Herrera steps up his crackdown on surcharge fraud by restaurants

City Attorney Dennis Herrera.

City Attorney Dennis Herrera has stepped up his efforts to ensure San Francisco restaurants aren't committing consumer fraud with their healthcare surcharges – by pocketing money collected from diners ostensibly to cover their city obligation to provide health coverage to employees – offering an amnesty period for following city law.

At a City Hall press conference on Friday – flanked by Sups. David Campos and David Chiu, Assembly member Tom Ammiano, and local restaurant employees – Herrera announced an investigation and enforcement effort targeting dozens of local business who have reported spending less on employee health care than they collect from customers for that purpose. They will receive letters this week urging voluntarily compliance during an amnesty period, after which they could be hit with lawsuits and civil penalties.

"The enforcement program we're launching today isn't simply to protect employees and consumers from surcharge fraud – it's also to protect the vast majority of competing restaurants that follow the law and provide health care benefits to their workers," said Herrera. "We San Franciscans take great pride in a vibrant local restaurant scene that enriches our neighborhoods, employs thousands of our residents, and serves millions of tourists each year. And it's unfortunate that the illegal business practices of a relative handful of bad actors require the creation of this enforcement initiative.”

The City Attorney's Office is refusing to release the list of restaurants that will receive the letters, calling it an ongoing investigation that exempts the list from public disclosure. But the office did furnish reporters who asked with a spreadsheet from the city's Office of Labor Standards Enforcement, which ensures compliance with the landmark Health Care Security Ordinance that Ammiano authored as a supervisor, going into effect in 2008 and creating the Healthy San Francisco program.

That list includes many well-known restaurants. Topping the list is Mina Group LLC (which includes restaurants Michael Mina, RN74, Bourbon Steak, and Clock Bar) collecting $539,806 and spending $211,809, Wayfare Tavern collecting $303,207 and spending $68,018, Layers LLC (owners of Paxti's Pizza, which Herrera's reached a settlement with two weeks ago), Squat & Gobble collecting $160, 498 and spending nothing on employee health care. Others on the list include Cheesecake Factory, Max's Opera Cafe, Asia SF, Burgermeister, Folsom Pie, Cafe Bellini, and One Market Restaurant.

Golden Gate Restaurant Association Executive Director Rob Black lashed out at Herrera's office for releasing that list and media outlets for publishing it, claiming that he's talked to many of those restaurateurs and that they had filled out the forms wrong or that they simply hadn't yet spent the surcharges collected even though the funds may be set aside for employee health care.

“They aren't committing fraud, which is the accusation by the city attorney, just because of errors in filling out a form,” Black said, urging the public to reserve judgment until the investigation is complete.

But it's hard to feel too bad for GGRA or the member restaurants that aggressively contested and then sued the city over the health care law, appealing it all the way to the Supreme Court, then turned around when they lost and used deceptive (and sometime fraudulent) surcharges to single out those costs for customers.

According to a press release put out by Herrera's office:

“The City Attorney's target letter outlined conditions worst-offender restaurants must take steps to meet by a deadline of April 10, 2013 to come into legal compliance, and avoid civil litigation by Herrera's office for pocketing customer surcharge money intended to fund employee health care benefits.  
* Worst-offenders must provide an accounting to City Attorney investigators for all health care surcharges collected during the period from 2009 to 2011, along with health care expenditures pursuant to the Health Care Security Ordinance, or HCSO, for that time period.
* Worst-offenders must distribute 50 percent of unallocated health care surcharge funds  to employees who worked for the company during the time surcharges were imposed on customers, covering the years 2009 to 2011, in accordance with City Attorney instructions.
* Worst-offenders must remit amounts unredeemed by their eligible employees to the San Francisco City Attorney's Office for the purpose of funding future enforcement of the HCSO and other consumer protection laws.
* Worst-offenders must attest that they will refrain from committing further consumer fraud and remain in full compliance in good faith with the HCSO going forward, in accordance with City Attorney instructions.”

In his press conference, Herrera emphasized the “relative handful” of restaurants targeted by his office, just a few dozen in a city with thousands of restaurants. But he also said that his office is aware of restaurants that use the surcharge without even reporting to the OLSE as required, so both the amnesty program and his investigation goes beyond just the restaurants who get letters.

“I'm tremendously gratified by this very statesmanlike and generous gesture by the City Attorney's Office, Mr. Herrera in particular,” Ammiano said. “I feel somewhat parental toward this program, the Health San Francisco program. It was a hard fight to get it and it's been successful, so any attempts to sully it, minimize it, or water it down get my dander up.”


employees health benefits? But not for all the other workers in San Francisco? What's special about servers?

