A San Francisco civil grand jury has concluded that 38 restaurants built into their prices the cost of providing city-mandated employee health coverage—and then never offered the benefits to workers.
The grand jurors’ suspicion: That restaurateurs pocketed a substantial portion of the money.
In 2006, San Francisco passed the Health Care Security Ordinance, the nation’s first public-option health insurance plan. It requires employers to provide health insurance.
If they don’t, they must pay up to $4,252 per employee annually into a San Francisco fund that reimburses employees for their health expenditures. The funds are collected at the point of sale from consumers.
Employees then submit medical bills directly to the employer for reimbursement.
In November 2011, San Francisco Mayor Edwin Lee signed legislation clarifying that the full amount collected from customers under the surcharge must be used for employee health care expenditures.
Grand jurors collected receipts from 38 restaurants and compared them with annual compliance reports, which employers file with the Office of Labor Standards Enforcement. They were also matched up with annual payroll expense tax documents filed with the Office of the Treasurer and Tax Collector.
The survey found that 18 restaurants collected $2.17 million in surcharges, of which $1.16 million was spent on health care expenses. A surplus of $1.01 million remained with the restaurants.
The report also found that more than half of the restaurants failed to add sales tax to the surcharge. In just that small sample, the city’s lost tax revenue added up to more than $77,000.
Rob Black, executive director of the Golden Gate Restaurant Association, criticized the report, saying it fell outside the scope of a civil grand jury’s purpose. He argued that of the 3,200 restaurants in the city, only a few were handpicked to make a political point.