In case you haven't been keeping up, the local restaurant world has been embroiled in a bit of a legal mess over the last year at the hands of City Attorney Dennis Herrera. At issue are those Healthy S.F. surcharges that started appearing at the bottom of restaurant bills in 2008, after the city ordinance took affect obligating all businesses to cover employees' healthcare if they worked over a certain number of hours.
Herrera commissioned an audit of healthcare set-aside funds that various restaurants and restaurant groups around town had collected, and discovered that huge sums of money had been essentially pocketed by restaurants due to a loophole in the law, and were never spent on healthcare. Arguing that this amounted to consumer fraud, he went ahead in January and laid out the amounts that these restaurants had pocketed, suggesting that there may be legal action taken. Among the biggest offenders were the Mina Group chef Michael Mina's company that owns and operates Restaurant Michael Mina, Bourbon Steak, and RN74 here in the city which had collected over a half million dollars in surcharges but only spent $211,000 on employee healthcare costs. They later settled with Herrera and agreed to pay $84,000 out to employees who worked there between 2009 and 2011.
Patxi's Pizza was made an early example of, and they were the first restaurant group to settle with the city. Patxi's agreed to pay out $320,000 in restitution and penalties, $205,000 of which was going directly to 115 current and former employees to compensation for health care coverage that wasn't provided.
From the perspective of restaurateurs, some of whom spoke to the Wall Street Journal back in 2011 when the story about the misappropriation of these funds first surfaced, any monies that weren't going toward healthcare were simply being used to offset the other extra costs of doing business in San Francisco, which has the highest minimum wage requirement in the country, and mandates sick leave as well. Different restaurants went about it differently, charging either a flat $1.50 or $2 per diner, or a 3 to 4% surcharge on the total bill. According to the law, these funds only had to be set aside for a year, in the form of a healthcare reimbursement account, after which the restaurants were absorbing the unused funds. The Board of Supervisors sought to close this loophole, and then a civil grand jury recommended last July that the practice be outlawed, and that the restaurants be investigated by the city.
The latest report via Inside Scoop details the rest of the settlements with the City Attorney, and the list of restaurant who were cleared of any wrongdoing. We don't have specific settlements from each, but the list of restaurants below have agreed to pay out a total of $440,644 to about 1,500 current and former employees.
The list: 5A5 Steak Lounge, Amber India, B Star, Bix, Burgermeister, Burma Superstar, Cafe Bellini, Cafe Flore, Colibri Mexican Bistro, Fresca, MarketBar, Nob Hill Cafe, Press Club, Skool, Tony’s Pizza Napoletana and Venticello Ristorante.
The following restaurants either settled without having to pay monetary compensation, or were cleared of any wrongdoing: Wayfare Tavern, Elite Cafe, Firefly, Bluestem Brasserie, Cafe Claude, Cupola Pizzeria, Gitane, Lark Creek Steak, Nopa, One Market, Plant Cafe Organic, Ristobar, and 25 Lusk.
It remains to be seen if this is all over, or if there might be any actual lawsuits to come. There may yet be more settlements, and you can be assured that those surcharges are going to start to disappear and be reflected instead in dish prices they've already been removed from bills at a large number of restaurants.