You know that Healthy SF surcharge that shows up at the bottom of your bill at many San Francisco restaurants?
Well, a number of those restaurants received a letter this week from the San Francisco City Attorney, claiming that they took in more from the surcharge during the period from 2009 to 2011 than they spent on employees' health care.
A few restaurants in our area, including Nopa and Nopalito, received the letter this week. We reached out to the owners of Nopa, and the City Attorney's office, to get their sides of the story.
Here's what they had to say.
The Facts Healthy San Francisco is a program requiring businesses with 20 or more employees to set aside money for employee health care. To comply with the program, which has been in place since 2007, many San Francisco restaurants have chosen to add an explicit surcharge to diners' bills. Earlier this week, the Chronicle obtained a list of businesses which had been identified by the City's Office of Labor Standards Enforcement as having Healthy SF surcharge discrepancies. Local restaurants on the list include Nopa (a discrepancy of $21,514), Nopa's offshoot Nopalito ($1,768), and Squat and Gobble ($160,498). We were unable to reach Squat and Gobble for comment on this story. For starters, Deputy City Attorney Sara Eisenberg told us yesterday that the O.L.S.E. list that has gotten so much attention this week is not the list of restaurants the City Attorney's office is investigating. "The City Attorney's office did not release [that] list," Eisenberg told us. "The list that's out there is a list created from publicly available data. That's just all of the restaurants that had a delta" between the amount they took in and the amount they spent. Eisenberg would not specify what additional criteria, if any, the City Attorney's office used to determine which restaurants to investigate. Regardless, Nopa co-owner Jeff Hanak confirmed to us that the restaurant did receive a letter from the City Attorney on Monday. The City Attorney's office has published the letter sent to all targeted restaurants on its website.
Nopa and Nopalito Hanak told us via email that Nopa has used the money collected from customers to fund a healthcare resimbursement account for its employees.
"When the SF Health Initiative started in 2008 we choose to offer a Health Reimbursement Account with no restrictions for our staff on how the dollars can be used, of course restricted to medical reimbursement which includes the ability to purchase your own individual plan. "From 2008-2011 we initiated no surcharge on our bill to cover for these expenditures. From our history of expenditures up until then we determined in mid 2011 what an appropriate fee would be to pass on to cover expenditures in accordance with the San Francisco Employer Mandates. We determined this to be 1.5%. At the end of 2011 we eliminated this fee. "In addition to funding Health Reimbursement Accounts for our staff, we have also offered our staff the opportunity to attend two yoga classes a week at no charge at the yoga garden on Divisadero since 2007."Hanak added that although Nopa took in revenue from the surcharge in 2011, they believed that money could carry over for up to 24 months in a reimbursement account without being used by employees. According to an amendment to the Health Care Security Ordinance that took effect in 2012, that appears to be the case. Hanak asserted that this approach was taken by both Nopa and Nopalito.
We asked the City Attorney's office specifically about when restaurants were expected to spend the money they collect via the Healthy SF surcharge. Here's where it gets confusing. Eisenberg told us that until the end of 2011, there was no deadline specified by City law. However, at the end of 2011, the H.C.S.O. was amended to require that Healthy SF surcharges reported on an annual basis match health care expenditures during that same annual reporting period. While that's technically true, the amended H.C.S.O. also stipulates that this change only applies to surcharges collected in 2012 and beyond. And annual reports to the O.L.S.E. typically occur in April, according to the O.L.S.E.'s own website. So presumably, surcharges collected in 2012 — which would be the only ones expected to be reported in the same calendar year — would not even be reported until this coming April.
Regardless of whether the law specified a deadline or not, Eisenberg said that some San Francisco restaurants were clearly either keeping the surcharge revenue for themselves, or stowing the money in accounts indefinitely. We asked whether the City Attorney had some sort of timeframe for what counts as "indefinitely" — A year? Six months? "We haven't drawn hard lines like that," Eisenberg told us, indicating instead that they would be evaluating restaurants on a case by case basis. We also asked Eisenberg whether items like yoga classes could count as health care expenditures. "Our conception of health care expenditures was narrower than that," she told us. But she added, "If a restaurant wants to take the position that it should be broader, we would certainly be open to hearing about that."
Eisenberg said the City Attorney's office has contacted "dozens" of restaurants this week, and has begun hearing back from some. She believes that not all restaurants were acting in good faith. "There is some indication that there was fraudulent activity," Eisenberg told us. "But we are looking forward to working with restaurants to resolve issues where that is not the case." Restaurants must reply to the letters they received by April 10th. After that, the City Attorney will decide whether to file lawsuits against those that have not sufficiently explained their discrepancies. Only if lawsuits are filed, or settlements reached, will those targeted restaurants be publicly named, Eisenberg said. As for Nopa, Hanak is "confident that we can explain the use of this surcharge for sf mandates and will report to the city attorney our findings."
So, that's the somewhat confusing, definitely unresolved story of the Healthy SF surcharge crackdown in our area. If we learn of any developments, we'll update accordingly.
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