For more information on this ordinance, including Health Care Security Ordinance Rules and Administrative Guidance, visit San Francisco’s OLSE website. You can also contact the San Francisco Office of Labor Standards Enforcement (OLSE) by phone at (415) 554-7892 or by email at hcso@sfgov.org.

Employers Covered Under the HCSO

You are covered by the HCSO if you:

• Employ one or more workers within the geographic boundaries of the city and county of San Francisco;
• Are required to obtain a valid San Francisco business registration certificate; and
• Are a for-profit business with 20 or more people performing work, or a nonprofit organization with 50 or more people performing work.

All employees, regardless of where they live or work, must be counted for purposes of determining employer coverage. All members of a controlled group of corporations are considered to be one employer. For-profit employers with fewer than 20 employees and nonprofit employers with fewer than 50 employees are exempt from the spending requirement.1

Employees Covered Under the HCSO

A covered employee under the HCSO is one who:

• Works at least 8 hours per week in the geographic boundaries of San Francisco; and
• Has worked for you for at least 90 calendar days.2

For employees whose hours fluctuate, you must determine the average hours each quarter.

Travel through the city for work is not considered hours worked within the city unless the employee makes work-related stops in the city.

Time an employee works from home within San Francisco, including telecommuting, qualifies as work performed within the city.

For rehires, you must count previous employment toward the 90-day requirement if the employee returns to work within a year. Employees who satisfy the 90-day requirement and are rehired within a calendar year of completing the 90 days do not have to complete a new 90-day period.

Some employees are not covered by the HCSO. Two common exceptions are:

1. Managers, supervisors and confidential employees above an earnings threshold; and
2. Employees who receive health care services from another employer and voluntarily waive HCEs each year.

Exception for Certain Managers, Supervisors and Confidential Employees

• An employee who is a “manager, supervisor or confidential employee” and who earns at or above a specified amount set by the city is exempt from coverage under the HCSO. For 2024, managerial, supervisory and confidential employees who earn more than $121,372 per year (or $58.35 per hour) are exempt. The rates change every year.3 Please review Rule 3.6 for a detailed definition of a manager, supervisor or confidential employee and Section C, Question 13 of the Administrative Guidance for more information.

Voluntary Waiver for Employees Receiving Other Employer Health Care Services

An employee who receives health care services, such as health insurance, through another employer — either as an employee or because the employee is a spouse, domestic partner, child or a dependent of another person — is exempt from coverage IF the employee also provides a voluntary written waiver of the HCEs on a city form. The form is available in multiple languages on the OLSE’s website.4 The OLSE has established the following rules:

• An employee may revoke the waiver at any time.
• Waivers are valid for one year.
• Employers may use an electronic version of the waiver form, as long as all of the following criteria are met:
• The forms must be identical to the city form;
• The signature, electronic signature or other authorization must be on the same page as the text of the form so the employee can view the entire text when providing a signature or authorization; and
• The website containing the form may not state or imply the employee is required to sign the form.

Declining coverage under your health plan by itself does not establish this exemption. You must make the required HCEs for employees who decline coverage, unless they meet all of the requirements for an exemption.5

Other exemptions exist. Please see Rule 3 for specific information.

Health Care Expenditure

Covered employers must make HCEs on behalf of each covered employee each quarter. The HCE is an amount spent for the purpose of providing or reimbursing the cost of health care services for covered employees and/or their families.

Calculating HCEs

The amount of required HCE for each covered employee is the appropriate HCE rate (see below) for each hour the covered employee works in the city (“hours payable”), up to 172 hours in a single month or 516 hours in a single quarter. Vacation, paid time off, paid sick leave and paid parental leave are hours payable.6

For example, if a covered employee works 480 hours in the city for a large employer (over 100 employees) during a quarter in 2025, the HCE required for that employee would be 480 x $3.85, which equals $1,848.00.

The city has published detailed rules for calculating hours payable, including the guidelines for travel and work from home mentioned above. It also has published guidelines for partially paid leaves, such as those qualifying under the Paid Parental Leave Ordinance and situations when an employee who works both within the city and outside of it takes paid leave. See Rule 4.

