. Thereafter, the minimum wage increases on July 1 each year by 3.5%, reaching $25/hour on July 1, 2033. Starting January 1, 2035, the minimum wage will increase annually (on January 1) at the lesser of 3.5% or the Consumer Price Index.
- Clinics: Beginning on October 15, 2024, or the sooner of January 1, 2025 or 15 days after the notification date (depending on what occurs with revenue and funding), and continuing to June 30, 2026, covered health care employees must be paid at least $21/hour. Between July 1, 2026 and June 30, 2027, these employees must be paid at least $22/hour. And starting on July 1, 2027, these employees shall be paid at least $25/hour. Starting January 1, 2029, the minimum wage will increase annually (on January 1) at the lesser of 3.5% or the Consumer Price Index.
- Other health care facilities: Beginning on October 15, 2024, or the sooner of January 1, 2025 or 15 days after the notification date (again, depending on the revenue and funding contingencies noted above), and continuing to June 30, 2026, covered health care employees must be paid at least $21/hour. Between July 1, 2026 and June 30, 2028, these employees must be paid at least $23/hour. And starting on July 1, 2028, these employees shall be paid at least $25/hour. Starting January 1, 2030, the minimum wage will increase annually (on January 1) at the lesser of 3.5% or the Consumer Price Index.
Takeaways
While there is a delay in the effective date of the increased health care minimum wage until at least October 15, 2024, this should not deter health care employers from analyzing now whether they are appropriately classifying themselves and their workers to determine which category of minimum wage increase will apply to them. Health care employers should review the FAQs and consult with their legal counsel to ensure they are prepared for these changes in the coming months.
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