SF Health Care Security Ordinance (HCSO)

What it is

The San Francisco Health Care Security Ordinance, in effect since 2008, requires covered employers to make health care expenditures on behalf of each covered employee. You can satisfy the requirement by paying for actual health insurance, contributing to a health reimbursement account, OR paying into the SF City Option (which funds Healthy San Francisco and Medical Reimbursement Accounts). The HCSO is administered by the SF Office of Labor Standards Enforcement (OLSE).

Who it applies to

Employers with at least one Covered Employee in SF, AND meeting one of these size thresholds:
• Small employer: 20–99 employees worldwide — required to spend (2026 rates)
• Large employer: 100+ employees worldwide — required to spend higher rates
• Non-profits with 50+ employees may also be covered

Covered Employee: works in SF, at least 8 hours per week, AND has been employed at least 90 calendar days. Includes part-time and temporary.

What compliance looks like

1. Calculate required spend per hour. 2026 rates:
• Small employer (20–99): $3.85 per hour worked in SF
• Large employer (100+): $5.78 per hour worked in SF
• Rates update each January — check OLSE for the current year.
2. Spend it. Options:
• Pay for actual health insurance for the employee
• Contribute to a stand-alone HRA (must be irrevocable, employee-accessible, and meet SF rules)
• Pay into the SF City Option — easiest for restaurants with high turnover or part-timers
• A mix of the above
3. Notice to employees. Post the official HCSO notice in the workplace (in English + Chinese + Spanish + Tagalog). Provide individual notice of each employee's expenditure quarterly.
4. Annual Reporting Form. File with OLSE by April 30 each year. Reports each Covered Employee, hours worked, and spend made on their behalf.
5. Records. Keep 4 years of HCSO calculations, payroll, and expenditure proof.
6. Audits. OLSE audits ~50 employers per quarter. Restaurants are over-represented in the audit pool.

Penalties for non-compliance

Failure to make required expenditure: 1.5× the unpaid amount + 10% per quarter interest.
Failure to file Annual Reporting Form: $500 per quarter unfiled.
Failure to post notice or provide quarterly employee notices: $50 per employee per quarter.
Retaliation against an employee asserting HCSO rights: $1,000 per occurrence + 3× back-pay damages.

Real-world enforcement: OLSE settlements often run $50k–$500k for mid-sized restaurants who didn't realize the City Option was an option, or who tried to count workers' comp / unemployment as health spend (they don't count).

How Panko helps

Panko's SF Pro Tips flag the annual rate change every December for the following January, with the new per-hour spend rate and a worked example. We also track OLSE enforcement announcements — they publish settlement amounts and patterns, which is a leading indicator of audit focus areas. Pro members get a push when OLSE issues new guidance (last guidance change: October 2024 on HRA structure).

Sources

• SF OLSE — Health Care Security Ordinance
• SF HCSO — Annual Reporting Form

Pro members get a push the moment this rule changes — new rate, new guidance, new court ruling. Plus city-specific Pro Tips that flag the compliance windows that matter for your operation.