Healthcare in the Restaurant Industry

Pass by any Tacolicious on a Friday or Saturday night during Happy Hour and it is guaranteed to be busy. The people of San Francisco flock to each one of the five locations around the city to grab savory designer tacos and appetizers like Hamachi ceviche and albondigas. Almost all of Tacolicious’ patrons have a drink in hand —— laughing, smiling, and talking with their friends. Tacolicious employees are providing service with a smile. It’s busy nights like these that allow Tacolicious to make the money they need to afford benefits for their hard-working employees.

Joe Hargrave started Tacolicious in 2009. The restaurant began as a small outlet at the Thursday Ferry Plaza Farmers Market, but soon expanded into a full brick-and-mortar restaurant on Chestnut Street in the lively Marina District. As of 2018, Tacolicious now has three locations all around San Francisco, one in downtown Palo Alto, and another in San Jose on busy Santana Row.

The San Francisco Bay Area restaurant industry is notoriously difficult to succeed in. No doubt, it is extremely tough to run a restaurant in one of the most expensive areas in the United States. Factors like rising minimum wage and high monthly rent contribute to the costly amount that it takes to run a restaurant. Currently, the minimum wage in San Francisco is $14.00, and it is set to rise to $15.00 this upcoming July. Although this is good for the employee, it can become costly for employer, especially for bigger restaurants that have a large amount of staff. According to a San Francisco Business Times article, base rents for restaurant spaces can range from around $27 to $65 per square feet. The same article reports that the annual rent for a restaurant can be up to $240,000, which works out to around $20,000 per month if the base rent is high.

“Healthcare costs have climbed astronomically over the last twenty years. The US healthcare system is the most complex and dysfunctional in the world,” says Ian Lewis.

Lewis is a research director at Unite Here, a San Francisco Bay Area restaurant and hospitality worker labor union. For-profit corporations run the healthcare system, and healthcare plan costs rise exponentially each year. According to eHealthInsurance, the United States’ largest online marketplace for health insurance, the average monthly individual healthcare insurance premium is $393 a month. The Bay Area, and the city of San Francisco specifically, is one of the most expensive places to live, and one of the most expensive in the country for buying healthcare.

There are government mandates at both a national and local level that affect healthcare requirements for businesses. The Affordable Care Act requires that “Employers with over 50 employees must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees (30 hrs or more) and their children up to age 26, or be subject to penalties,” according to Cigna, a worldwide health organization based in Connecticut.

San Francisco has its own mandate titled “San Francisco Health Care Security Ordinance.” The purpose of the San Francisco ordinance is to guarantee some sort of healthcare options for all employees, regardless of how often they work. The ordinance requires business to meet certain healthcare expenditure rates depending on the amount of employees they have. For example, if a business has 0-19 employees, they are exempt from the ordinance. But, if a business has 20-99 employees, they must pay an additional $1.89 per hour. Even more so, a business with 100+ employees must pay an additional $2.83 per hour. The employer is required to report these additional payments through the Employer Annual Reporting Form.

The issue with this mandate is that it is very broad. The only requirement is that these businesses must meet the mandated spending requirements——there is no guide or suggested way that the businesses meet these stipulations. They simply must do so, or face the consequences. According to the San Francisco Office of Labor Standards Enforcement, if a business fails to report through the Employer Annual Reporting Form, they are subject to a penalty of $500 per business quarter.

Restaurants like Tacolicious want to provide the best for their employees by affording them healthcare coverage or the means to buy into a healthcare plan.

“Healthy employees are generally happy employees. By being able to provide a quality health plan to everyone, we improve the well-being of our community,” says Joe Hargrave, Founder and CEO of Tacolicious.

Although Tacolicious is a large and successful company with multiple locations and dedicated patrons continually coming in and out the door, figuring out the company’s healthcare options for employees is not a simple task. “It's expensive. But we'd rather spend a little more up front to support our staff and provide preventative care. So, finding a plan that is inclusive without being overbearingly expensive is challenging,” says Hargrave.

Currently, many San Francisco restaurants are exploring the option of passing on the cost to the consumer. Tacolicious opts for applying an additional 5% charge to the customer’s bill. “This collected amount goes toward our city mandated per employee spend for health care, then Tacolicious covers the balance of what is due. Additionally, we offer medical, vision, and dental insurance plans for all of our employees. Some plans are covered by our company, and others are "buy-in" options for staff depending on their work status,” states Hargrave.

Although the government and employers are attempting to provide healthcare for workers, there are still struggles. It is extremely expensive to afford healthcare for employees, therefore very few restaurants would do it if not mandated. Restaurant workers face difficulties when negotiating with employers on what types of healthcare are covered or what types of packages are offered to them. “Workers need power. The laws in this country have been revised and enforced in such a way to leave workers, especially in the restaurant industry, with little ability to organize collectively,” says Ian Lewis of Unite Here.

According to a research report done by ROC United, a restaurant workers advocacy group, “9 out of 10 people who work in the restaurant industry lack paid sick days (87.7%) and health insurance from their employer (89.7%).” Because these benefits are not available or are being withheld from employees, they are forced to go into work sick.

Unions and associations are available for both restaurants and restaurant workers to join in order to guarantee better working conditions and circumstances, like Unite Here and ROC United. These groups are effective ways for restaurant workers to advocate for their healthcare rights. They provide support, get the word out about changing laws and mandates, create campaigns, and assist with collective bargaining. “We have been active for two decades in pushing government to pass health care reforms at the local, state and federal levels. We also prioritize healthcare coverage as part of our contract negotiations employers,” says Lewis of Unite Here. Unfortunately, employers can express a preference that their employees not join a union, which may discourage some employees from reaching out altogether.

Changing the system at a larger government level will take time, but improvements are still being made in order to alleviate the situation for employers. Just this past April, the National Restaurant Association teamed up with United Healthcare in order to create specialized healthcare plans specifically for small businesses. This plan is titled the “Restaurant & Hospitality Association Benefit Trust Health Plan,” and it is offered to businesses with less than 99 employees. According to the National Restaurant Association’s article, there are “more than 120 plan designs to choose from, and that they are flexibly priced to suit all budgets. It also is compliant with Affordable Care Act requirements and simplifies administrative tasks associated with it. That makes it easier for smaller operations to use.” The invention of this partnership and results in manageable and affordable options for the employer, which directly helps the employee because of the new availability.

Will employee healthcare coverage and options improve immediately? It’s unlikely. But, despite the obstacles that restaurants and employees face, there is merit in the restaurants who lead the way in providing benefits to employees and the unions that help employees negotiate with their employers. Having staff members who are ready and able to work to their full potential is essential to the successful operation of the restaurant, and it is essential for employers to realize that in the first place. “We place a premium on our staff maintaining their health and not having to worry about affording care when needed; there are enough expenses in San Francisco already,” says Hargrave.