Castro Eateries Caught Up in City Probe Around Healthy San Francisco Fees

City Attorney, Dennis Herrera, Assembly member Tom Ammiano, Supervisor David Campos, and two servers from Zazie Restaurant in Cole Valley. (Photo: InsideScoop SF)
City Attorney, Dennis Herrera, Assembly member Tom Ammiano, Supervisor David Campos, and two servers from Zazie Restaurant in Cole Valley. (Photo: InsideScoop SF)

On Friday, Jan. 25, City Attorney, Dennis Herrera announced dozens of SF's 3500 restaurants are under investigation for possibly scamming funds for their own use through customer surcharges that should-be earmarked for their employees healthcare.

Five of those 93 targeted eateries, listed by CBS News, under scrutiny are Castro establishments of note: Squat and Gobble, Cafe Flore, Starbelly, Chow and the now defunct 2223 Market St. Bar & Restaurant shuttered in 2011.

How was this missing cash generated? The Healthy San Francisco program, a universal healthcare Citywide initiative authored by CA Assemblyman and former SF Supe, Tom Ammiano, was launched in 2008. To fund it the City mandated businesses with 20 or more employees set aside $1 to $3 an hour per worker for health care costs.

(Photo: SF Weekly)
(Photo: SF Weekly)

Most of San Francisco restaurants decided instead of raising prices to cover this new cost opted to fund the program by charging diners an extra fee or percentage for every meal. This figure is accounted for at the bottom of your tab before taxes and tip.

What investigators found within a few of the City's epicurean establishments amounted to massive accounting missteps. For example; the once Castro fave, now closed, 2223 Market St Bar & Restaurant took in $77.737 from the Healthy SF surcharge fee, spent $5,230 of it on employee healthcare needs leaving them a whopping $72,507 in monies unaccounted for, unspent or worst case scenario-in someone's pocket.

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.

Herrera offered the suspected eateries partial amnesty stating in a letter (see below) sent to 50 of the businesses on the list that they have until April 10 to spend at least half the fees collected on employee health care or face consumer fraud lawsuits.

"Requiring these people to pay restitution is a compromise," Tom Ammiano said to the SF Gate. "If it was up to me, I'd throw them in jail."

Unspent fees must then be turned over to the City, which will use the money for future enforcement of the City’s heralded, universal, health care program.

Restaurant owners have cried 'foul' saying, according to the SF Gate, the cash they collected is still in an account for workers who need medical care. Others say their surcharges were not just for employee health care, but also to cover the cost of other San Francisco requirements, taxes and fees. And some, even after four years of the program being installed in the City, have just voiced confusion over the whole process.

It's important to note that not one of our Castro restaurants or any other has been officially charged with anything. These missing funds could be innocent mistakes or clerical errors. San Francisco is reported to rank first in the nation in the number of restaurants per capita. The VAST majority of our City restaurants are in complete compliance.

This is why Mr. Herrera insisted on an amnesty component and time allowed for those in question to clean up the issue.

"The enforcement program we're launching today isn't simply to protect employees and consumers from surcharge fraud - it's also to protect the vast majority of competing restaurants that follow the law and provide health care benefits to their workers," said Mr. Herrera in his offices official press release on the 25th.


Healthcare Surcharge Letter

Healthcare Surcharge Letter Pt. 2








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