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Employers covered by the San Francisco Health Care Security Ordinance (HCSO) are required to submit the 2024 HCSO Annual Reporting Form by Friday, May 2, 2025.
The 2024 HCSO Employer Annual Reporting Form will be available on April 1, 2025, at this webpage. Covered employers who fail to make a timely submission of the HCSO Annual Reporting Form may be subject to a penalty of $500 per quarter.
The HCSO is a San Francisco city law, in place since 2008, establishing several employer healthcare-related obligations and enforced by the Office of Labor Standards Enforcement (OLSE). The HCSO requires all covered employers in San Francisco to spend a minimum amount of money, called a health care expenditure, on a quarterly basis toward their covered employees’ healthcare costs.
Covered employers: Under the HCSO, covered employers are those:
Employers must count all individuals working for the entity, regardless of whether they are located in San Francisco or outside of the city, to determine if they are considered a covered employer under the HCSO.
Covered employees: Under the HCSO, covered employees are those employees who work for a covered employer (defined above) and:
Exempt Employees: The HCSO exempts the following employees from employer spending requirements:
Who qualifies as an exempt “manager, supervisor, or confidential employee”?
Under the HCSO, these employees are defined as follows:
Remote Employees: As a result of the San Francisco City public health order on June 11, 2021, which removed the remote work recommendation for employers, employees working remotely outside of San Francisco are not covered under the HCSO employer spending requirements.
Owners: The HCSO confirms that owners are not considered covered employees under the HCSO because they are not entitled to payment of the minimum wage and businesses are not required to make health care expenditures on behalf of owners. However, owners who perform work for compensation must be counted for the purpose of determining employer size as a covered employer under the HCSO.
The required HCSO health care expenditures are based on hours payable, which includes both:
The minimum health care expenditure for each covered employee is calculated quarterly by multiplying the total number of hours payable to the employee in the quarter (capped at 172 hours per month or 516 hours in a single quarter) by the applicable expenditure rate.
Refer to the table below for the 2025 HCSO expenditure rates based on size and type of employer:
Employer Size |
Number of Workers |
2025 Expenditure Rate |
2024 Expenditure Rate |
Large |
All employers w/ 100+ workers |
$3.85 per hour payable |
$3.51 per hour payable |
Medium |
Businesses w/ 20-99 workers |
$2.56 per hour payable |
$2.34 per hour payable |
Small |
Businesses w/ 0-19 workers |
Exempt |
Exempt |
Covered employers can comply with the HCSO by making health care expenditures for their covered employees under the following options:
Note that the following do not qualify as health care expenditures under the HCSO:
Click here for more information on making health care expenditures under the HCSO.
Covered employers may comply with the HCSO by providing a self-funded group health plan to some or all of its covered employees under certain conditions. Generally, if a self-funded health plan employer pays claims as they are incurred, the employer may calculate the health care expenditures on an annual basis. If the employer’s annual spend fell short of the HCSO expenditure rate, the employer must make “top-off” payments for employees enrolled in these plans by the end of February of the following year.
Click here for additional HCSO resources for self-funded health plans.
Some San Francisco businesses elect to impose a surcharge, such as an extra fee or cost, on the goods or services they sell to customers to completely or partially cover the expense of complying with the HCSO.
The HCSO does not require or prohibit businesses from imposing surcharges. However, employers that choose to impose these surcharges must comply with specific requirements found here.
Recordkeeping: Covered employers are required to maintain sufficient records for four years from each covered employee’s employment dates, including itemized pay statements,[1] records of health care expenditures for each covered employee demonstrating compliance with the HCSO (including calculations and proof of quarterly payments, as applicable), and documentation supporting an exemption from HCSO (including a signed voluntary HCSO waiver form).
Posting: Covered employers must post the 2025 HCSO Poster in a conspicuous place at all workplaces with covered employees in English, Spanish, Chinese, and any other language spoken by at least 5% of the employees at the workplace. For employees working in a location that is not controlled by the employer (for example, employees working from home or outsourced to a third party), the employer must ensure that each employee is provided a copy of the HCSO posting.
Annual Reporting: Covered employers are also required to submit an annual reporting form to the OLSE by April 30th of each year (May 2nd in 2025), including information on total health care spending and any applicable surcharges that a covered employer imposes on customers to offset HCSO costs.
Refer to the table below outlining the administrative penalties for failing to comply with HCSO requirements:
HCSO Violation |
Maximum Administrative Penalty |
Failure to make the required minimum Health Care Expenditures within five business days of the quarterly due date (30 days after the conclusion of each quarter) |
$100 for each employee for each quarter that the violation occurred. |
Failure to submit the Annual Reporting Form |
$500 for each quarter that the violation occurs |
Retaliation* against employees *Retaliation against employees includes disciplining, discharging, demoting, suspending, or taking any other adverse action against an employee for exercising their rights under the HCSO, including refusing to sign the employee voluntary waiver form. |
$100 for each person who is the target of the prohibited action for each day the violation occurs. |
Refusing to allow OLSE access to employer records |
$25 for each worker whose records are not provided for each day the violation occurs |
Failure to maintain or retain accurate and complete records |
$500.00 for each quarter that the violation occurs |
Failure to post the Official HCSO Notice |
$25 per day for each workplace or job site where the Notice is not posted |
Employers covered under the HCSO should be aware of the upcoming May 2, 2025 deadline to submit the 2024 Annual Reporting Form online, which will be available starting on April 1, 2025 here.
Click here for OLSE-released HCSO administrative guidance with additional information to comply with the HCSO.
Risk Strategies’ team of experienced professionals can help covered employers navigate the complex HCSO requirements. Contact your Risk Strategies team members for assistance or contact us directly here.
[1] In compliance with California Labor Code Section 226.
The contents of this article are for general informational purposes only and Risk Strategies Company makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.