Herrera takes on restaurants that use bogus healthcare surcharges

In reality, some restaurants offer employees substandard health coverage and pocket surcharges customers pay.

City Attorney Dennis Herrera fired a warning shot across the bow of San Francisco restaurants that use a customer surcharge ostensibly to pay for employee health care – while in reality, many restaurateurs simply pocket the money and offer substandard health care options to employees – over the weekend when his office announced a settlement with Patxi's Chicago Pizza.

The tone of the press release announcing the $320,000 settlement was generally positive, with Patxi's claiming it was an innocent error and Herrera praising the owner's cooperation in an agreement that improves the health care coverage of Patxi's employees, compensates employees for the error, and ensures all surcharges tacked onto customers' bills go to employee health care. Yet Herrera also included a warning to other restaurants.

“But today's settlement should send a strong message that San Francisco is serious about making sure that restaurants keep their promises to their customers about health care surcharges. I look forward to announcing a larger, more global effort in the coming days to address this issue, to make sure health care surcharge money goes to the workers rather than being pocketed by business owners," Herrera said in the release, signaling an effort to resolve with civil enforcement something that the political system has failed to do.

This became a hugely contentious issue in 2011 when the Golden Gate Restaurant Association (GGRA) and San Francisco Chamber of Commerce aggressively opposed reform legislation by Sup. David Campos that would have required that all surcharges be spent on health care and prevented employers from raiding health savings accounts at the end of each year. Mayor Ed Lee vetoed that measure but signed a watered down version by Sup. David Chiu – moves that Herrera criticized while running for mayor.

GGRA (whose Executive Director Rob Black didn't return our call) aggressively fought the city's Health Care Security Ordinance requirement that employers provide minimal health coverage to their workers, taking it all the way to the US Supreme Court. After losing that battle, many restaurants began adding a 3-5 percent surcharge of customers' bills, even while offering employees what experts say is the worst form of health coverage, healthcare savings accounts, and often blocking their employees efforts to use them.

An investigative report in the Wall Street Journal showed how many San Francisco restaurants were essentially committing consumer fraud by pocketing the surcharges, elevating the issue, but the District Attorney's Office has consistently refused to treat this as a criminal matter, despite calls for action by the Civil Grand Jury. So Herrera's willingness to use civil sanctions, and his warning of more to come, was enthusiastically welcomed by Campos and other advocates.

“I'm very happy with what the City Attorney's Office is doing,” Campos said. “It's time for this kind of legal action.”

Campos had already pledged to reevaluate the issue later this year as data comes in about how the compromise regulations by Chiu and Lee are working, threatening to take it to the ballot if necessary and calling it an important issue for all San Franciscans.

“It's not just about protecting workers and consumers, but also protecting businesses that play by the rules and comply with the law,” said Campos, noting that many restaurants have admirably refused to use the surcharge, shortchange their employees, or support GGRA's litigation against the city. “It's about fairness.”


essentially getting a 4% payrise thru this regulation.

Why would anyone think my budget is flexible and unlimited? The server gets 15% total - tip plus healthcare subsidy.

Posted by Guest on Jan. 14, 2013 @ 7:38 pm

Seriously. Get a rope and hang yourself.

Posted by Lucretia Snapples on Jan. 14, 2013 @ 9:00 pm

This elitist commenter excels at anti-social, insulting posts. His hatred of and disdain for CCSF is off the charts.

Posted by Eddie on Jan. 14, 2013 @ 11:35 pm

paychecks to pay for healthcare that they would otherwise have to pay themselves, then that's a raise.

I have no problem with the restaurant paying them more if they are worth it, but why should I pay 4% more for a service so that you can take home more cash? That should be purely discretionary and, if it is not, then I'll reduce the part of the bill that is discretionary.

Oh, and in most towns, wait staff are exempt from the minimum wage laws, so wait staff are making out there too.

Posted by Guest on Jan. 15, 2013 @ 7:32 am

You would still be paying the 4% whether it was listed on the bill as a surcharge or simply factored into the overall menu prices.

