California Governor Gavin Newsom has recently enacted significant changes to minimum wage regulations for healthcare workers through the signing of Senate Bill 525. Set to take effect on June 1, 2024, SB 525 will impact a broad spectrum of healthcare employees and facilities throughout California.

SB 525 will introduce a tiered minimum wage structure designed specifically for healthcare workers employed in covered health facilities. A "covered health facility" is broadly defined, excluding only those owned, controlled, or operated by the California Department of State Hospitals, specific tribal clinics, and outpatient facilities.

Under the new law, a maze of distinct minimum wage schedules for covered healthcare employees are outlined based on facility type, with variations based on the nature, size, and structure of the employer's facility. 

1. Large Health Systems, Dialysis Clinics, County Facilities (Population 5 million+):

• $23.00 per hour from June 1, 2024
• $24.00 per hour from June 1, 2025
• $25.00 per hour from June 1, 2026

2. Hospitals with High Medicare/Medicaid Populations, Rural Facilities, County Facilities (Population <250,000):

• $18.00 per hour from June 1, 2024, with a 3.5% annual increase
• $25.00 per hour from June 1, 2033

3. Free Clinics, Community Clinics, Urgent Care Clinics, Rural Health Clinics, Skilled Nursing Facilities (with spending requirement):

• $21.00 per hour from June 1, 2024
• Incremental increases from June 1, 2026, based on facility type

4. All Other Healthcare Facilities:

• $21.00 per hour from June 1, 2024
• $23.00 per hour from June 1, 2026
• $25.00 per hour from June 1, 2028

The scope of "covered healthcare facilities" will include medical hospitals, psychiatric hospitals, skilled nursing facilities, home health agencies, and a patient's home when healthcare services are provided by an entity owned or operated by a general acute care hospital.

SB 525 will also apply to a diverse range of positions, encompassing patient care roles such as nurses and physicians, as well as support positions like janitors and clerical workers, collectively referred to as "covered health care employees." 

Exceptions to covered healthcare employees will include outside salespersons, public sector employees whose primary duties are not healthcare services, individuals engaged in delivery or waste collection work, and providers of medical transportation services.

Notably, SB 525 will encompass independent contractors if there is a contractual arrangement with the healthcare facility for healthcare services or services supporting healthcare provision, and the healthcare facility exercises control over the contractors' wages, hours, or working conditions.

SB 525's wage increases, effective June 1, 2024, are anticipated to result in approximately a 3% increase in operating costs for employers. Given the complex framework of this new law, we recommend all healthcare employers seek legal counsel for guidance on how best to assess the applicability of SB 525 to their specific facility type and to carefully review existing policies to prepare for the forthcoming minimum wage adjustments.