Yesterday, the San Francisco Civil Grand Jury released a report that confirms earlier investigations by the press that found that restaurants are not actually putting all those Healthy S.F. surcharges toward actual healthcare for their employees. The Scoop shares the report, and it states that a "small but growing segment of employers" are profiting from these surcharges, which have been added on to many restaurant checks in town ever since the city's healthcare ordinance took effect in 2008. The report recommends that the city disallow restaurants from adding these surcharges and representing them as earmarked for health benefits, and to furthermore investigate possible consumer fraud at the hands of restaurants who are either profiting from these charges or illegally charging sales tax on them after they've been added to a subtotal.
The grand jury's report stems from a Wall Street Journal investigative report from last September that found multiple large restaurant operations in town were pocketing any unused funds that were earmarked for employee health benefits and this is perfectly legal, because while the law requires businesses to set up healthcare reimbursement accounts for employees, it does not actually require them to provide full benefits, and employees were not even made aware that the funds were available to them. In the case of One Market restaurant, for instance, the reporter found that the restaurant had set aside $100,000 for health benefits in 2010 but only spent $12,000 of it, and the rest went into the restaurant's coffers at year's end.
Michael Bauer has also kept up a steady drumbeat of protest against the surcharges in the last two years, arguing that it might have been acceptable to make the public aware of the city's mandate for the first couple years of the law, but after that the restaurants should have sucked it up and rolled the costs into the prices of dishes. He took his protest further this year by calling out all the restaurants in his Top 100 that persisted in adding surcharges to bills.
Restaurateurs argue that while the monies may not have gone directly to paying for healthcare bills, the surcharges were necessary for covering a host of city mandates, including the highest minimum wage in the country, and paid sick leave.
The new report recommends that the city revise the ordinance both to disallow the health reimbursement account option which allows the restaurants to quietly pocket the unused money and to remove the time limits on the use of the funds by employees.
Given the potential legal implications of the grand jury's report, you can expect those surcharges to disappear pretty soon, we'd suspect. And if you see sales tax being charged on subtotals that include the surcharge, call them on it.
San Francisco Civil Grand Jury condemns restaurants profiting from Healthy SF, urges ban on surcharges [Scoop]
Earlier: Bauer Still Vehemently Anti-Surcharge
One Market Restaurant and an Anonymous Server Respond About Healthy S.F. Surcharges
Restaurants Adding Health-Care Surcharges to Checks Arent Using Funds for Health Care