That $1 "Healthy S.F. Surcharge" you occasionally see screwing up the math on your tab at dinner bill was intended as a way for local restaurants to cover the cost of healthcare for their employees. After a lengthy audit by the city's Office of Labor Standards Enforcement, however, a whole slew of big-name restauranteurs were called out over the weekend for collecting fees well above the amount they paid out in healthcare costs. In one case, the city's audit shows a large local restaurant chain had collected over $160,000 in fees without ever paying one shiny penny in healthcare fees.

That particular offender was the fast-casual Squat & Gobble chain, but other industry employers had even larger amounts of unspent healthcare funds. As GrubStreet reports today, Michael Mina's restaurant group held on to over $328,000 in unspent healthcare funds in 2011. Rounding out the top offenders were Wayfare Tavern's $235,000 excess and Prospect's $170,000 surplus. The Cheesecake Factory, Max's Opera Cafe, Zero Zero, Burger Bar, 25 Lusk, One Market and Bix all had surpluses ranging anywhere from $90,000 to over $150,000. (To be fair, the Mina Group and Prospect covered over $200,000 and $85,000, respectively, in employee healthcare costs in 2011.)

Under the original language of the Healthy S.F. bill, which some folks have blamed for bad tipping, employers only needed to hold on to money set aside for healthcare for up to a year, allowing them to pocket unspent funds on January 1. That loophole was closed at the end of 2011. At issue now is what should be done with funds collected from local diners under the pretense of universal healthcare. Last summer, a Civil Grand Jury condemned the practice of tacking on $1 Healthy S.F. fees and then benefitting from the surplus of funds.

For their part, the Golden Gate Restaurant Association says the controversy is just an error with the paperwork. Grubstreet reports:

Rob Black of the Golden Gate Restaurant Association says that the controversy has been blown out of proportion. He told ABC 7 that he believes there will be "a lot of people who can show that this was just reporting error" when all is said and done, because the information was based on forms that they, the restaurants, filled out themselves for the city. He argues that perhaps 90% of them did not understand the nature of the forms, and failed to report all of their costs associated with healthcare.

The Healthy S.F. surpluses aren't limited to the restaurant industry either. Trinity Building Services, the second biggest offender on the list published by the Chronicle, offers commerical janitorial services. In that case, Trinity collected nearly $250,000 in employee healthcare fees passed on to clients, but spent less than $3,000 on actual employee healthcare.

City Attorney Dennis Herrera had originally stated the city would not be releasing the names of specific offenders, but after an initial report appeared in the Chronicle on Friday, the paper obtained the list from the city's Officer of Labor Standards Enforcement and ran it over the weekend.

Now that the information is out there, expect a slew of disclaimers and responses from those named to appear across our city's thriving food blog scene. Patxi's Pizza — one of the few restaurants actually hit with fines for pocketing the funds — issued a response earlier this month claiming the money collected was never used for anything other than employee healthcare and that the City Attorney's report was an unfair characterization of what happened. Still, Patxi's will have to distribute about $200,000 to their 115 employees who didn't receive (or need) the money for healthcare. Other restauranteurs have argued that using the funds to cover the high cost of operating in San Francisco (thanks to the highest minimum wage in the country and paid sick leave requirements) was fair use.

[Chron] [City Audit]
[Grubstreet]