Check, please - Page 2

Top San Francisco restaurants facing exposure over health surcharge

City attorney Dennis Herrera is targeting restaurants that target their customers and employees.

GGRA Executive Director Rob Black has maintained that the OLSE figures don't accurately reflect whether businesses are in compliance because the reporting requirements are confusing. GGRA held a compliance workshop on April 17, and Black told us about 40 restaurateurs attended.

"It was very informative and we got really good feedback from the restaurants," Black told us. "We had people saying, 'knowing what I know now, we should redo my 2011 form because I did it wrong."

Black was initially critical of Herrera's focus on the restaurant industry, but told us last week, "He made a commitment that the process would be efficient and fair, and he's lived up to that so far....I still believe that the majority [of violators] didn't have a mal-intent...Many people on the list that was reported have done nothing wrong."

Cheesecake Factory — which was seventh on last year's OLSE list, allegedly taking in $159,242 more in surcharges than it spent on employee health care — insists that it is in compliance and expects the City Attorney's Office to confirm that.

"We believe the City Attorney's initial review was erroneous," Richard J. Frings, the company's vice president of compensation and benefits, told us. "We are in full compliance with HCSO. Our healthcare costs in San Francisco have far exceeded the surcharge that we have collected. Once the City Attorney's office has an opportunity to review our filings, we believe this matter will be closed without any further action." He refused to provide figures to support the assertions.


Most of the restaurants that have been accused of stiffing employees use health savings accounts, which health officials say is a far worse option than private health insurance or the city's Healthy San Francisco plan, which was created in conjunction with HCSO. Federal law bars cities from prescribing how health benefits are delivered.

San Francisco's restaurant industry has always been hostile to the HCSO's employer mandate, with the Golden Gate Restaurant Association unsuccessfully challenging the law all the way to the US Supreme Court. Controversy then erupted in 2011 with revelations (first in the Wall Street Journal, followed up by local media outlets) that some of the city's most high-profile restaurants were shirking their responsibilities even as they charged diners 3 percent to 5 percent surcharges, sometimes essentially pocketing that money at the end of each year.

That verges on consumer fraud, but District Attorney George Gascon has refused to investigate, telling the Guardian and other papers that he was deferring to the OLSE and the City Attorney's Office.

In 2011, a progressive-led majority on the Board of Supervisors passed legislation authored by Sup. David Campos to require that businesses keep the money they are required to spend on employee healthcare — which is currently $2.33 per employee-hour for large companies or $1.55 per employee-hours for businesses with less than 100 employees — for employees to use as needed.

But under aggressive lobbying by the GGRA and San Francisco Chamber of Commerce — which asserted the right of business owners to raid these funds, calling the set-aside a multi-million-dollar annual loss to the local economy — Mayor Ed Lee vetoed the measure. He later signed watered-down legislation requiring the money be set aside for two years, setting standards for letting employees know how to access the funds, and explicitly calling for all customer surcharges to remain in escrow accounts.

The OLSE, which also monitors compliance with the city's paid sick leave and minimum wage laws, can only investigate businesses when an employee files a complaint. But then complaints trigger investigations that cover all of a given business's employees, who are often compensated for past violations. To file a complaint, just write or call (415) 554-7892.