Los Angeles Restaurants Pass Employee Healthcare Costs to Customers

20-with-diner-receipt-189321-m***I’m very interested in innovative ways benefits are offered to the average worker.  This is a repost of a recent article review I wrote for a class I am currently taking. (Prof. Moyer – I’m not plagiarizing, promise!)

ORIGINAL ARTICLE HERE: “The 3% Surcharge Catches On: The Lucques Group Introduces Healthcare For Employees”  http://www.laweekly.com/squidink/2014/09/02/the-3-surcharge-catches-on-the-lucques-group-introduces-healthcare-for-employees

As costs rise across industries, many employers struggle to find ways to increase employee satisfaction by providing health care benefits, while remaining competitive in their industry. The Los Angeles based The Lucques Group (TLG) has introduced a self-funded health maintenance organization (HMO) option for its full time employees. Earlier this year, one restaurant unrelated to TLG, Republique, set a precedent in the area by adding a 3% surcharge to fund their staff’s health care program. Recently, The Lucques Group has followed suit, and benefits will be available for employees working 30 or more hours at their various sites. Qualified employees will be eligible for benefits as early as October 1, 2014.

According to the article, Republique’s bold move to provide health coverage for its staff has paved the way for a number of Los Angeles establishments to follow. For food service staff in the area, this health care surcharge may soon become a standard. Management at The Lucques Group, with three restaurants, considers the surcharge an ethical way to recover from past financial losses due to the rising costs of food. The public has questioned why management opted for the surcharged rather than rolling the amounts into menu price increases. TLG’s reply was that menu prices are tied to ingredient prices, and to heavily increase menu item pricing was a less desired option. Many have accused TLG for inserting a political statement into their fine dining experience, but TLG denies this move is tied to anything involving the Affordable Care Act, as critics claim. TLG insists the provision will allow their staff stable, long-term security options in an otherwise transient industry that rarely provides health care benefits. While there are accusations that the surcharge funds will be misappropriated, TLG vowed to publicly report to maintain transparency.

There are a number of critics who genuinely disapprove of what this surcharge represents, however, the most glaring question at hand is who is responsible for the payment of this provision. While it was not made entirely clear in the article whether the HMO is contributory or noncontributory, TLG has been very honest about being unable to afford the coverage. It wants to provide its staff affordable group insurance, because “it’s the right thing to do.” I completely agree. While the article muddles it, ultimately, TLG is paying for the group benefit, but passing along the cost increase to the consumer in a very transparent way: as a surcharge, not hidden in the menu pricing.

In food service, many workers are exploited due to certain clauses around minimum wage and tips. Federal law states that tips and wages are to be equivalent to minimum wage, and when this does not happen, owners are responsible for paying the employee the difference. Many times, this does not happen, and servers are left dealing with the deficit. With such low paying positions, which for many are only part-time, accessing health care services would be tremendously challenging and costly.

The local restaurant industry might be very threatened by this move to make health care benefits available to its staff, as TLG and other restaurants are setting the new standard in the Los Angeles food service economy. In this particular industry, the low wages and lack of benefits are precisely why some sites are thriving and earning high profits. It can be expected that if this practice were to become a citywide or statewide mandate, many owners would lobby to oppose it.

Patrons of the restaurant are put off by the responsibility of paying for the staff’s medical coverage. In the article, there is a certain sentiment where customers are angered to have to cover the restaurant’s overhead costs. Even being put in a position where they have to think about providing health care for others is highly offensive these customers. On the Yelp! reviews of Republique, patrons found the surcharge to be tacky and very upsetting, despite the excellent customer service they received throughout their meal. It is illogical to assume that restaurants have other streams of earning other than the the meals served and the beverages purchased. Folded into the price of any meal is the cost of a restaurant’s overhead expenses.

This flawed logic points to a broader societal sentiment where the consumer does not see himself / herself engaged in a larger process within the service economy. There has to be a better understanding of basic workers rights, especially as quality of life dwindles as the cost of living rises. To offer its staff medical care is an important step for TLG to normalize within the restaurant industry. More forward-thinking Los Angeles restaurateurs should be encouraged to do the same, in the hopes that it can affect change on a federal level. This would be a victory for food service workers, and would help raise their total income rather than maintain the low wages they usually are paid.

Beam, Burton T., and John J. MacFadden. Employee Benefits. Chicago, IL: Dearborn Financial Publ., 2012. Print.
Rodell, Besha. “The 3% Surcharge Catches On: The Lucques Group Introduces Healthcare For Employees.” L.A. Weekly 2 Sept. 2014: n. pag. Print.
“République.” Yelp! N.p., n.d. Web. 11 Sept. 2014. Retrived from http://www.yelp.com/biz/r%C3%A9publique-los-angeles-2?q=surcharge

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