Digital Debut

California Raises Minimum Wage for Healthcare Workers

Covered employees will make $25 an hour by 2028

BY STEPHEN ABRESCH | OCTOBER 2023

On October 13, California Governor Gavin Newsom signed SB 525 into law. The bill increases the minimum wage for healthcare employees from $15.50 to $25 over a five-year period. ASCs will see their first wage increases effective June 1, 2024.

The new law phases in minimum wage increases for “covered health care employees” in the state employed by “covered health care facility employers,” which include ASCs certified to participate in Medicare. The measure defines “covered health care employees” broadly, including employees of healthcare facilities who provide patient care, healthcare services or support services—with positions like call center, warehouse and laundry workers explicitly identified—as well as contracted or subcontracted employees who meet specified criteria. For covered employees in an ASC, the minimum wage will be $21 per hour beginning June 1, 2024, will rise to $25 per hour beginning June 1, 2028, and will be adjusted annually thereafter. For any covered healthcare employees paid on a salary basis, the bill requires a monthly salary equivalent to no less than 150 percent of the healthcare worker minimum wage or 200 percent of the state minimum wage, whichever is greater, for full-time employment to qualify as exempt from the payment of minimum wage and overtime under state law.

State Senator María Elena Durazo introduced SB 525 on February 14, 2023, and Service Employees International Union (SEIU) California sponsored it. Durazo argued that raising the minimum wage for healthcare workers would help address the state’s healthcare workforce shortage, as it would help retain staff and “help restore healthcare jobs to the status of a job a person can support a family with, attracting more workers and bolstering efforts to fill the huge shortage of healthcare workers our state is facing.”

SEIU argued during the bill’s first hearing that the proposal would address the “systematic undervaluing of care work and elevate this majority women workforce out of poverty.” The California Labor Federation also supported the measure and echoed Durazo’s position in their own comments, arguing that without the kind of stable workforce they believe the bill will deliver, California could not meet its goal of ensuring accessible, affordable and equitable healthcare to all residents.

Opponents of the measure focused on its costs. The California Hospital Association argued that the COVID-19 pandemic left many healthcare facilities in dire financial straits and unable to shoulder the burden of an increased minimum wage. Other opponents argued that the added costs would force healthcare providers to cut hours, positions and services, ultimately exacerbating the state’s workforce shortage. Some also raised concerns about how the increased minimum wage would increase the cost of care, impacting millions of state residents.

One notable early opponent of the measure was the California Nurses Association (CNA), which opposed the measure unless it was amended to exempt registered nurses (RN) from its requirements. The association argued that the bill would ultimately lower the wage floor for California RNs, who already are among the highest paid RNs in the nation and well above the $25 minimum wage included in the bill. The CNA argued that this law would encourage employers to propose reductions to wages during bargaining.

Members of the Senate Labor, Public Employment and Retirement Committee additionally flagged the overly broad definition of “covered health care employment” as an issue that was a major concern for opponents. As introduced, “covered health care employment” “could capture anything from a UPS or FedEx delivery to a DoorDash food delivery, (and) as long as it was happening on the facility premises, it would have to be compensated at the $25 minimum wage.” The definition for “covered health care employment” was replaced with the somewhat narrower “covered health care employee” near the end of the legislative process, through an amendment in the California State Assembly on September 11.

After multiple amendments and behind-the-scenes bargaining, the California Hospital Association ultimately changed its position in September and supported the bill. Based on reporting from Politico, this switch was the result of a deal brokered with SEIU in which language was added to the bill preempting any local ordinances that would increase the healthcare minimum wage further. Dialysis centers secured a separate deal and dropped their opposition when SEIU agreed to stop seeking dialysis industry regulation through legislature or the ballot process for the next four years.

When SB 525 reached the governor’s desk on September 26, uncertainty still prevailed over whether Newsom would sign or veto it. He has pushed back against labor proposals over budgetary concerns and the potential impacts on the competitiveness of the state’s economy. A July 12 fiscal analysis from the Assembly Committee on Labor and Employment that showed fiscal impact estimates from the California Department of Human Resources and the Medi-Cal (Medicaid) program at billions of dollars annually and hundreds of millions of dollars annually, respectively, did little to allay those concerns.

In the end, though, Newsom got past his reservations and signed the bill into law.

Write Stephen Abresch with any questions.