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California’s New Healthcare Worker Minimum Wage Law (SB 525): What Small Practices Need to Know in 2025
As of mid‑2025, California’s groundbreaking Senate Bill 525—signed in October 2023—has officially reshaped the wage landscape for healthcare facilities. Its phased minimum‑wage increases began in June 2024 (or, in practice, October 2024) and are now in full swing for most covered employers. That said, small medical practices with 24 or fewer physicians remain exempt—a critical detail that gives independent clinics much-needed breathing room.
Here’s an untangled, practice‑owner‑friendly guide to where we are now and what lies ahead.
SB 525 in 2025: Where We Stand
SB 525 establishes a healthcare‑specific wage floor, peaking at $25/hour for covered workers—and ensures annual inflation-linked adjustments thereafter. Importantly, implementation is tailored to facility types and size:CMA DocsCastle Employment Law+1SEIU UHW+1
Timeline as of 2025:
June 1, 2024 to June 30, 2025: baseline wage for most covered health care employees was $21/hour.ECJ Law+7LegiScan+7Digital Democracy | CalMatters+7
October 16, 2024: the law formally took effect after SB 159 triggered implementation. Employers began paying the new rates then.CDF Labor Law+1Moss Adams+1
July 1, 2025 to June 30, 2026: large systems (facilities with ≥ 10,000 FTEs, county systems in counties with 5M+ people, and dialysis clinics) must pay $24/hour. That rate rises to $25/hour on July 1, 2026, then adjusts annually.Healthcare Law Blog+4LegiScan+4Digital Democracy | CalMatters+4
All other facilities (not in large systems, not special clinics) follow: $21/hour through June 2026, then $23/hourJuly 1, 2026–June 30, 2028, then $25/hour July 1, 2028 and thereafter.Digital Democracy | CalMatters+3Castle Employment Law+3ECJ Law+3
Clinics, community clinics, rural health and urgent care clinics (“specified clinics”): they get $21/hour through May 31, 2026, $22/hour June 1, 2026–May 31, 2027, and $25/hour from June 1, 2027 onward.ECJ Law
Other categories like rural hospitals or high Medi‑Cal/Medicare payor‑mix hospitals have slower phase‑ins, starting at $18/hour and rising gradually up to $25/hour by 2033.Castle Employment Law+4Healthcare Law Blog+4Digital Democracy | CalMatters+4
Exemption for Small Practices: Why It Matters
Small medical group practices—defined as those with 24 or fewer physicians—and IPAs secured an exemption from SB 525’s wage hike schedule. That means that if your practice is small, your non‑physician support staff (e.g. medical assistants, front desk, contracted personnel) are not subject to SB 525 increases.CMA DocsUC Berkeley Labor Center
This exemption was a hard‑won protection by the California Medical Association: small clinics operate on thin margins and face both staffing cost pressures and patient‑care demands. Knowing your exemption status—and maintaining it—is critical for budgeting and planning.
What Small Practices Should Do in 2025
If your practice qualifies (≤ 24 physicians), here’s how to proceed:
Confirm your physician headcount and ensure your practice license/status remains under the 24‑physician threshold.
Communicate clearly with HR/payroll vendors that SB 525 increases do not apply to your support staff.
Continue paying state general minimum wage (currently $16/hour, rising under other statewide rules), but no additional health‑care premium is required.
Monitor any structural change: if you hire a 25th physician or merge with a larger group, you may fall under the law and need to comply.
For facilities not exempt, planning ahead is essential:
Budget staffing cost increases through 2026–2028 depending on facility category.
Estimate impact—workers directly affected number in the hundreds of thousands statewide—which may increase operating cost by roughly 3% initially, per UC Berkeley research.Castle Employment Law+1calmatters.org+1CMA Docscalmatters.orgMoss Adams+4Healthcare Law Blog+4Digital Democracy | CalMatters+4
Plan for future inflation adjustments, as once wages hit $25/hour, annual increases are tied to CPI or 3.5% whichever is less.SEIU UHW+1Healthcare Law Blog+1
Review salaried (exempt) employees: SB 525 requires salaries ≥ 150% of the applicable healthcare minimum wage (or 200% of state minimum wage), whichever is higher. As of July 2025, that means at least ~$71,760/year for large‑system employees.healthcareappraisers.com+4UCI Human Resources+4Healthcare Law Blog+4
Apply for waivers if needed: Clinics under category (C) may request one‑year delays if they meet serious financial hardship criteria. Applications had to be submitted by Sept 20, 2024—but future years may allow rolling waiver requests.HCAI
What This Means in Mid‑2025
Small practices can breathe easier—your wage bill hasn’t been hit by SB 525 yet. That buffer gives you time to invest in retention strategies, staff training, or technology without immediate federal wage shock.
For medium‑to‑large clinics or outpatient facilities that fall into SB 525 tiers:
Raises are already underway (e.g. from $21 to $24 by mid‑2025 for large systems).
The next steps—$25/hour phase in—is coming mid‑2026 or earlier depending on inflation indexing.
Your salaried staff earnings thresholds will continue rising as well to maintain exempt status.
By 2026–2028, most covered employers will have to reach $25/hour, aligning with ongoing inflation indexing. That means headcount decisions—especially adding or merging physician numbers—could alter your compliance status.
Minimal Bullets for Quick Reference
Key Takeaways for Small Practices (≤ 24 physicians):
Exempt from SB 525 phased wage schedule—support staff do not need SB 525 wage rates.
Still subject to state general minimum wage (e.g., $16/hour as of 2025).
Watch changes in physician headcount or corporate structure that could trigger coverage.
No need to file or track phased schedule raises.
Final Thoughts
As of mid‑2025, SB 525 is shaping up as a transformative minimum wage policy for the healthcare sector. But small practices were able to avert its immediate impact thanks to the physician‑count exemption secured by CMA. If your clinic remains small, you’re not yet subject to the higher wage floor—but you should stay aware of your classification.
That breathing room can be used to strengthen operations, plan retention strategies, and keep your cost structure competitive—while larger facilities absorb rising costs through staggered pay increases. And whether or not you’re covered, being mindful of future CPI adjustments and exempt status thresholds ensures you remain compliant and ready for any organizational shift.
