A provision buried in SB 163 overrides federal overtime exemptions for supported living service providers—effective immediately.
Most California professional services owners who contract as supported living service vendors have no idea that a provision in SB 163 just changed their overtime obligations—and their labor costs.
The surprise: federal overtime exemptions no longer apply. Under the new rule, every hourly worker in supported living services must be paid 1.5 times their regular rate for any hours worked beyond 40 in a single workweek. This applies regardless of job classification or whether federal law would otherwise exempt that worker from overtime.
Section 39 of SB 163 added Section 4689.9 to California's Welfare and Institutions Code. The provision is straightforward: supported living service providers—small businesses vendored by the state to deliver in-home and community-based services to clients with developmental disabilities—must now pay overtime to all hourly workers for hours exceeding 40 per week.
This applies to every vendor, regardless of size. There is no exemption for small businesses, no threshold, and no carve-out for administrative or supervisory roles that might qualify for overtime exemption under federal law.
If you operate as a supported living service provider and employ hourly workers—whether full-time, part-time, or on-call—this affects your payroll. A worker scheduled for 45 hours in a week must be paid time-and-a-half for those five hours, even if federal law would classify them as exempt.
SB 163 is a budget-related bill and took effect immediately upon passage. The operative date is July 13, 2024. The overtime mandate in Section 4689.9 applies from that date forward.
This means any hours worked after July 13 fall under the new rule. If you have not yet adjusted your payroll systems, scheduling practices, or vendor agreements to account for this requirement, the time to do so is now.
The practical impact is a direct increase in labor costs. If your supported living service model relies on flexible scheduling or occasional overtime to meet client needs, you will pay more for those hours. There is no offset, no tax credit, and no state reimbursement tied to this mandate.
Vendors should review their current contracts with the state to understand how rates are set and whether there is any mechanism to adjust compensation for increased labor costs. Some may need to revisit scheduling practices to minimize overtime, while others may need to factor the cost into service pricing or staffing models.
The rule is clear, the effective date has passed, and compliance is mandatory. If you have questions about how this applies to your specific operation or workforce, consulting with a payroll professional or employment attorney familiar with California's supported living service requirements is advisable.
Source: SB 163, Section 39, Section 4689.9, Welfare and Institutions Code; effective July 13, 2024.