Figuring out the tip next time you dine out may include, along with the usual percentage decision, whether or not to contribute to your wait person's health insurance cost. But restaurants that are asking customers to pay extra to cover employee insurance may find themselves crossways with consumer protection cops.
The restaurant industry has been among the loudest opponents to sections of the Patient Protection and Affordable Care Act that require employers to provide coverage for certain employees under certain conditions. The industry has traditionally sought extra help from customers to pay those who bring them their food and drinks. Now, some restaurants are boldly soliciting extra fees from diners that, they claim, will be earmarked for employee health insurance.
That can be a dangerous practice, advised attorney Carolyn D. Richmond in a Law360 article. Richmond said she expects state consumer protection agencies to scrutinize such surcharges
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Richmond, who specializes in retail law, said she's been receiving inquiries from clients about how to handle the costs they will incur as a result of Obamacare. While she's discouraging the use of the surcharge directly related to health reform, she believes other ways exist to help restaurants adopt.
"I think as the months go by we'll see a lot of entrepreneurial approaches to solving the crisis," Richmond said.
Perhaps she'll be hearing from Gator's Dockside franchisees in Florida or the owners of Republique in Los Angeles.
Both were cited in a February CNN Money article on health insurance-driven restaurant surcharges. The two restaurants have openly solicited specific percentages from customers so workers can have health coverage.
In Florida, CNN found that certain Gator's Dockside Restaurants were adding a percent to customers' bills so that Gator's could comply with the tenets of health care reform
"The Gator Group's full-time hourly employees won't actually receive health insurance until December," CNN reported. "But the company said it implemented the surcharge now because of the compliance costs it's facing ahead of the Affordable Care Act's employer mandate kicking in in 2015.
One Gators restaurant, according to the report, posted a sign on its door reading: "The costs associated with PPACA compliance could ultimately close our doors. Instead of raising prices on our products to generate the additional revenue needed to cover the costs of ACA compliance, certain Gator's Dockside locations have implemented a 1 percent surcharge on all food and beverage purchases only."
Republique, a new L.A. bistro opened in November, unveiled "an optional 3 percent surcharge that allows it to employ all of its 80 workers full-time and provide them with health insurance. The fee is explained in a sign and on the menu, and servers explain it to diners without prompting," CNN said.
However, Republique specifically noted that "the surcharge is not related to Obamacare."
"The eatery is not subject to the employer mandate until 2016 because it has fewer than 100 workers, but it already offers coverage to its staff," CNN said.
So far, the restaurant told CNN, most customers have paid the fee.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
