Background
City Attorney Dennis Herrera undertook a major enforcement effort in 2013 to ensure the integrity of “Healthy San Francisco” surcharges paid by customers at many of San Francisco’s eating establishments. The year-long effort sought to remedy shortfalls between amounts charged to restaurant customers to cover the cost of complying with the City’s universal healthcare law, and funds actually expended to provide healthcare benefits to employees.
And the results were impressive. The enforcement program included a one-time 50 percent amnesty offer for establishments with significant shortfalls—provided that they fully cooperate with city investigators; agree to good faith compliance with the employer spending requirement of San Francisco’s HCSO moving forward; and directly compensate their current and former employees who were the intended beneficiaries of the surcharges paid by customers. All agreements announced under the program resolve potential disputes with the City over collected surcharges without admissions of liability. Herrera announced the restaurant surcharge fraud enforcement program at a City Hall news conference on Jan. 25, 2013 with Assemblymember Tom Ammiano, Supervisors David Campos and David Chiu, and representatives from San Francisco restaurants and the Office of Labor Standards Enforcement. Ammiano first authored legislation in 2005 as a member of the Board of Supervisors that would ultimately lead to the City’s Health Care Security Ordinance, or HCSO, which passed in 2007 with key policy input from then-Mayor Gavin Newsom. Board President Chiu and Supervisor Campos have both been active in subsequent proposed amendments to strengthen and improve the law. In launching the enforcement and amnesty program, Herrera credited the Golden Gate Restaurant Association for working productively to share its input, even after years of legal disputes over the law’s validity, which ultimately ended in the U.S. Supreme Court.
Results: $2 Million for workers, 0 lawsuits
Some 57 of the restaurants that took part in the City Attorney’s investigation and enforcement program either reached voluntary settlements under the terms of Herrera’s one-time offer of 50 percent amnesty, or were cleared of wrongdoing for discrepancies resulting from their inadvertent reporting errors. Not a single lawsuit has been filed. Accounting for all settlements since Herrera launched the enforcement program in January 2013, the City Attorney’s effort netted a total of at least $2,085,915 to be distributed to nearly 4,000 eligible employees by 38 different dining establishments. (Interest may accrue on some of the settlements negotiated.) Two additional establishments reached non-monetary settlements that assure compliance with employer spending requirements of San Francisco’s Health Care Security Ordinance, or HCSO. Another 17 businesses targeted for investigation by the City Attorney’s Office on the basis of the health care expenditure shortfalls they reported to San Francisco’s Office of Labor Standards Enforcement, or OLSE, received “clean bills of health.” The letters absolved recipients of wrongdoing after evidence provided in the course of the City Attorney’s investigation found that no surcharge-related consumer fraud occurred during the relevant time periods. In most instances, shortfalls reported to OLSE by businesses that received “clean bills of health” were attributable to restaurants’ accounting or reporting errors. “The success of this enforcement program owes in large part to good faith efforts by restaurants to honor the intent of fees paid by their customers, and to do right by their employees,” Herrera said. “I’m grateful to these businesses for understanding our duty to enforce the law even-handedly, and for working cooperatively with us to either reach settlements or identify the errors responsible for their reported discrepancies. I also want to express my appreciation to Rob Black and the Golden Gate Restaurant Association for sharing their input about our program. I think their engagement was important to helping us resolve the legal issues without needing to file a single lawsuit.”
News Releases & Presskits
- Final tally on Herrera’s restaurant surcharge amnesty: $2 million for workers, 0 lawsuits; Online video segment touts success of year-long Healthy San Francisco Surcharge Enforcement Program, as 57 restaurants came through with 100 percent participation (Dec. 30, 2013)
- Restaurant workers net $844K restitution in 19 surcharge enforcement settlements so far; Herrera praises good faith efforts by restaurants ‘to do right by their employees’; announces ‘clean bills of health’ for 12 other establishments targeted in investigation (May 8, 2013)
- Restaurant surcharge fraud crackdown includes one-time amnesty, enforcement; Illegal business practices of ‘relative handful’ of worst-offenders require tough enforcement initiative, Herrera says (Jan. 25, 2013)
- Patxi’s Chicago Pizza settlement secures $320K for worker benefits, enforcement; Voluntary agreement avoids litigation over compliance with ‘Healthy San Francisco,’ surcharge that didn’t fund benefits (Jan. 13, 2013)
Settlement Agreements
- 5A5 Steak Lounge: $18,883.81 settlement
- Amber India: $10,456.85 settlement
- B Star Bar: $14,756.00 settlement
- Betelnut: $51,433.30 settlement
- Bix: $13,255.00 settlement
- Blue Plate: $58,680.00 settlement
- Burger Bar San Francisco: $112,770.00 settlement
- Burgermeister: $134,088.00 settlement
- Burma Superstar: $10,045.00 settlement
- Cafe Bellini: $51,341.00 settlement
- Cafe Divine: $27,961.50 settlement
- Cafe Flore: $19,670.00 settlement
- Caffe Museo: $8,414.68 settlement
- Chaya Brasserie: $22,113.00 settlement
- Citizens Band LLC: $11,031.92 settlement
- Connecticut Yankee: $37,054.00 settlement
- Fog City Diner: $14,486.21 settlement
- Fresca Restaurants: $60,806.00 settlement
- Hog and Rocks LLC: $42,207.43 settlement
- Juban, Inc.: $26,617.75 settlement
- King of Thai Noodle House, Inc.: $50,000.00 settlement
- La Folie, Inc.: $12,157.65 settlement
- La Mar: $200,000.00 settlement
- Magnolia Pub & Brewery: $25,202.26 settlement
- MarketBar: $18,356.50 settlement
- Mina Group LLC: $83,617.50 settlement
- Nob Hill Cafe: $49,180.57 settlement
- Patxi’s Chicago Pizza: $205,000.00 settlement
- Press Club: $11,103.00 settlement
- Prospect: $25,588.00 settlement
- Resmex Partners: $76,352.50 settlement
- Sens: $36,260.50 settlement
- SKK Restaurant Group: non-monetary settlement
- Skool: $8,266.00 settlement
- Squat & Gobble Cafe LLC: $200,766.10 settlement
- Tony’s Napoletana: $48,244.54 settlement
- Trattoria Pinocchio: $140,265.50 settlement
- Trinity Building Services: $85,862.00 settlement
- Wayfare LP: non-monetary settlement
- Zero Zero: $63,620.84 settlement
- Total: $2,085,914.91
“Clean Bill of Health” Letter Recipients
- 1300 on Fillmore: No wrongdoing found
- 25 Lusk: No wrongdoing found
- Bimbo’s 365 Club: No wrongdoing found
- Bluestem Brasserie: No wrongdoing found
- Cafe Claude Restaurant Inc.: No wrongdoing found
- Cheesecake Factory: No wrongdoing found
- Firefly Restaurant: No wrongdoing found
- Fourth Floor Restaurant: No wrongdoing found
- Fourth Floor Restaurant Two: No wrongdoing found
- Gitane Restaurant and Bar LLC: No wrongdoing found
- Lark Creek Management LLC: No wrongdoing found
- Lettus LLC: No wrongdoing found
- Liverpool Lil’s: No wrongdoing found
- NOPA: No wrongdoing found
- One Market Restaurant: No wrongdoing found
- Ristobar: No wrongdoing found
- Tempositions Inc.: No wrongdoing found