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Retention Pay Proposal Promising but Problematic

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Gov. Newsom’s proposal to provide health care workers with $933 million in retention payments represents an important step toward recognizing the invaluable contributions of California’s pandemic heroes.  

The proposal, announced earlier this month during the governor’s press conference on his May budget revision, signifies the far-reaching and deep appreciation for health care workers in California. Hospital leaders share this sentiment and have been working hard throughout the pandemic to honor the contributions of health care workers through increased wages, childcare vouchers, housing vouchers, and extended paid time off. 

At a high level, the proposal works like this: California will provide a $1,000 retention payment to all full-time health care workers at hospitals and skilled- nursing facilities. Part-time workers (those averaging under 32 hours per week) would receive $750. The state will provide an additional payment to these workers, up to $500, to match any additional funds employers decide to give. There is no requirement that employers make any payments, and there is an opportunity for payments already made to be recognized and eligible for the state match. 

Despite the positive intent of the proposal, the bill language makes the process of administering these payments difficult and fraught with legal concerns. Specifically, there are six key issues that must be remedied to effectively deliver the recognition health care workers deserve: 

  1. Exclusion of Employees The time frame to qualify for a state match begins Jan. 1, 2022, and concludes in July/August. This time frame excludes workers who received bonuses in the fourth quarter of 2021 and any workers getting bonuses later in 2022, resulting in lower payments for tens of thousands without reason or justification. 
  1. Temporary Employment Requirements The language requires hospitals to transmit payments to temporary employees and contractors. Hospitals do not have the contact and payroll information for these workers, nor do they have the legal authority to request this information. 
  1. Limited Funding, Uncertain Payments – The language provides specific retention payment amounts, but then goes on to allow the Department of Health Care Services to reduce these payments on a pro rata basis. This creates uncertainty on the retention payment amount for both employees and hospitals and opens the door to reduced benefits, potentially reducing retention payments for all workers.  
  1. Limitation on Qualifying State Match The type of compensation that enables employees to receive a state match is very limited. By allowing only bonus pay, other critical benefits such as higher wages, childcare vouchers, housing vouchers, and additional paid time off are excluded entirely.  
  1. Implementation Questions The bill is silent on several basic questions. These include, but are not limited to: Do hospitals and skilled-nursing facilities need to participate? What happens if the employer cannot locate a former employee? What if there is a material error in the filing? Failure to clarify these questions opens the door to litigation.  
  1. Legal LiabilityUnder state and federal law, payments made for services rendered, including bonuses, are considered wages. These retention payments exist in a gray area, and the bill is silent on whether the payments would be considered wages. Without clarification, hospitals could face multiple lawsuits due to potential wage and hour violations for both employees and contractors, even without a matched contribution. 

CHA is working directly with the governor’s office to address these concerns ahead of the Legislature’s opportunity to weigh in and potentially modify this proposal. We will keep you apprised of changes as they come through and welcome any additional input you have — questions or ideas can be sent to Gideon Baum at