Making HCEs

Covered employers can make HCEs in a number of ways, including making health, dental or vision insurance premium payments; expenditures by self-insured or self-funded insurance programs; health care expenditures made to a union trust fund; irrevocable contributions to medical reimbursement accounts; or costs of the direct delivery of health care services.7

The city has provided extensive detail as to what expenditures qualify, as well as guidance for uniform health plans, self-insured and self-funded plans, and health surcharges. See Rules 5 and 6.

Another way for employers to make required HCEs is by making payments to the city on behalf of covered employee(s). This is the City Option. If you participate in the City Option Program, you send HCE payments to the City Option Program on behalf of your eligible employees. The City Option has three health care programs:

• San Francisco Medical Reimbursement Account;
• San Francisco Covered Medical Reimbursement Account; or
• Healthy San Francisco.

Your payments for each employee are held in an employer contribution pool until the employee enrolls in a City Option health care program. You can find information about the City Option at the City Option website.

HCEs for all hours payable must be made irrevocably, meaning that no amount of the HCE may be retained or recovered by, or returned to, the employer.8

Posting and Recordkeeping Requirements

The HCSO contains several notice, posting and recordkeeping requirements.

Covered employers must post the official HCSO notice informing employees of their rights under the HCSO. The notice must be posted in a conspicuous place at every workplace, job site or other location in San Francisco. The notice must be posted in English, Spanish, Chinese and any language spoken by at least 5 percent of the employees at the workplace.9

• San Francisco specific posters, containing the notice in all languages, are available for purchase on the CalChamber Store.

In addition, if you use the City Option, you must notify each covered employee using a city-provided form within 15 days of making the payment.10

Covered employers must maintain the following records for four years from each covered employee’s dates of employment:

• The itemized pay statements required by California law;
• Employee’s address, telephone number, first day of work and email address;
• Sufficient records to establish compliance with the HCE requirement;
• Records showing separation of employment;
• Signed Voluntary Waiver Forms;
• Copies of Notices to Employee of Payment to the City Option; and
• Amount of health care surcharges collected from customers.11

Covered employers must also provide information about their HCEs to the city on an annual basis on a city-provided Employer Annual Reporting Form. The form is available on San Francisco’s Office of Labor Standards Enforcement (OLSE) website. The annual reporting deadline is typically in late April/early May.

Retaliation

You cannot retaliate against employees for exercising their rights under the HCSO, such as inquiring or informing others about, or participating in any action to enforce rights under the HCSO. Any adverse action taken against an individual within 90 days of exercising one of these rights creates an assumption of retaliation, which you then have the burden to rebut.12

Enforcement

The OLSE enforces the HCSO.13 If the OLSE determines that an employer violated the HCSO, it may order restitution to employees and administrative penalties.

Administrative penalties can include:

• 1.5 times the amount of unpaid HCEs, up to $100 for each employee for each quarter that required HCEs were not made;
• $25 per day per employee for each day an employer fails to cooperate with OLSE — or reduces the number of employees in order to decrease its HCE rate or avoid being a covered employer;
• $500 per quarter for failure to maintain records;
• $100 per worker for each day of a retaliation violation; and
• $25 per day for other violations, such as failure to post the required notice.

The city may bring a civil action to enforce the HCSO and may recover enforcement costs in addition to restitution and administrative penalties.14

1. San Francisco Labor and Employment Code (L.E.C) article 21, sec. 21.1; Administrative Guidance, sec. B(1); Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 2

2. San Francisco L.E.C. sec. 21.1; Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 3

3. San Francisco L.E.C. sec. 21.1; Administrative Guidance, sec. C(13) (August 6, 2021); Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 3.6

4. San Francisco L.E.C. sec. 21.1; Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rules 3.8-3.10

5. Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 5.3

6. San Francisco L.E.C. sec. 21.3; Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 4

7. San Francisco L.E.C. sec. 21.3; Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 4

8. San Francisco L.E.C. sec. 21.1, 14.3(b)(3); Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 4

9. San Francisco L.E.C. sec. 21.3(e)

10. Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 7.1

11. San Francisco L.E.C. sec. 21.3(f); Administrative Guidance, sec. (I)(1-3) (August 6, 2021); Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 7

12. San Francisco L.E.C. sec. 21.4(d)

13. San Francisco L.E.C. sec. 21.4; Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rules 8, 9

14. San Francisco L.E.C. sec. 21.4(e), Rules Implementing the Employer Spending Requirement of the San Francisco HCSO (October 29, 2017), Rule 9