In fact, they are better off in SF than most other places because they qualify for minimum wage even though they get tips - most places exempt servers from minimum wage laws because of their cash income.

Posted by Guest on Jan. 28, 2013 @ 6:42 pm

While you're correct about front-of-house staffers making tips on top of the minimum wage, you're overlooking the fact that those who work in the back-of-the-house do not. A prep cook may make 12 bucks an hour and that's what he gets. Period.

Posted by Eric on Jan. 31, 2013 @ 11:48 am

Do you tip the janitor and the bottle washer?

Posted by Guest on Jan. 31, 2013 @ 12:56 pm

Servers also tip out a certain % to the Kitchen, BOH. they get more than the hourly rate.

Posted by Guest on Apr. 23, 2013 @ 5:11 pm

on looking into the immigration status of people employed in SF?

Nothing will raise the income level of SF's kitchen employees like enforcing America's immigration laws. If he is serious about helping America's under class of wage peasants he will look into enforcing this nations laws.

Posted by matlock on Jan. 28, 2013 @ 7:16 pm

Get ready for $25 burgers.

Posted by marcos on Jan. 28, 2013 @ 7:36 pm


When I go back to Portland, much like Austin it seems, I can see hipsters washing dishes and doing other such jobs that here are beneath some folks.

If the various city laws such as the Daly hangover pay mandate are here to protect the citizens, then let us actually protect the citizens.

Posted by matlock on Jan. 28, 2013 @ 8:33 pm

One has a hope of surviving in Portland because housing prices are not totally detached from wage prices throughout much of the City.

The same was true of Austin during the "Slacker" period when I lived there, not sure if it is the case nowadays.

Posted by marcos on Jan. 29, 2013 @ 10:49 am

homes would ever sell. But the math is quite simple:

Average SF income: 75K
Average income for a SF couple: 150K
Average loan: 4 times annual income i.e. 600K
Average SF home: 750 K ie 600k plus 20% down

Bingo. Homes are selling like hot cakes.

Posted by anon on Jan. 29, 2013 @ 12:00 pm

I posted accurate ones last week. Median household (not per capita) income in San Francisco is about $70,000.

Your universe consists only of people of your socio-economic class and above.

Posted by Eddie on Jan. 30, 2013 @ 10:30 am

Two people who make that average can afford to buy the average SF home.

Posted by Guest on Jan. 30, 2013 @ 10:43 am

household and per capita? San Francisco median per capita income is $45,478, median household income is $71,304, median family income is $85,778. Households or families with median incomes cannot afford to buy the average San Francisco home.


Posted by Eddie on Jan. 30, 2013 @ 11:02 am
Posted by Guest on Jan. 29, 2013 @ 7:22 am

I love SF but the burgers are already 25 dollars.

Posted by Guest on Jan. 29, 2013 @ 10:42 am

If restaurants are collecting a surcharge for employee healthcare they need to spend it on that purpose - period.

Posted by Lucretia Snapples on Jan. 28, 2013 @ 8:11 pm

and e-mailing the cities dimwitted sleazy labor department lawyer idiots over and over again. it would seem the cities laws are a minimum.

The places in question should just set up a fund where the principle should go to insurance and the interest goes back into the fund or the owners. The companies could have a huge interest bearing insurance endowment.

Posted by matlock on Jan. 28, 2013 @ 8:42 pm

should have just raised prices and kept their mouths shut. instead they document their own dimwittedness and fraudulence and get hoisted by their own petard. good riddance.

Posted by aml on Jan. 28, 2013 @ 9:09 pm
Posted by lillipublicans on Jan. 28, 2013 @ 9:22 pm

on the Mirkarimi matter. That kind of absence of integrity takes at the very least a sincere "mea culpa" to get past.

Posted by lillipublicans on Jan. 28, 2013 @ 9:25 pm

really don't belong in the same sentence. I wrote what I wrote below, before I saw this comment. And not just the Mirkarimi matter, but the gang injunctions, invalidating the Lennar petitions, as well as a few other things that escape my memory now. Suffice it to say that this is a man who doesn't have much respect for democracy or the rule of law. He's a politician and he does what's politically expedient.

In this case, he's right though. Like I said... "IF he keeps this up." He's done about a half dozen things that are each about as awful as this one thing is good. So maybe if he does a string of about a half dozen things like this, he'll win me over again. Not holding my breath.

Posted by Greg on Jan. 28, 2013 @ 10:50 pm

I love to dine out. From now on, I'm going to check to make sure the restaurant I'm going to is not on that list before I go there.

I'm not surprised that Michael Mina is one of the worst. The disclaimer on his menu reads like an anti-San Francisco political treatise:
"A 3% surcharge is added for San Francisco Employer Mandates, including Health Care Security, Commuter Benefit and Minimum Wage Ordinances."