If you don't appreciate the charges you are assessed when you dine out, perhaps you should cook your own meals at home.

Posted by Guest on Jan. 15, 2013 @ 8:29 am

would be more likely to eat some place else where the food was 4% cheaper.

But I'm glad it is itemized separately because it helps me do the tip computation, as noted above.

Posted by Guest on Jan. 15, 2013 @ 9:07 am

Heartless, Brainless, and Cheap, the commenter who has consumed the most spit in his food at local restaurants.

Posted by Eddie on Jan. 15, 2013 @ 9:11 am

No wonder the wait staff love you.

Posted by Guest on Jan. 15, 2013 @ 11:50 am

aware of your cheap tipping habits. Your picture is likely posted throughout many restaurant kitchens. For sure, I wouldn't eat twice in the same restaurant if I were you. And word travels fast among that sector of workers.

Posted by Eddie on Jan. 15, 2013 @ 12:13 pm

rarely see the same server twice.

Wait staff get minimum wage AND tips AND free healthcare. Plenty of other folks give me services on minimum wage AND I don't have to tip them AND I don't have to pay for their damn healthcare.

What's so damn special about shlepping food?

Posted by Guest on Jan. 15, 2013 @ 12:55 pm

picture in the kitchen!!! Thanks for sharing your restaurant preferences. The fact that you chose to eat in chain restaurants even in San Francisco should win readers over to your political beliefs.

Posted by Eddie on Jan. 15, 2013 @ 1:08 pm

I don't need to eat food prepared by some fat lesbian with tattoos, piercings, stretch marks and a slappable attitude.

Posted by Guest on Jan. 15, 2013 @ 1:20 pm

So you don't like "fat" people, lesbians, people with piercings or tattoos. Why'd you leave out dyed hair this time?

And as I suspected, you are prone to violence. Get some help. One day, someone from one of the many groups you despise (which appears to be almost everybody) will offend you in some way, and you'll shoot her with the pistol that the 2nd Amendment allows you to pack.

Posted by Eddie on Jan. 15, 2013 @ 1:33 pm

than someone like me who feels very comnfortable in mainstream society.

Serial killers and mass murderers are usual loner misfits, like you, and not successful business people with happy families, like me

Posted by Guest on Jan. 15, 2013 @ 2:18 pm

Your comments are consistently belittling, classist, racist and violent. Maybe sharing your violent fantasies on a website will prevent you from actually committing violence. I can only hope.

Of course, you would define someone who doesn't share your conformist, boring world view as a "misfit." Since that is the case, I'll proudly carry that title.

How much more mainstream and dull can one be than to eat in chain restaurants in San Francisco.

Posted by Eddie on Jan. 15, 2013 @ 2:36 pm

Or do you think that anyone who doesn't bow down to your weird, twisted version of the "truth" is somehow a potential mass murderer?

Posted by Guest on Jan. 15, 2013 @ 3:05 pm

as "slappable." You are so filled with rage and hatred that you can't even remember your own recent comments.

Posted by Eddie on Jan. 15, 2013 @ 3:14 pm

You're weird.

Posted by Guest on Jan. 15, 2013 @ 5:44 pm

I generally don't eat at Chevy's or The Cheesecake Factory when so many better local options exist. I'll admit to a Subway or Quizno's when I'm travelling if I'm having problems finding vegetarian fare.

"Slappable" is a metaphor for what, exactly?

Posted by Eddie on Jan. 15, 2013 @ 7:13 pm
Posted by lillipublicans on Jan. 15, 2013 @ 1:33 pm

Shit troll. You are what you eat and you eat shit thus you are shit.

Posted by marcos on Jan. 15, 2013 @ 1:11 pm

And I'm comfrtable with 10-12% given that they also get minimum wage and free healthcare.

Posted by Guest on Jan. 15, 2013 @ 1:21 pm
Posted by lillipublicans on Jan. 15, 2013 @ 1:37 pm
Posted by Guest on Jan. 15, 2013 @ 2:18 pm

twice, hardly.

And that, of course, works to keep the eating of foreign spit down to a minimum.

