Voluntary agreement avoids litigation over compliance with ‘Healthy San Francisco,’ surcharge that didn’t fund benefits
SAN FRANCISCO (Jan. 13, 2013) — City Attorney Dennis Herrera today announced a settlement agreement with Patxi’s Chicago Pizza over its compliance with the Health Care Security Ordinance, the City’s universal healthcare law, and surcharges assessed to customers at its four San Francisco locations to fund the costs of compliance. The settlement valued at $320,000 provides health care benefits to Patxi’s current and former employees, and is the result of an unlitigated demand Herrera made following an investigation by the Office of Labor Standards Enforcement and the City Attorney’s Office. That investigation found that Patxi’s did not comply with the ordinance between 2009 and 2011, and did not use most of the four percent “Healthy San Francisco” surcharge it added to customers’ checks for its stated purpose.
Under terms of the agreement announced today, Patxi’s will distribute $205,000 to current and former employees who were eligible for health care spending during the relevant time period. It will also increase its health care spending by roughly $100,000 for employee health care in 2013 (for a total of $285,000 in employee health care expenditures for 2013). Patxi’s also will pay $15,000 to the City in penalties to cover investigation costs, and commit that any money intended for workers under the settlement that goes unclaimed will revert to the City to fund further consumer and worker protection enforcement efforts.
“Though Patxi’s was wrong to not comply with the health care ordinance and to collect a surcharge from its customers for health benefits it wasn’t providing to employees, the company deserves credit for working cooperatively with us to remedy the problem, to avoid litigation, and to make sure its workers are fully and fairly compensated,” said Herrera. “Based on the company’s conscientious and productive effort to resolve this dispute, I am perfectly comfortable to continue being a loyal Patxi’s customer. But today’s settlement should send a strong message that San Francisco is serious about making sure that restaurants keep their promises to their customers about health care surcharges. I look forward to announcing a larger, more global effort in the coming days to address this issue, to make sure health care surcharge money goes to the workers rather than being pocketed by business owners.”
“When we discovered that our health care plan did not comply with San Francisco law and that we were collecting more in surcharges than we were paying for employee health care, we knew we needed to take immediate steps to make things right,” said William Freeman, the company’s CEO. “Patxi’s is proud of the role it plays in the community, and we want to make sure we comply with the spirit as well as the letter of the law. As a result of this settlement, Patxi’s will be offering incredible health care benefits to its workers and spending 50% more on health care benefits in 2013 than we collected in surcharges in 2012. I hope other restaurants will step up and participate in Dennis Herrera’s efforts to meaningfully address this issue.”
Herrera successfully defended key provisions of San Francisco’s Health Care Security Ordinance, which was authored in 2006 by then-Board President Tom Ammiano with the support of Mayor Gavin Newsom, from a four-year legal attack by the Golden Gate Restaurant Association aimed at effectively gutting the Healthy San Francisco program. The trade association of local restaurants alleged that the federal Employee Retirement Income Security Act, or ERISA, preempted local laws such as San Francisco’s from requiring ongoing employer spending for employee health benefits, or alternative payments to a local government. The U.S. Supreme Court ultimately denied GGRA’s petition for review on the last day of the high court’s 2009-10 term, on June 28, 2010, sustaining a prior Ninth Circuit Court of Appeals decision that upheld the legal validity of the City’s employer spending requirement for health care.
PDF of the Patxi’s Chicago Pizza presskit (Jan. 13, 2013)