What are the requirements for employers under the San Francisco, Calif., Health Care Security Ordinance?

San Francisco's Health Care Security Ordinance (HCSO) requires covered employers to spend a minimum amount of money on health care benefits for their covered employees. The following obligations must be met:

• Satisfy the employer spending requirement by making required health care expenditures on a quarterly basis on behalf of all covered employees (those who have been employed for more than 90 days and who regularly work at least eight hours per week in San Francisco).
  
• Maintain records sufficient to establish compliance with the employer spending requirement.
• Post an HCSO Notice in all workplaces with covered employees.
• Submit an Annual Reporting Form to the Office of Labor Standards Enforcement (OLSE) by April 30th of each year.

Source: Office of Labor Standards Enforcement

Covered Employers

An employer need not be physically located in San Francisco to be a covered employer. The ordinance defines a covered employer as any medium or large for-profit company engaging in business within the city and county of San Francisco that is required to obtain a valid San Francisco business registration certificate from the San Francisco Tax Collector's office or, in the case of a nonprofit corporation, an employer for which an average of 50 or more persons per week perform work for compensation during a quarter. Medium businesses are those for which an average of between 20 and 99 persons per week perform work for compensation during a quarter, and large businesses are those for which an average of 100 or more persons per week perform work for compensation during a quarter. Small businesses are not covered employers and are exempt from the health care spending requirements.

When determining employer size, all employees performing work for compensation during a given week must be counted, regardless of whether the employees work in San Francisco.

For businesses with a fluctuating number of employees, employer size is determined based on the average number of employees per week performing work for compensation during an applicable quarter.

For more information, see Covered Employers.

Covered Employees

Generally, a covered employee is any person who works for a covered employer, is entitled to be paid minimum wage, has been employed by the employer for at least 90 days and performs at least eight hours of work per week in San Francisco.

The definition of employee under the ordinance includes all employees, even if they are temporary, part-time, commissioned or contracted.

Work performed by an employee who lives in San Francisco and works from home is considered work performed within San Francisco.

Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco; however, if an employee's job requires him or her to make stops in San Francisco (e.g., deliveries), the employee is considered to have performed work in San Francisco. For these employees, hours worked include travel within the geographic boundaries of San Francisco.

There are five exemptions to the general definition of covered employees:

1. Employees who voluntarily waive their right to have their employers make Health Care Expenditures for their benefit.
2. Employees who qualify as managers, supervisors, or confidential employees AND earn more than the applicable salary exemption amount.
3. Employees who are eligible for Medicare or TRICARE (the health care program serving Uniformed Service members, retirees and their families). In order to claim these exemptions, an employer must be able to document employee eligibility.
4. Employees who are employed by a non-profit corporation for up to one year as trainees in a bona fide training program consistent with federal law.
5. Employees who receive health care benefits pursuant to the San Francisco Health Care Accountability Ordinance (HCAO).
   

See Covered Employees.

Health Care Expenditures

Under the HCSO, covered employers must make certain required health care expenditures for each covered employee to, or on behalf of, the employee each quarter. A health care expenditure (HCE) is any amount paid by a covered employer to its covered employees, or to a third party on behalf of its covered employees, for the purpose of providing health care services to, or reimbursing the cost of such services for, its covered employees. For example, an HCE may be a payment for health insurance premiums or a contribution to a health care savings or reimbursement account.

The required health care expenditure for a covered employer is calculated by multiplying the total number of hours paid for each of the employer's covered employees during the quarter (including only hours starting on the first day of the calendar month following 90 calendar days after a covered employee's date of hire) by the applicable health care expenditure rate. These rates are adjusted annually. Current rates are available from the Office of Labor Standards Enforcement.

Note that hours paid include both hours for which a person is paid wages for work performed within San Francisco and hours for which a person is entitled to be paid wages, including, but not limited to, paid vacation hours, paid time off and paid sick leave hours, not exceeding 172 hours in a single month or 516 hours in a single quarter.

Notice

Businesses with 20 or more employees and nonprofits with 50 or more employees must post the official HCSO notice at every workplace or job site where a covered employee works in a language the employee can read. The notice is updated with new rates annually and is available from the Office of Labor Standards Enforcement.

Record Keeping

Covered employers are required to keep the following records for a period of four years from a covered employee's date of employment:

• Itemized pay statements, as mandated by California Labor Code Section 226.
• The employee's address, telephone number and date of first day of work.
• Records sufficient to establish compliance with the employer spending requirements of the ordinance.
• A signed Employee Voluntary Waiver Form for every employee for whom a covered employer seeks to claim an exemption from the Employer Spending Requirement.
• A copy of the Employer Notice to Employee of Payment to the City, where applicable.

Employers must allow the Office of Labor Standards Enforcement reasonable access to such records.

See Employer Recordkeeping Requirements.

Reporting

Covered employers must provide information to the city regarding their health care expenditures by April 30th of each year. The information must be reported online at the Office of Labor Standards Enforcement website.

Discrimination and Retaliation

The ordinance makes it unlawful for any employer to retaliate against any person exercising rights under the ordinance. Taking an adverse action against any person within 90 days of the person's exercise of his or her rights under the ordinance raises a rebuttable presumption of retaliation for the exercise of such rights.

See Retaliation Prohibited.