SAN FRANCISCO (CBS 5) — A grand jury report found a “significant number” of San Francisco restaurant owners benefiting financially from the city’s universal health care program.

The report found restaurants pocketing about $1 million collected from customers in just one year, money that customers were told was for workers’ health care costs.

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Dining in San Francisco can be pricier due to the city’s Health Care Security Ordinance, which requires business with over 20 employees to provide health benefits to their workers.

KCBS’ Barbara Taylor Reports:

In an undercover investigation, CBS 5 found that the law is loosely understood by employees and employers alike, and that some restaurants have made no reimbursements despite collecting hundreds of thousands of dollars in surcharges from patrons.

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Read The Grand Jury Report (.pdf)

Two employees at the West Portal location of the restaurant chain Squat and Gobble told and an undercover producer that they were not aware of health benefits provided to them by their employer and required by city law. The company had collected more than $200,000 in health care surcharges.

Deisy Bach, who is contracted by the restaurant to provide human resources, was shocked by employee responses. City records show the restaurant had not reimbursed a single dollar in health care expenses in the last year.

“You know, all I can look at is what we have done to try and communicate to employees and we have gone out and provided communication both in verbal and written form,” said Bach, who added the company has taken great measure to follow the letter of the law.

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A report released Thursday by San Francisco’s Civil Grand Jury (.pdf) shows this circumstance is a growing reality in the city. The jury’s investigation found a segment of employers “primarily in the restaurant industry are (sic) profiting from the practice of adding a surcharge to a bill.”

The grand jury focused on eighteen restaurants which collected more than $2 million in 2010, but spent more than $1.1 million on health care expenses. But according to the law, they are not required to give employees the difference.

CBS 5 asked other restaurant workers all over the city, many of whom were not aware of their right to health care benefits. Owners of the restaurant Caffe Delucchi in North Beach said it is a communication problem and difficult to avoid.

The restaurant gives each eligible employee a debit card managed by Wells Fargo that workers may use for health care fees. Still, one of the restaurant’s waiters told CBS 5 that he was not eligible for health benefits. For its part, the restaurant said that they had notified him of his rights to the funds.

The issue of communication is at the center of the problem with the law. Businesses are also able to recoup unused funds after two years.

“On paper, some of these businesses tell us that they have a third party administrator and the information is provided to the worker. But we know, and you saw for yourself in your own investigation, that many workers are not educated on that and they don’t know what their rights are,” said San Francisco Supervisor David Campos. Last year Campos tried and failed last year to close what he calls a loophole in the law.

“I think there is this incentive where they can make money if the workers do not use the accounts,” Campos said.

Restaurant owners said the city should take a great role in making workers aware of their rights. They add employment laws in the city are tough to follow and change frequently, making it one of the most unfriendly business climates in the country.

The city department tasked with enforcing the ordinance is staffed by only a few people and for now mainly responds to worker complaints, instead of launching proactive investigations.

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