Diners in San Francisco are used to paying surcharges for employees’ healthcare on top of their tabs for food and drink. But several eateries may risk lawsuits for pocketing surcharges rather than spending them on their workers, city officials said Friday.
All city businesses with more than 20 employees are required to provide those workers healthcare; if they do not, they must either contribute between $1.55 and $2.33 per worker per hour to Healthy San Francisco or allow employees to access a reimbursement account under The City’s Healthcare Security Ordinance. Many restaurants pass on the costs to their customers in the form of 3 percent to 5 percent surcharges.
City Attorney Dennis Herrera on Friday said that “dozens” of local restaurants received warning letters which informed them that they collected more money from their customers than they have spent on employee healthcare.
Because the restaurants told customers that the money collected was going to healthcare and it did not, offending restaurants may be guilty of consumer fraud, Herrera said.
Offending restaurants have until April 10 to give their employees half of the unallocated surcharges as well as account for every surcharge dollar collected. Any other money collected from customers and not spent on healthcare must be given to the City Attorney’s Office, Herrera said. If offenders do not come into compliance by April 10, they can be sued and assessed a $2,500 penalty per employee.
One of the restaurants on the list of offenders, Paxti’s Chicago Pizza, already settled with The City. The restaurant chain, with locations in Hayes Valley, Noe Valley, the Marina, and the Inner Sunset, agreed to pay $205,000 to 115 current and former employees who did not receive healthcare plus $15,000 in penalties. The restaurant charged customers a 4 percent surcharge.
Well-known San Francisco restaurants that reported spending less on employee healthcare than they collected from customers include some of The City’s toniest eateries, according to data provided by the Office of Labor Standards Enforcement, which enforces the healthcare law. Michael Mina, celebrity chef Tyler Florence’s Wayfare Tavern, Zero Zero on Folsom Street, Prospect, Squat and Gobble, and The Cheesecake Factory all collected at least $100,000 more than they spent on employee healthcare, according to the data. It is unknown which businesses received a letter from the City Attorney’s Office.
A spokeswoman for the Mina Group, which had the largest gap between funds collected and money spent, said any unused money was still available to employees.
“Funds collected have not been misappropriated and all funds remain available to all current San Francisco employees,” said Kristin McLarty, vice president of public relations for the Mina Group, in an e-mailed statement. The restaurant “rolls over” unspent money into a fund that employees can then access the following year, she said, adding, “Mina Group is confident that we have and will continue to be fully compliant with city, county and state law.”