Blogs August 2020

The San Francisco Health Care Security Ordinance (SF HCSO) requires covered employers to make a minimum health care expenditure on a quarterly basis on behalf of all covered employees. While the ordinance has been in place since 2008, many employers are still out-of-compliance or unsure how the rules apply. The following is a brief overview of the compliance and annual reporting requirements.

Covered Employers

Employers are subject if they have 20+ employees (50+ for non-profits), with 1 or more working in the geographic boundary of San Francisco, and required to obtain a San Francisco business registration certificate. Small employers 0-19 (0-49 non-profit) are exempt.

Tip: The headcount for determining your company size under HCSO – both for determining applicability and expenditure rate – includes ALL employees, regardless of status, classification, or contract status. That means even temp or contract employees that are paid via 1099 or through an agency still count!

Covered Employees

Employees working an average of 8 or more hours per week in San Francisco and entitled to be paid minimum wage. There is a waiting period of 90 days.

Tip: Look at the exemption criteria closely. The manager/supervisor exemption is coupled with the salary exemption amount, meaning the two are not separate. An employee needs to make more than the salary exemption (2020: $102,754 annually) AND be considered a manager/supervisor/confidential employee per HCSO.

Calculating Expenditure Rate (Updated for 2021)

Rates are based on employer size and are calculated per hour payable to covered employees. A medium size employer is 20-99 employees (50-99 non-profit) with a rate of $2.12 per hour, while a large employer is 100+ employees with a rate of $3.18 per hour.

Tip: Hours worked include both paid and entitled, like PTO. Maximum hours for the calculation is capped at 172 a month.

Tip: Self-funded employers would evaluate health care expenditures based on calculated claims spend.

Making Expenditures

For full-time, benefit eligible employees, average costs for medical, dental, and vision can be used. For most employers, the minimum expenditure is easily reached. A large employer would need to spend approximately $547 per month on an exempt or 40-hour non-exempt employee. Most medical, dental, and vision premiums, when combined, exceed that amount. Remember that employee contribution amounts cannot be included in the calculation. For non-benefit eligible employees, the expenditure would be made quarterly. The simplest method for making an expenditure is via the San Francisco City Option.

Tip: Being benefit eligible does not immediately mean that HCSO requirements are met and expenditures do not need to be made. If a benefit-eligible employee waives the employer’s company sponsored health plan, the employer is still required to make a minimum expenditure on behalf of that employee. That means paying into the City Option, similar to non-benefit eligible employees. The exception is if the employee voluntarily signs the HCSO Waiver Form. You may NOT coerce an employee to sign the form and the form language dissuades one from signing it! Due diligence would mean sending the form to a waived employee and if the employee chooses not to sign, be sure to make the quarterly expenditure.

Due Dates - Regular

Quarterly expenditures are due 30 days following the end of the quarter. First quarter expenditures are due April 30^th. Annual Reporting to HCSO of covered employees and expenditures made are also due April 30^th and is completed online. The online form will be posted to the OLSE HCSO website no later than April 1, so mark your calendars.

Due Dates - COVID-19 Relief

Consistent with the Emergency Proclamation by the SF Mayor, the employer requirement to submit the 2019 Annual Reporting Form for the Health Care Security Ordinance and the Fair Chance Ordinance is cancelled. This only means that the 2019 Annual Reporting Form does not need to be submitted to OLSE. Employers must continue to make health care expenditures on behalf of their Covered Employees by making City Option payments and/or paying for health insurance.

Currently, the COVID relief order for 2019 reporting (due in 2020) is still in effect. We expect requirements for the 2020 reporting cycle to be clarified prior to the due date in April 2021.

Risk

There are penalties for non-compliance – up to $100 per employee per quarter for failure to make expenditures and up to $500 per quarter if the annual reporting is not submitted. There are other penalties as well for retaliation, failure to provide records to OLSE, and failure to post the required notice. However, while there is no guarantee, the OLSE generally does not fine an employer that has been out-of-compliance that now comes into compliance. The bigger risk is if an employee complains as that is generally when the OLSE would take action and penalize for non-compliance.

More Information

SF HCSO Resources including training slides, rules, an administrative guide and FAQs. This site also contains instructions for the online Annual Reporting Form.
2020 HCSO Poster

Overview

In response to the COVID-19 pandemic, Congress passed the Families First Coronavirus Response Act (FFCRA) which created emergency paid sick leave (ePSL) and emergency FMLA (eFMLA) leave for those suffering from COVID-19 or its effects. Shortly after the passage of FFCRA, the Department of Labor (DOL) finalized temporary regulations interpreting and implementing the FFCRA’s provisions.