It's a shame I won't be eating there now, because he's a damn good chef. But you know what? If he hates this city so much, he should just pack up and leave. Greedy bastard should be ashamed of himself with all the cash he's rolling in -cash provided mostly by San Francisco liberals who SUPPORT all those mandates he hates. Either take the good with the bad locating here (and clearly the good far outweighs the bad if you look at how wonderful this city has been to him)... or STFU, quit whining, and go try peddling your black truffle-crusted ocean trout with baby beets, pommes purée, and melted leeks in Houston or Atlanta and see how long your restaurant can stay in business!

Posted by Greg on Jan. 28, 2013 @ 9:41 pm

at a place that does not adhere internationally recognized immigration laws?

Posted by matlock on Jan. 28, 2013 @ 11:06 pm

As long as capital can move freely to wherever it feels conditions are best, then labor should also have the right to move freely to where conditions are best.

People should have at least as much freedom as companies, no?

Posted by Greg on Jan. 28, 2013 @ 11:48 pm

If one were to take ill gotten gains from outside the USA and attempt to launder them, through an ATM for example, the department of homeland security would investigate and take action. If the monies were not financing militants but just plain old laundering the various other authorities would be notified.

Alas greg's moral stand is but dust in the wind.

Posted by matlock on Jan. 29, 2013 @ 2:27 am

I had trouble understanding your argument at first, but I think I get it now.

Your analogy doesn't hold up, however, because the undocumented immigrant and the businessman shipping jobs away under NAFTA are doing the exact same thing. Both are just moving to where conditions are more favorable, no more, no less.

It's just that in one case, the law defines the activity as illegal, while in the other it's perfectly OK. There's no rhyme or reason to why the businessman's activity is legal but the worker's is not, except that the law is made by and for businessmen and not labor. Personally I think the businessman's activity is more detrimental to the social fabric.

Posted by Greg on Jan. 29, 2013 @ 8:40 am

All restaurants employ undocumented immigrants. No north-american will ever work the hours they work and do the job they do. So before you lash out and hate on those very hard working people, ask yourself if it's really worth it. In regards to what Herrera is organizing...I fully support him. I work for one of the black-listed restaurants mentioned here and we deserve health insurance or at least HSF.

Posted by Angel on Jan. 29, 2013 @ 8:31 am

As a worker in one of those restaurants, do you think it's helpful to not patronize the place while it's on the list?

A boycott is always a double edged sword, because some of your money goes to the workers.

Posted by Greg on Jan. 29, 2013 @ 8:46 am

because I disagree with the whole Healthy SF anyway.

What is special about servers?

Posted by Guest on Jan. 29, 2013 @ 9:04 am

because the workers at such restaurants are likely less healthy so their spit will be more toxic.

I didn't notice any chain restaurants on the list.

What's so special about you?

Posted by Eddie on Jan. 29, 2013 @ 10:04 am

Most people think of Healthy SF as a worker protection measure. But it's actually also a consumer protection measure. As a restaurant patron, I'd rather have waitstaff who are sick stay home rather than come to work and get me sick. No one should have to make the choice between coming to work sick and not getting paid.

Posted by Greg on Jan. 29, 2013 @ 11:07 am

The same people who undertip and risk spit in their food are the same ones who willingly expose themselves to sick restaurant employees who handle their food.

Posted by marcos on Jan. 29, 2013 @ 11:19 am

work in hospitals. Do they matter less than servers? Why?

Posted by anon on Jan. 29, 2013 @ 12:02 pm

Jason Grant Garza ... wow, what a wonderful puff article about Herrera. Wasn't there concern over this back ago in the newspapers? Is this part of the followup to that ... just now?

So Herrera takes on BOGUS HEALTHCARE CHARGES ... WHAT ??? What about the CITY LAWBREAKERS such as the DEPARTMENT of PUBLIC HEALTH ???

I'm a bit confused ... what about BOGUS STAYAWAY (Restraining Order) that DENIES PUBLIC HEALTHCARE to a DISABLED individual seeking HEALTHCARE ISSUED from San Francisco's Department of Public Health?. See youtube https://www.youtube.com/watch?v=7cP3jCmJFRo on 8/15 and then after going to the Sheriff (Ross) and told NO such ORDER and videotaping is ALLOWED on 11/27 (see youtube for the six parts https://www.youtube.com/watch?v=ZYC-syG0D7Y ) Please note who is there ...

Then what DPH does again - BREAK the LAW - WHAT is/was the CONSEQUENCE??? https://www.youtube.com/watch?v=VFd-KtS8Zss . on 12/19 and what the LAPDOG of DPH does https://www.youtube.com/watch?v=HaMW9xGq-LU
I'm waiting to be told that Herrrera can not make DPH perform ... you know follow the LAW and provide legally required medical services ...

