Feb. 21, 2008 United States Supreme Court Refuses To Stop Enforcement Of San Francisco's Health Care Security Ordinance; Compliance Deadlines Approach

Yesterday, the United States Supreme Court refused to stop enforcement of the employer funding provisions of San Francisco's new Health Care Security Ordinance (HCSO), pending resolution of a lawsuit brought by a restaurant association challenging the legality of the law.  The Supreme Court's refusal to stay enforcement of the HCSO means that employers subject to the HCSO must begin making healthcare expenditures on behalf of covered employees and be aware of the upcoming compliance deadlines, even though the lawsuit is still pending.  The Ninth Circuit Court of Appeals plans to hold an expedited hearing on the matter on April 17, 2008.

In the interim, covered employers with 50 or more employees must make minimum healthcare expenditures on behalf of most employees working 10 or more hours a week within the City and County of San Francisco.  These expenditures must be made regularly, but cannot be made later than 30 days after the end of the preceding quarter.  This means that, for most covered employers, the first healthcare expenditure payment must be made by no later than April 30, 2008 (for hours worked by covered employees from January 9, 2008 through March 31, 2008).  There are certain exceptions from this payment deadline for employers with self-funded plans for some or all of their covered employees and for employers who provide "uniform health coverage."  An employer will be deemed compliant with the HCSO if its preceding year's average expenditure rate per employee in a particular health care plan meets or exceeds the applicable expenditure rate under the HCSO. 

The HCSO compliance date for for-profit employers of 20-49 employees is April 1, 2008.  Consequently, those employers must prepare to make minimum healthcare expenditures of $1.17 per hour on behalf of their covered employees who work 10 more hours per week within the City and County of San Francisco.  Payments may be made in a variety of forms, including directly purchasing health insurance for covered employees, making contributions to health savings accounts, providing direct reimbursement to employees for some of the expenses incurred in the purchase of healthcare services, making payments to third parties for the purpose of providing healthcare services, or making payments directly to the City.

Additionally, covered employers must report their healthcare expenditures on an annual basis by filing the Mandatory Annual Reporting Form with San Francisco's Office of Labor Standards Enforcement (OLSE) by April 30, 2008.  Since the HCSO did not become effective for large employers until January 9, 2008 (or April 1, 2008, for medium-sized employers), the initial reporting is based on an employer's "voluntary business practices in 2007."  The Annual Reporting Form was mailed by OLSE to all San Francisco-registered businesses earlier this month.  The form is also available on the OLSE's website.

This E-Update was authored by Brenda Kasper of the firm's Transactional Practice Group.   If you have employees in San Francisco and need more detailed information on how to comply with the HCSO, please contact Ms. Kasper, or any Paul, Plevin attorney at 619-237-5200.