Posted by lillipublicans on Jan. 15, 2013 @ 3:15 pm

When I worked in food service, we knew who the bad tippers were. The shit troll better not come back to the same establishment twice.

Posted by Greg on Jan. 15, 2013 @ 5:24 pm

Refreshingly honest of you to admit that you spit in food.

And that you're only good for a server job.

15% gross tip isn't "bad".

Posted by Guest on Jan. 15, 2013 @ 5:46 pm

Troll shits where s/he eats.

Posted by marcos on Jan. 15, 2013 @ 7:59 pm

Guest troll never returns to the scene of the under tip crime lest he dine on leprosy tainted spit food.

Posted by marcos on Jan. 15, 2013 @ 12:16 pm

But 11% is a decent tip and I sleep at night

Posted by Guest on Jan. 15, 2013 @ 12:56 pm

We'll see how far Herrera goes with this, though. I'm not too optimistic about anything coming from his office. Good start though.

I like the ballot idea. Progressive issues tend to win on the ballot. Probably should've been done from the start, but Campos is pretty moderate, so I understand his sensible, centrist approach in waiting for the data to come in. But justice delayed is justice denied, so if it comes back (as I expect) that whatever Chiu and Lee hammered out isn't working to make sure employers are doing the right thing, we shouldn't waste any more time and put tougher regulations to a vote of the people.

Posted by Greg on Jan. 14, 2013 @ 7:47 pm

"Campos is pretty moderate" -- seriously? That's a new one.

Posted by The Commish on Jan. 15, 2013 @ 8:57 am

live in a topsy-turvey world where Avalos and Campos are centrist while the other Democrat Supervisors are extreme right-wingers.


Posted by Guest on Jan. 15, 2013 @ 9:12 am

Actually, I think the truth is closer to the opposite: when you're a fiscal conservative who fetishizes the "free market system," anyone who sponsors even the most reasonable regulation looks like a wild-eyed radical.

Posted by steven on Jan. 15, 2013 @ 12:55 pm

It's as ridiculous to regard Campos as a "moderate" and Wiener as a "conservative" as it is to regard a typical centrist, moderate SF voters as a "wide-eyed radical".

Most SF'ers, like most Americans, are moderate. Then we have extremists on both sides.

Posted by Guest on Jan. 15, 2013 @ 1:19 pm

I don't find the term "moderate" to be very meaningful, and I think it's unfortunate that it has caught on as a label here, but it generally seems to apply to people who are fiscally conservative and socially liberal, as Wiener basically is (although those angry about him banning nudity could quibble with the latter label). Campos is more progressive on economic issues, but he's hardly a radical, either in demeanor or policy positions. On this issue, it seems to be a fairly moderate stand to insist on fair competition among businesses, complying with the law (which "moderate" Mayor Newsom signed) on providing minimal health coverage to their workers (which isn't free to employees, despite previous claims by commenters), and not committing consumer fraud. I honestly think that the Chamber and Mayor Lee have taken the extremist position on this issue, claiming that businesses somehow have a right to cheat their customers and their employees to seek a competitive advantage over restaurants that do the right thing. It's a morally indefensible position that only makes sense to those who have strong ideologically opposition to the notion that governments can and should play a role in regulating markets and creating a social safety net.

Posted by steven on Jan. 16, 2013 @ 12:28 pm

It isn't "progress" to fight every development of market-rate housing, for instance. Nor to let companies like Twitter leave without trying to reach a deal to get them to stay.

In fact, the Progressives are often quite regressive in trying to change nothing and leave SF as it is, rather than what it naturally aspires to be.

As you say, Wiener is economically conservative ("moderate" by national standards) and more liberal socially. For some here to claim he is a right-wing republican is blatant nonsense, but it doesn't stop them.

But what I really value in Supes is when their votes are independent and not easily labelled. By that standard, Avalos and Campos fail, because you can always preduct their vote. While Kim (voted for the Twitter tax break) and Mar (voted to oust Mirk) can still surprise, and so get more credit in my book.

