Restaurants Adding Health-Care Surcharges to Checks Aren’t Using Funds for Health Care

By
Servers with sniffles aren't using the funds, so the restaurants are pocketing them. Photo: Matt Brown/iStock Photo

Anyone who's dined out in San Francisco in the last few years is familiar with the well-intentioned but slightly annoying surcharges added to the bottom of their checks — sometimes a flat three or four percent, sometimes a dollar or buck-fifty per head — which are intended to help restaurants defray the costs, mandated by the city, of providing health benefits for their workers. We always assumed this meant that they were providing health insurance for workers, but the 2008 city ordinance actually just requires that restaurants set aside a certain amount of money per hour worked to cover "health expenses." As the Wall Street Journal reports today, in a hard-hitting piece of investigative journalism, a slew of large S.F. restaurants including One Market, Wayfare Tavern, and Trademark are pocketing whatever unused cash there is at the end of the year — in one case as much as $100,000 — and this isn't actually illegal. So perhaps Mr. Bauer's steady drumbeat of protest against these surcharges isn't just commenter bait after all!

A server who works 40 hours a week, 50 weeks out of the year, is going to generate $2,340 per year in set-aside health-care funds on the restaurant's books. If that employee doesn't go to the doctor that year, or doesn't fill out the proper paperwork to get reimbursed for prescriptions or doctor visits, the restaurant is legally able to reclaim the funds under S.F.'s Health Reimbursement Account system, which is used in lieu of full insurance benefits.

According to city data, Wayfare Tavern earmarked $63,724 for health care in 2010, but only spent $6,013; One Market has $100,000 earmarked, and only laid out $12,646; Blue Plate set aside $41,859, but only spent $723; Trademark and Café Flore, which each levy the surcharges on customers, didn't lay out a dime in health expenses. All the restaurants say it's up to the employees to come asking for the funds, which most of them don't; they also argue that the surcharge helps them to defray the cost of S.F.'s steep minimum wage law and mandated paid sick leave. But it's unfair to customers to levy such steep surcharges, labeling them as Healthy S.F., and then using only ten percent of them for their intended purpose.

Also, it's arguably unfair to the servers themselves. Full health benefits — as opposed to a reimbursement account, and which restaurants would argue they can't afford — would probably make for healthier employees. And what of the employee who gets injured while not on the job, and who becomes unable to work? Are restaurants holding aside these funds under the worry that they could have catastrophic health expenses to cover?

And as Michael Bauer pointed out yesterday, San Franciscans would probably tip a few extra percent if they weren't always staring at those three- and four-percent surcharges tacked onto the bill; so have the restaurants found a legal way to pocket money that would otherwise be going into servers' pockets? Expect this debate to rage on, and expect to see these surcharges start to disappear, probably, off of some bills as the fog of political correctness around them starts to burn off.

Menu Surcharge Can Ben Misleading [WSJ]
Earlier: Bauer Thinks San Franciscans Would Tip More If It Weren’t for Healthy S.F. Surcharge
Bauer Weighs In About Healthy SF Surcharges, Cranky Commenters Go Nuts