Navigating San Francisco Health Care Security Ordinance (HCSO) Compliance
Author: AEIS
Regardless of where your headquarters are located, the shift to remote and hybrid work has expanded many companies’ reach, often unintentionally. When an employee responds to emails from a kitchen table in their San Francisco home during a work-from-home day, your company may be operating in a new or different legal environment without even realizing it. Across the Bay Area, several cities enforce their own labor rules related to health care expenditures and paid sick leave. These rules apply based on where work is performed, not where the company is based. If someone on your payroll regularly works from a home office in San Francisco, your responsibilities change.
Under the San Francisco Health Care Security Ordinance (HCSO), employers with 20 or more workers worldwide must spend a set dollar amount on health care for each hour an employee works within city boundaries. This applies even to part-time employees, provided they meet the required threshold.
Understanding who is subject to the HCSO and what it requires is the first step toward staying aligned.
What Is the San Francisco Health Care Security Ordinance (HCSO)?
The San Francisco Health Care Security Ordinance (HCSO) is a city law that requires qualifying employers to make health care expenditures on behalf of employees working in San Francisco. Designed to improve access to medical care, the ordinance applies to for-profit businesses with 20 or more employees worldwide, and nonprofit organizations with 50 or more, when even one employee performs work inside the city for at least 8 hours per week.
This applies to any employee working within San Francisco city limits, whether on-site or from home. It’s the employee’s location that matters, not where the company is based. Employers must calculate expenditures based on hours worked, provide acceptable health care benefits or contributions, and maintain proper documentation. Failing to meet these standards can lead to back payments and financial penalties.
Who Is Required to Comply with HCSO?
As previously stated, the San Francisco Health Care Security Ordinance (HCSO) applies to for-profit businesses with 20 or more employees worldwide and nonprofit organizations with 50 or more. If even one of those employees performs work within the geographic boundaries of San Francisco for at least 8 hours per week, the employer is required to make health care expenditures on their behalf.
This includes remote, part-time, and temporary staff who meet the hourly criteria. Employers must also meet several ongoing requirements: posting HCSO notices, tracking health care expenditures, maintaining detailed records, and ensuring that spending meets or exceeds the city’s minimum contribution rate.
Covered Employers must also post HCSO notices, maintain detailed records, and ensure that health care spending meets the city’s hourly minimum requirement. Failing to comply can trigger audits, penalties, and repayment obligations.
HCSO Compliance Requirements for Employers
Employers covered under the San Francisco Health Care Security Ordinance must follow several ongoing requirements to remain in compliance.
Employer Health Care Expenditures: Minimum Contribution Rates
Employers must make health care expenditures for each covered employee based on hours worked in San Francisco. The required hourly rate is adjusted annually. These contributions can be made through insurance premiums, payments to the SF City option, contributions to a reimbursement program (subject to limitations), or other approved methods.
Recordkeeping and Reporting Obligations
Businesses must track all health care expenditures and retain documentation for at least four years. Employers are also required to submit the Annual Reporting Form to the San Francisco Office of Labor Standards Enforcement (OLSE).
Notice and Posting Requirements
A current HCSO notice must be posted at each worksite where covered employees perform duties. For remote workers, digital distribution may be required.
Waivers
Employees may voluntarily waive employer health care contributions if they have other group coverage. Valid waivers must be renewed annually and kept on file.
Common HCSO Compliance Mistakes and How to Avoid Them
Some employers overlook how easily HCSO requirements can be triggered. It doesn’t take a full office in San Francisco; just one employee working a regular schedule from home is enough. If that work happens inside city limits, the rules apply. Too often, businesses focus on where they’re based instead of where the work is happening.
Another oversight is failing to track hours accurately, especially for employees with irregular schedules. Without precise records, calculating the required expenditures becomes difficult—and noncompliance more likely.
Some employers also miss the annual reporting deadline or neglect to post required notices, both of which can lead to fines. Others rely on outdated contribution rates, unaware that the city adjusts them each year.
Avoiding these mistakes starts with understanding your workforce location, updating procedures regularly, and working with a knowledgeable benefits partner who stays current on HCSO rules. Consistent review helps reduce risk and keep your business on the right track.
What Are the Penalties for HCSO Non-Compliance?
Non-compliance with the San Francisco Health Care Security Ordinance can lead to significant financial consequences. The Office of Labor Standards Enforcement (OLSE) may impose different penalties depending on the violation. These fines can add up quickly, especially if multiple requirements, like insufficient health care spending, failure to post notices, or missing records, are involved. The OLSE also reserves the right to conduct audits, which can extend across several years of employment history.
Frequently Asked Questions About HCSO Compliance
Can Employers Use Existing Health Plans to Comply?
Yes. Employers can meet HCSO requirements through contributions to existing health insurance plans as long as those plans provide meaningful coverage and meet the city’s minimum expenditure rate. Simply offering a plan isn’t enough if the cost-sharing or benefit design falls short.
How Much Must an Employer Spend on Healthcare Per Employee?
The required hourly expenditure rate is set by the City of San Francisco and adjusted annually. Rates vary depending on business size. Employers must track hours worked within city limits and apply the correct rate accordingly.
How Can Employees Spend HCSO Funds?
If employers choose to use the City Option, the Medical Reimbursement Account to comply, employees can use those funds to pay for qualified medical expenses, including copays, prescriptions, dental and vision expenses, and medical devices.
How Does HCSO Compare to ACA and Other Regulations?
The HCSO operates separately from federal laws like the Affordable Care Act (ACA). Employers must comply with both, even if they meet ACA standards. HCSO has its own thresholds, spending requirements, and documentation rules.
Can Employees Opt to Waive HCSO Expenditures from Employers?
Yes. Employees with other group health coverage (Medicare, Medi-Cal, or veterans benefits) can complete the San Francisco Employee Voluntary Waiver Form. Waivers must be voluntary, renewed annually, and kept on file.
Simplify HCSO Compliance with AEIS
Managing compliance across multiple jurisdictions can feel overwhelming, especially when local rules shift under the surface of a remote workforce. The San Francisco Health Care Security Ordinance is just one of many regulations that can impact your business without warning. Staying ahead requires more than awareness; it demands structure, accuracy, and the right partner.
At AEIS, we help businesses like yours navigate complex benefit regulations, reduce compliance risk, and build benefit strategies that support both your team and your bottom line. From HCSO requirements to broader workforce compliance concerns, our team is here to provide clarity and confidence.
Connect with us today, and we’ll help make sure your business stays compliant (and competitive) in every ZIP code where work gets done.
Disclaimer: Any information related to compliance, laws and regulations, or other subject matters in this content is intended to be informational and does not constitute legal advice regarding any specific situation. The content is based on the most up-to-date information available on the date it was published and could be subject to change. Should you require further assistance or legal advice, please consult a licensed attorney.
