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SAN FRANCISCO (CBS/AP) – Dozens of San Francisco restaurants are under investigation for exploiting a new city program by keeping customer surcharges instead of spending them on employee health care, city attorney Dennis Herrera announced Friday.
Herrera said during a City Hall press conference that the offending restaurants have until April 10 to spend at least half the fees collected on employee health care or face consumer fraud lawsuits. Unspent fees must then be turned over to the city, which will use the money for future enforcement of the city’s landmark universal health care program.
The so-called Healthy San Francisco program launched in 2008 and requires city businesses to set aside $1 to $3 an hour per worker for health care costs. Many San Francisco restaurants have taken to paying for the program by charging diners an extra fee for every meal.
The city’s Office of Labor Standards Enforcement reported that only about one-third of the $14 million city restaurants collected in surcharges were spent on workers’ health care.
“We San Franciscans take great pride in a vibrant local restaurant scene,” Herrera said. “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 has about 3,500 restaurants, the most in the United States on a per capita basis.
Herrera didn’t name any of the restaurants under investigation. He said that “several dozen” restaurants consider to be the worst offenders were sent “target” letters on Friday informing of the offer to avoid litigation.
Those restaurants are also required to prove a full accounting to the city attorney of all fees collected and spent.
Herrera said he hopes the letters to offending restaurants spurs them to act. “The proposal we’re offering is eminently fair; partial amnesty for past violations in exchange for cooperation for compliance in moving forward.”
State Assemblyman Tom Ammiano, who authored the city’s health care security ordinance, applauded the crackdown.
“When you’re providing something that’s so valuable to us, it doesn’t allow you to be above the law. It does require transparency and accountability.”
They both stressed that most of the city’s 3,500 restaurants are following the law, but Supervisor David Campos said this targets the few that aren’t.
“I really hope that the businesses that are the focus of the investigations see the light and that they do the right thing,” Campos said.
The Golden Gate Restaurant Association said an overwhelming majority of eateries are complying with the health care program and that it supported Herrera’s approach of “partial amnesty” because some of the suspected “worst offenders” may be in arrears because of innocent mistakes.
The association’s director Rob Black said “the vast majority of businesses are not misrepresenting information to their customers.”
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