Love them or hate them, employee wellness surcharges have begun sprouting at restaurants across the Twin Cities. Typically, it’s a 3 percent fee tacked on the end of the bill. Restaurateurs say the surcharges are needed to offset growing health care costs and mandatory minimum wage increases.
“You can only take so much pain,” says Kim Bartmann, owner of Bartmann Group, which operates Barbette, Tiny Diner, and a handful of other restaurants in the area. “Health care costs have been rising for years in double-digit percentages.”
In 2017, she began instituting an employee wellness surcharge at her restaurants, following in the footsteps of several restaurants on the West Coast.
Bartmann was the first to implement the surcharge in the Twin Cities, but she’s missed a second distinction—the first lawsuit challenge. That honor now belongs to Blue Plate Restaurant Group. Late last month, Minnesota resident Christopher Ashbach filed a class action suit against Blue Plate over its employee wellness fee. In a Nov. 25 filing in Hennepin County District Court, Ashbach’s lawyer argues that the surcharge constitutes “fraud, misrepresentation, and deceptive practices.”
“As a direct and proximate result of Blue Plate’s wrongful conduct, [Ashbach] unknowingly paid more to Blue Plate and has been damaged,” the complaint reads. “Blue Plate, through its menu, advertised its goods and services at a certain price but did not intend to sell them as advertised.”
The class action suit seeks more than $50,000 for the surcharges.
Ashbach’s attorney Jon Farnsworth says his client doesn’t take issue with Blue Plate offering health care coverage for employees. It’s simply a matter of how the wellness surcharge is disclosed. The placement of the surcharge near the end of the bill “creates a likelihood of confusion or misunderstanding,” the complaint says.
“We are very supportive of businesses offering health care and other wellness benefits to employees,” says Farnsworth, an attorney with law firm Spencer Fane LLP. “But in this particular instance, I think it’s deceptive. I don’t think it’s disclosed properly. And on top of that, there’s a fundamental lack of disclosure about who’s getting the benefits and where that money is going.”
As a result, Farnsworth is asking to “recoup the fee that’s been paid by consumers.” He’s also asking for an injunction against the fee.
For its part, Blue Plate notes that it prints information about the employee wellness surcharge on its menus. The company began instituting the fee in June.
“Blue Plate restaurants are proud of the benefits we provide our valued employees and their families,” the company said in a statement. “We respect the legal process and will continue working under the direction of legal counsel.”
Marshall Tanick, a Twin Cities lawyer who’s not involved in the suit, says the case will likely hinge on the timing of the disclosure of the fees. For him, the main question is: Did the restaurant group disclose the surcharge before the customer made the purchase?
“Businesses do not have to disclose components of charges for goods or services,” Tanick notes. “However, there may be an obligation to properly disclose surcharges that are above and beyond the quoted price. The key issues here are the degree of disclosure and the timing of disclosure.”
David Schultz, a professor at the University of Minnesota’s law school, agrees. But for him, the existing law isn’t necessarily on the plaintiff’s side.
“I think it’s going to be hard to win, but not impossible,” Schultz says. “The deception is possibly there. It could be unethical. But I don’t think, under the current Minnesota law, it would cross over into illegal behavior.”
Meanwhile, other Twin Cities restaurants that have implemented the charge say complaints have been few and far between. Brent Frederick, owner of Jester Concepts (Parlour, PS Steak, Borough), says many people have shown support for the fee. His company began implementing the surcharge in January 2018.
“It lets people know that we’re taking care of our employees, which I think a lot of people in Minnesota value and appreciate,” he says. “I would say 99 percent of our guests that have mentioned it to us love that we’re doing it.”
There has been the occasional complaint, he says. And in those cases, the restaurant will simply waive the fee. Ditto at Bartmann’s restaurants. (Blue Plate, however, says its surcharge can’t be waived.)
Kip Clayton, VP of marketing at Parasole Restaurant Group, says the feedback he’s heard about Parasole’s surcharge has been generally positive, too.
“We communicate it on every menu,” he notes. “What we state on the menu is that in order to maintain quality benefits for our employees, we add a 3 percent employee wellness surcharge to guests’ checks. All of our staff is trained on how it works.”
It’s worth noting that minimum wage has been steadily increasing in the Twin Cities. In Minneapolis, the minimum wage now sits at $11 an hour for employers with less than 100 people. For companies that employ more than 100 workers, the minimum wage is $12.25. It’s a similar story in St. Paul, where the minimum wage is now $9.86. Each city has already authorized a $15 minimum wage.
Undoubtedly, the costs of running a restaurant have been growing. But one question lingers among many restaurant-goers: Why not just raise prices like other retail businesses? Bartmann says that’s a “lot more difficult than it sounds.” She points to her Red Stag Supper Club as an example. In 2008, she charged $24 for a chicken dish. Now, the same dish costs around $26, a roughly 10 percent increase.
“My backend costs have gone up a lot more than 10 percent,” Bartmann says. “I cannot raise my prices at a pace to keep up with the rising costs of doing business,” for competitive reasons.
And, of course, there are some general expectations for the cost of entrees. (“You don’t want to pay more for a hamburger. That’s the bottom line,” Bartmann says.)
For Bartmann and other restaurateurs, instituting the surcharges is simply a matter of survival.
“This is just mostly independent restaurant people trying to survive and still offer benefits in a competitive labor market,” Bartmann says.
This article is reprinted in partnership with Twin Cities Business.