Yes, let the GAMES continue ...

Look at all the OTHER videos and remember YOU ARE NEXT ... keep drinking the KOOL-AID.

Where is the INTEGRITY ... oh, that's right ... it is JUST ILLUSION ... too bad the CHRONICLE won't let me post comments ... I wonder WHY.

Posted by Jason Grant Garza on Jan. 29, 2013 @ 2:42 am

Jason Grant Garza here ... HOW CURIOUS ....

"The City Attorney's Office is refusing to release the list of restaurants that will receive the letters, calling it an ongoing investigation that exempts the list from public disclosure."

Would that be the same city attorney that denied me my own MEDICAL RECORDS through SUNSHINE ( case # 11081) in which DPH'S expert and the city attorney said I was INCORRECT and the DISABLED Mr. Wolfe could NOT find a HIPPA expert? Well, I was RIGHT ... the almighty city attorney was WRONG just as in the FEDERAL LAWSUIT when the city DENIED HEALTH CARE (C02-3485 PJH) where the CITY committed FRAUD and TESTILIED only to sign a settlement/confession YEARS later through the OFFICE of INSPECTOR GENERAL admitting FAULT and GUILT while leaving their INNOCENT VINDICATED VICTIM for DEAD ... yes, Mr. Herrera was in CHARGE. Where was the INTEGRITY, DAMAGES, or even HUMANITY? go to myownprivateguantanamo.com to see the paperwork, confession, LEFT for DEAD and WHAT I got from the other city agencies.

Then go here to see it start ALL over again ... http://www.youtube.com/watch?v=7cP3jCmJFRo

While, we are AT it ... what about the INVESTIGATION
into ROSS' matter ... wasn't the video tape released ... what is the difference ... just another question that will go UNANSWERED by our CRAFTY city attorney.

Please where is MY BARF BAG ... keep DRINKING the KOOL-AID, look over here but NOT over here ... yes, FOLKS ... carefully CRAFTED ILLUSION ... if he was SINCERE DPH would be PROSECUTED. Rigged is as RIGGED DOES.


Oh and by the way ... WHY NOT ask the MINISTRY of SUNSHINE (Sunshine Task Force) how many DETERMINATIONS against the city attorney it has that are going UNENFORCED.

Watch, learn and KNOW how the GAME is played. Yes the CITY that can ... DOES screw its citizens with false concern, manipulation, false unaccountable words and non-performance ... what is the consequence ... another puff article telling us HOW GREAT they are ???

Go to the website and youtube that is IF YOU WISH to LEARN the TRUTH or keep drinking the KOOL-AID (propaganda)

"A NATION of FOOLS deserves WHAT it GETS."

Posted by Jason Grant Garza on Jan. 29, 2013 @ 6:40 am

Heartless, Brainless, and Cheap, has been spotted in North Carolina:


Posted by Eddie on Jan. 30, 2013 @ 10:31 am

Why should the rate go up?

Posted by Guest on Jan. 30, 2013 @ 10:45 am

black people sat on the back of the bus and drank from separate water fountains. Change and progress happen, problem?

Posted by Eddie on Jan. 30, 2013 @ 11:05 am

There is no need therefore for the rate itself to go up.

Posted by Guest on Jan. 30, 2013 @ 11:17 am

The increase in the socially accepted tip rate is a sign of progress. You can't comprehend that because you define progress only as more money in your pocket at the expense of others.

Posted by Eddie on Jan. 30, 2013 @ 11:31 am

amount of the tip. As has been explained before, I tip 15% - 11% in cash and 4% for their healthcare. Everyone wins.

Posted by Guest on Jan. 30, 2013 @ 11:43 am

I'm not a server. Of course, you are free to undertip a server. It must make you feel like quite a rebel to reject social convention by stiffing people who try to make your dining experience pleasurable.

How do you win by publically expressing (albeit anonymously) your sociopathy?

Posted by Eddie on Jan. 30, 2013 @ 11:55 am

mandatory and added to the bill, at some insane job-killing rate of course.

Posted by Guest on Jan. 30, 2013 @ 12:06 pm

Cheap and speculative troll.

Posted by Eddie on Jan. 30, 2013 @ 3:37 pm
Posted by anon on Jan. 30, 2013 @ 4:25 pm

and referee your own arguments.

Posted by Eddie on Jan. 30, 2013 @ 10:30 pm

High wage economies are high demand and high growth economies. You want lower wages, lower demand and low growth. Why do you hate baby chicks, kittens and fuzzy bunnies so?

Posted by marcos on Jan. 30, 2013 @ 11:02 pm

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