San Francisco Health Care Security Ordinance (HCSO)

The San Francisco Health Care Security Ordinance (HCSO) requires Covered Employers to satisfy an Employer Spending Requirement by making health care expenditure for their Covered Employees, among other reporting and notice requirements.

What Constitutes a Covered

Employer to SF HSCO?

An employer does not need to be physically located in San Francisco to be deemed a Covered Employer by the Office of Labor Standards Enforcement (OLSE). The HCSO defines a covered employer as

  • Any medium or large for-profit company engaging in business within the city and county of San Francisco; and
  • Has employees who work in San Francisco.
  • These companies are also required by law 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 given quarter each year.
Employee Size Number of workers 2019 Expenditure 2020 Expenditure
Large All employers w/100+ workers. $2.93 per hour payable $3.08 per hour payable
Medium Businesses  w/20-99 workers.

Non-Profits  w/50-99 workers.

$1.95 per hour payable $2.05 per hour payable
Small Businesses  w/0-19 workers.

Non-Profits w/0-49 workers.

Exempt Exempt

The above table shows us that for 2020, medium-sized covered employers and large covered employers can spend a maximum of up to $352.60/month and $529.76/month respectively on their covered employees’ health care. Non-managerial, supervisory, and confidential employees who earned more than $100,796 (or $48.46 per hour) were exempt from this expenditure requirement in 2019. In 2020, that exemption limit will rise to $104,761 (or $50.37 per hour). For more information on historical rates from previous years, follow this link.

SF HCSO Covered Employers’

Obligations

Employers are only obligated to make Health Care Expenditures on behalf of employees. However, merely labeling an employee as an “independent contractor”, or issuing a 1099 form does not make him or her so. A fact-specific inquiry issued by the OLSE will ultimately determine whether a person is an employee or an independent contractor.

Once an employee has been deemed as such by the OLSE, Covered Employers are obligated to:

  • Make any required health care expenditures on a quarterly basis on behalf of all Covered Employees;
  • Maintain records sufficient to establish compliance with the employer spending requirement;
  • Post the 2019 HCSO Poster in all workplaces with covered employees; and
  • Submit an Annual Reporting Form to the OLSE by April 30th of each year.

What Constitutes a Covered

Employee to SF HSCO?

With some exceptions, an Employee is covered by the HCSO if the Employee works for an Employer covered by the HCSO and:

  • Is entitled to be paid the minimum wage;
  • Has been employed by the Employer for at least 90 calendar days; and
  • Works at least 8 hours per week in San Francisco.

What is important to understand with Covered Employees under SF HSCO is that any work performed by an employee who lives in San Francisco and works from home is still considered work performed within San Francisco. On the other hand, Employees who travel through San Francisco while carrying out their job duties are not considered to have performed work in San Francisco. For a comprehensive overview of the Covered Employee exemption criteria, see the section on Covered Employees.

Requirement to Report Health Care

Expenditures under SF HCSO

A health care expenditure (HCE) is any amount paid by a Covered Employer to its Covered Employees to ensure health care services are provided for or costs are reimbursed. Covered Employers are required to keep adequate HCSO records and documentation including (but not limited to):

  • Itemized pay statements;
  • Employee information;
  • Records to support the employer has met the expenditure requirement;
  • Proof that expenditures were made;
  • Employee terminations;
  • Employee voluntary waiver forms; and
  • Copies of notices given to employees for a period of four (4) years.

Next Steps for

Covered Employers

Covered Employers must carefully assess the new changes to health care expenditure reporting and compliance requirements under SF HSCO. Having a financial strategy in place that outlines the plan for how to itemize your Covered Employees’ contributions will save a plethora of time in the long term. Make sure that your organization knows when a new Annual Reporting Form is available by signing up for the HCSO Email List. It is also wise to review the complete 28 page SF HSCO rules implementing the Covered Employer spending requirement document to get a full spectrum understanding of the entire OLSE regulations contents.

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