Posted by Guest on Jan. 16, 2013 @ 12:51 pm

Matt Gonzalez claims to be a fiscal conservative, but progressive on social issues. Doesn't that put him in the same camp as Wiener? Yet the two of them couldn't be more different. Don't these labels tend to break down at some point?

Posted by Guest on Jan. 16, 2013 @ 2:50 pm

The employees aren't getting the money - that's the point. The owners are using your well-intentioned liberal guilt and sympathy with the workers' plight to rip you and them off. That's fraud, and jail time is the appropriate response.

Posted by Guest on Jan. 14, 2013 @ 10:22 pm

It's the customers who should get the break, because they are the ones paying for this.

Posted by Guest on Jan. 15, 2013 @ 7:33 am

universal single-payer healthcare coverage. Too bad, the parasites (insurance and drug companies) that skim profit from the existing system are too politically and economically powerful for such a reform to occur. Obamacare further institutionalizes this theft by subsidizing the profits of private insurance without any guarantee of adequate healthcare for its purchasers.

Posted by Eddie on Jan. 14, 2013 @ 11:58 pm

If even liberals won't support a public option, you know it's a bad idea.

What's wrong with people paying for their own healthcare? That's what i have to do, so why should I pay for yours too?

Posted by Guest on Jan. 15, 2013 @ 7:34 am

First of all, there are very few liberals in Congress any more and the fact that Democrats didn't force through a public option does not reflect on liberals.

Second of all, two-thirds of Americans think there should be a robust public option, so you are in a minority.

Thirdly, a public option is not about people having others pay for their healthcare, but rather simply enabling people to buy insurance which is administered at low overhead by the government; something it has proven itself comptetent to do through the Medicare programs.

Lastly, your flip statement that since you can afford private health care then there is nothing more that needs to be done appears psychopathic and cruel. "Let them eat cake!"

Posted by lillipublicans on Jan. 15, 2013 @ 8:35 am

And yet even they wouldn't support a public option.

Your 2/3 support is obviously based on some bogus question because Congress voted the public option down because of the public opposition to it.

The comparison with MediCare doesn't stack up because that is funded by contributions while, no doubt, you expect even those who don't contribute would care ehalthcare.

ObamaCare will provide everyone with the ability to pay their own insurance. Most of us would rather control our own healthcare than have a bureaucrat or a "death panel" deciding that.

Posted by Guest on Jan. 15, 2013 @ 9:11 am

Would be unions, they are happy with their mandated tax payer health care, they will be howling if these are forced into universal care with the 95%.

And who owns the democrats at the various levels of government?

Posted by matlock on Jan. 15, 2013 @ 3:05 pm

By and large, unions backed the health care overhaul, a law from which nearly a half million of their workers are now exempt.

Read more: http://dailycaller.com/2012/01/06/labor-unions-primary-recipients-of-oba...

Two unions are on strike against Verizon Communications in protest of proposed company policies that the unions themselves helped bring about. The new Obamacare law, which both unions supported, dramatically hikes the cost of Verizon’s employee health care plan. Efforts to pass some of that cost on to employees have sparked outrage.



Once they figure out they are going to be lumped in with everyone else things quickly change.

Posted by matlock on Jan. 15, 2013 @ 3:30 pm

That is why I support single payer, or to use a dirty word, socialized health care. It's no accident that all the rest of the "rich" nations in the world use some form of that system, even though it is under attack from privatizers who smell easy money.

It's an odd phenomenon in the US that people who suffer with a bad deal at work with bad wages and benefits would rather knock down those with a little better situation, like unionized workers, rather than strive for the better conditions that many private sector workers had just a short generation ago. Or pretend that the increasing inequality between owners of the economy and the rest is not really happening.

Posted by Eddie on Jan. 15, 2013 @ 4:06 pm

And your words are an insult to all those who fought to come here from Europe and find a better place

Posted by Guest on Jan. 15, 2013 @ 5:47 pm

Very few Europeans want to come here these days.

Besides, most Americans support single payer, according to the polling. It's just that our wonderful "democracy" can't find a way to do what the people ask for.

Posted by Greg on Jan. 15, 2013 @ 6:20 pm

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