On Monday, a federal district court judge provided a ruling that invalidated four significant aspects of the regulations:

1. The DOL’s definition of “healthcare provider”
2. The DOL’s “work availability” requirement
3. The requirement of employer consent to intermittent leave
4. The requirement that employees provide notice of leave prior to taking the leave
   
   

What Does This Mean?

The result of this ruling will be that that more employees are eligible for up to 12 weeks of COVID-19-related ePSL and eFMLA. As such, employers should consider whether they need to adjust their leave determinations in light of the court’s decision. This is particularly relevant for any employers who are healthcare providers or who have denied COVID-19 leaves.

A Little History on the FFCRA and the DOL Regulations

Anticipating the stress COVID-19 would put on our nation’s healthcare system, Congress made certain types of employees, specifically healthcare providers and emergency responders, ineligible for FFCRA paid leave. If an employee falls into either category, the employer may decline to authorize requested leave. The FFCRA generally defines a healthcare provider as:

• A doctor of medicine or osteopathy who is authorized to practice medicine; or
• Any other person determined by the Secretary of Labor to be capable of providing healthcare services.
  
  

Dramatic Expansion

The DOL dramatically expanded the definition of healthcare provider under the regulations such that, a “health care provider” includes:

• Anyone employed at a “doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or other similar institution, employer, or entity.” As an example, a professor or cafeteria worker at a medical school would all be considered health care providers under the DOL definition.
• Anyone employed by an entity that contracts with one of the aforementioned institutions to provide services that support or maintain the institution’s operation.

The regulations also spelled out several other criteria for leaves:

• Employers do not need to provide employees with paid leave when the employer does not have work for them (the “work availability” requirement)
• Employees must receive employer consent before taking intermittent leave
• Prior to taking leave, an employee must provide documentation to the employer outlining, among other things, the reason for and duration of the leave.
  
  

Four Key Aspects of the Regulations Invalidated

1. Definition of Healthcare Provider: The court struck down the DOL’s definition of healthcare provider, finding that it was “vastly overbroad” and did not focus on whether an employee’s duties have a nexus to the provision of healthcare. As such, the rule gave employers wide latitude to exclude employees in a broad array of facilities and positions. Rather than exempting entire companies from providing paid leave, the court held that only employees who are capable of providing healthcare services should be excluded.
   
   RESULT: Employers will need to consider, on a role-specific (if not case-by-case) basis, that the “skills, role, duties, or capabilities of a class of employees” render those individuals “capable of providing healthcare services,” before they can be excluded from FFCRA paid leave.
   
   
2. Work Availability Requirement: The regulations applied the work availability requirement to eFMLA leave and to three of the six reasons an employee may take ePSL. The court found that the regulations lack an explanation as to why the work availability requirement only applies to half of the ePSL qualifying absences. As a result, the court noted that the requirement was unreasonable.
   
   RESULT: Employers may not deny FFCRA paid leave to an employee simply because the employer has no work for the employee. Many employers have already relied on DOL’s rule to grant or deny leave. Under the court’s ruling, employees must still have a FFCRA-qualifying reason for leave, but they may now be eligible even if the employer has no current work for them.
   
   
3. Employer Consent for Intermittent Leave: The regulations distinguish between eFMLA leave that may be taken intermittently and ePSL that may not be taken intermittently (unless the employee is teleworking). Employer consent is required in order to take intermittent leave. While the court did not object to limiting intermittent leave to certain types of absences, it did find that the DOL failed to explain why employer consent should be required.
   
   RESULT: Employers should allow intermittent eFMLA and ePSL teleworking arrangement leaves upon request. (Note that the prohibition on intermittent leave for certain qualifying absences is allowed because the conditions for which intermittent leave is entirely barred are those that logically correlate with a higher risk of viral infection.
   
   
4. Documentation Requirements: Under the FFCRA, employees wishing to take ePSL must provide notice to their employer after the first day they are on leave, and employees wishing to take eFMLA leave must provide notice as soon as practicable. The regulations require employees to submit documentation regarding their need for leave prior to taking leave. The court found that the timing of the documentation requirement is inconsistent with the FFCRA’s notice provisions.
   
   RESULT: While employers may still require documentation, they cannot require that employees provide documentation before taking leave.
   
   

The Future

It is anticipated that the DOL will appeal the judge’s ruling. However, in the interim, employers that do not follow the court’s revised interpretation of these four provisions are at risk of noncompliance and associated penalties. Other than the four provisions that were invalidated, the remainder of the regulations remain in effect.