New Minimum Wage for Healthcare Workers Delayed Due to Concerns Over Impact on California Budget

The minimum wage bump for fast food workers that went into effect in California last April was not the only wage hike targeted to a specific group of employees. The state also passed a law to raise the minimum wage for healthcare workers. This law was slated to go into effect on June 1, but implementation was delayed at the last minute due to concerns about the new wage on the state’s budget. Read on to learn about the status of healthcare worker wages and if and when they can expect to see a rise in wages. If you are a Bay Area employer or employee with questions about the minimum wage, overtime, and other California wage and hour issues, contact attorney Richard Koss to speak with a knowledgeable and experienced San Francisco employment law attorney.

What Was the New Law Supposed to Do?

Even before Senate Bill 525 was passed last October, it went through a round of revisions that slowed the raise promised to healthcare workers. When first introduced, SB 525 was set to raise the minimum wage to $25 per hour, effective June 1 of this year. By the time the legislation reached the governor’s desk, however, the legislature had adopted a gradual phase-in that raised the minimum wage little by little depending on the size of the employer, the type of facility, its geographic location, and governmental payor mix. Although some wage increases would still start in June of this year, healthcare workers might not see $25 an hour until 2026, 2027, 2028, or even 2033. On top of that, the law also allowed for waivers, pauses, and alternative phase-in schedules for employers who could demonstrate a need.

SB 525 also raised the salary basis required to meet the white-collar exemption from overtime for healthcare workers, meaning fewer employees would be exempted than previously.

Why Was It Delayed?

Concerns about the consequences of a higher wage for healthcare workers on the state budget have so far delayed its implementation. Most minimum wage increases have no negative impact on the state budget, as the cost is borne by private employers for the most part. If anything, a rise in the minimum wage generates more revenue for the state in the form of increased payroll taxes (and more income tax to a lesser extent). However, the same metric does not apply when it comes to healthcare workers. A great many healthcare workers are employed at state hospitals, clinics or other medical facilities where patients are reimbursed through Medi-Cal. Therefore, the state as employer foots the bill for thousands of healthcare worker payrolls.

The minimum wage increase for healthcare workers as enacted was expected to cost the state four billion dollars. That might sound like a small portion of the state’s budget which exceeded $450 billion last year, but unfortunately, the state was already projecting to run a deficit of $28 billion this year, making $4 billion for healthcare workers too big a pill to swallow. A nearly $300 billion spending plan for the coming year reflects the state’s serious attempts to bridge that funding gap and balance the budget.

Raises for Healthcare Workers: Where Are They Now?

Although Governor Newsom signed SB 525 last October, he went to the legislature in January of this year requesting the institution of a trigger mechanism to condition the annual schedule increases on the basis of the availability of funds every year.

By the time the June 1 date rolled around for the first phase of increases, the effective date of the law had been pushed off to July 1. Before that could come to pass, however, the Governor and Democratic leaders in the legislature agreed to a new budget bill that put off the first wave of raises until October 15. And that date will be realized only if the state brings in three percent or more in revenue than forecast or is able to secure additional federal funding to offset some of the costs associated with the raise. Otherwise, the first round of increases won’t happen until January 1, 2025. But they will happen eventually. Maybe.

Help With Minimum Wage Violations and Employment Discrimination in San Francisco

If you are an employee or employer in the Bay Area facing legal issues related to California minimum wage or maximum hour laws, or if you have been discriminated against or retaliated against at work for exercising your legal rights, contact employment law attorney Richard Koss for help. Call 650-722-7046 on the San Francisco Peninsula or 925-757-1700 in the East Bay.