Some Local Businesses Pocket Employee Medical Benefits

Food service workers prepare dinner in the kitchen of One Market restaurant on Oct 2, 2011. One Market charges its patrons a 4 percent surcharge for “San Francisco imposed employer mandates,” according to its menu, which include the health care spending obligation.
PHOTO BY RAMSEY EL-QARE

By Alex Emslie
El Tecolote

San Francisco food-service worker John Chisholm asked his boss, his boss’s boss and then their boss to reimburse him for medical expenses covered under city law; every time, he was told he did not have health care benefits.

It wasn’t until Chisholm marched into the vice president of human resources’ office that the company finally acknowledged that it was aware of the law and he was covered. But the ordeal wasn’t over. Chisholm had to contact the owner of the company directly, months later, to finally get a check.

“Eventually I did get it, but I’m the only one there who marched up and demanded answers from the vice president of human resources,” Chisholm told the San Francisco Board of Supervisors Government Audit and Oversight Committee at a special meeting, Sept. 30.

Chisholm was speaking in favor of District 9 Supervisor David Campos’ amendment to San Francisco’s Health Care Security Ordinance. The 2006 law mandates that medium and large employers in the city spend money on their employees’ health care – by providing private insurance, paying into Healthy San Francisco on behalf of their employees, or by setting up third-party-administered accounts to reimburse workers’ health care costs.

The amendment aims to close a loophole in the law that allows companies to set the required amount aside, in what are called “Health Reimbursement Accounts,” discourage employees from claiming the money, and then pocket the funds at the end of the year.

A recent Wall Street Journal article focused on San Francisco restaurants’ compliance with the Health Care Security Ordinance. The newspaper reported that many high-end restaurants add a 3 to 5 percent surcharge to every bill to cover their obligations, but very little of that money is actually spent on employee health care.

Los Angeles resident John Erickson paid a $1.48 surcharge on a $37 lamb dinner at Boulevard near the Ferry Building, and he said the restaurant’s workers should definitely be getting that money.
“It costs so much to live here, and workers don’t have extra money to spend on health care,” he said.

Chisholm said he eventually quit the bakery that gave him the runaround about his reimbursement, but his new employer told him he has no health care benefits.
“None of my coworkers know and they are scared to come forward,” he said.

El Tecolote attempted to interview four separate food-service employees in the high-end restaurant district near the Ferry Building. No one was willing to go on record about their health care provided by their employers.

As the law stands, San Francisco employers can satisfy their obligations simply by placing their required health care expenditures into an a third-party-administered reimbursement account, but Campos is trying to change the law so that only money actually spent on employee health care would count. Also, the money would continue to accumulate as long as someone remained employed with that company, instead of resetting every year.

“Of the businesses impacted by the Health Care Security Ordinance, 80 cents on the dollar is not going to health care,” Campos said, citing data from the Office of Labor Standards and Enforcement. “It is pocketed by those businesses.”
Campos’ proposal has drawn some typical battle lines, between the board’s progressive bloc and the mayor, and between organizations representing labor and those representing the business community.

Asian Law Caucus staff attorney Winnie Kao said San Francisco’s immigrant community is especially vulnerable to exploitation under the loophole.

“A lot of immigrant workers wouldn’t even imagine that they have health care benefits,” she said. “The loophole creates an incentive to evade the intent of the law.”

Many San Francisco business owners are up-in-arms over the proposed changes, claiming they will cause them to lay off employees or even close their shops.

“You talk about this loophole like it’s bringing in cocaine from South America, but it’s not,” said Dave Prinz, owner of Amoeba Music in San Francisco. “It’s enabling businesses to stay open in a very unhealthy economic climate.”

Daniel Scherotter, head chef and owner of Palio D’Asti in the financial district, said he would have to fire two or three employees if Campos’ amendment became law, after reducing his staff from 45 to 31 in the last three years.

“Fact is, it’s already more expensive to hire in San Francisco than anywhere else in the country, and this won’t help. And it won’t provide health care,” Scherotter said. “Food costs are rising, labor costs are rising and I can’t raise my prices the way progressives tell me to. Raising prices right now would be a bad idea, given that every restaurant around me has closed.”

Campos said he is confident that the amendment will pass at the next Board of Supervisors meeting, but Jason Elliot, a representative from Mayor Ed Lee’s office, all but guaranteed that Lee would veto the legislation. Board of Supervisors President David Chiu has proposed alternative legislation and Elliot said the mayor’s office is working on its own proposal.

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