Supreme Court asked to ax S.F. health care rule

Heather Knight, Chronicle Staff Writer

Tuesday, June 9, 2009, San Francisco Chronicle

The Golden Gate Restaurant Association filed a petition v on Monday asking the U.S. Supreme Court to make the final decision on whether San Francisco's mandate that employers pay for health care coverage is legal.

The city's first-of-its-kind universal health care program, dubbed Healthy San Francisco, began two years ago and requires that employers with at least 20 employees provide health insurance, set up health care spending accounts or pay into the city's fund.

Kevin Westlye, director of the restaurant association, said the fees are incredibly burdensome on restaurant owners - and pointed to the recent failure of two restaurants in Mayor Gavin Newsom's PlumpJack Group as proof.

Jack Falstaff in the South of Market neighborhood and PlumpJack Cafe in the Marina have both closed, though the latter might reopen in several months after a retooling.

"It's ironic the mayor has been in this business and tells us repeatedly he understands our financial concern, and yet at the same time, it's contributed to the bankruptcy of two of his restaurants," Westlye said.

Newsom gave up his stake in PlumpJack's San Francisco holdings when he became mayor, but still holds a stake in those outside the city.

The restaurant association lost its case last fall before the Ninth Circuit Court of Appeals, and its request for an emergency stay from the Supreme Court was denied in March.

Westlye, Newsom and Public Health Chief Mitch Katz have met recently to negotiate a compromise. But Westlye said the association's ideas - including a citywide quarter-cent sales tax increase and a tip credit so waiters' tips count toward the wages restaurant owners must pay them - have repeatedly been rejected, thus necessitating the appeal to the Supreme Court.

Katz said only voters could authorize a tip credit after passing minimum wage laws and that his offer to freeze the rates employers must pay to support health care has been deemed not good enough.

"They made it clear they want major changes that go way beyond the health care issues," Katz said. "I'm disappointed because here we have a program that's already covered more than two-thirds of all the uninsured in San Francisco and is being hailed as a national model, and they're trying to block it."

Newsom has made Healthy San Francisco, which now provides care for 41,000 people, a centerpiece of his run for governor. His press secretary, Nathan Ballard, said the mayor understands the restaurant owners' concerns, but is committed to universal health care.

"He wants to do everything he can to make it easier to do business in San Francisco," Ballard said. "However, we are committed to providing universal health care to San Francisco's uninsured, and we're not backing down."

The restaurant association's petition focuses mostly on the Employee Retirement Income Security Act (ERISA), a 1974 federal law that governs employee benefit programs, and whether Healthy San Francisco conflicts with it. Westlye said it's unfair to businesses to have a patchwork of city and state plans.

"We have a failing health care system, and we're simply assigning the costs of that to the employer," he said. "The solution needs to be national."

Vince Chhabria, deputy city attorney, said the country already has a patchwork of city and state regulations when it comes to a variety of benefits issues including wages, sick leave, vacations and severance packages - and none of them have been found to violate ERISA.

Chhabria said he expects a decision from the court on whether to hear the case in October or November and, if the court accepts it, a decision in June 2010.

E-mail Heather Knight at hknight@sfchronicle.com.

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This article appeared on page B - 2 of the San Francisco Chronicle