Restaurant owners sue S.F.

A group of restaurant owners filed a lawsuit Wednesday that could jeopardize funding for The City’s ambitious plan to provide health care for more than 82,000 uninsured residents.

Pushed by Mayor Gavin Newsom and Supervisor Tom Ammiano, the recently adopted health care ordinance was unanimously approved by the Board of Supervisors, but largely opposed by the business community, which will have to pay a portion of the program’s estimated $200 million price tag. The program is expected to begin this July.

The Golden Gate Restaurant Association, a nonprofit group representing the interests of restaurant owners, allege in a lawsuit filed with the U.S. District Court in San Francisco that The City’s health care ordinance is pre-empted by a federal law, known as Employee Retirement Income Security Act, which sets national standards for employee benefit plans. The federal law prevents states and local governments from dictating specific terms of an employee benefit plan, which includes health care benefits.

“ERISA broadly pre-empts all state and local laws relating to the administration of federally governed employee welfare benefit plans,” the lawsuit said. “If implemented, the ordinance would intrude both directly and indirectly upon the administration of such plans.”

The health care ordinance requires businesses with 20 employees or more to invest $1.06 to $1.60 for each employee hour worked for health care.

“The judge will rule that the intent of ERISA is violated by the funding mechanism of the health care program,” said Kevin Westlye, president of the Golden Gate Restaurant Association.

While not having seen the lawsuit yet, proponents of the health care ordinance were quick to defend it against a legal challenge.

“This law was written very carefully to avoid pre-emption under ERISA,” said Ken Jacobs, chairman of the UC Berkeley Center for Labor and Research. “This law is like the minimum wage law. It sets standards for spending on health care. The law says nothing about the content of the health services, which is what ERISA addresses.”

“I haven’t read the details of the lawsuit but I am confident we’ll prevail and it won’t stop our momentum over the course of the next year to begin the process of implementing the San Francisco Health Plan,” Newsom said.

Westlye and other business leaders wanted to explore other options to fund the program, such as a quarter-cent sales tax.

“[The lawsuit] is an example of what happens when a process like the health care mandate does not seriously take into consideration the financial impact of legislation on small businesses and restaurants,” said Steve Falk, president of the San Francisco Chamber of Commerce. “It doesn’t surprise me that a lawsuit has been filed just out of frustration of not being listened to.”

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