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.
I don’t know how the lawsuit will play out, but frankly this surcharge looks like more like an attack employee wages than a promotional campaign. Restaurants don’t have to itemize their expenses on their bills so why is THIS expense highlighted? Wages ARE intrinsically health and wellness expenses and if 3% actually covers health care expenses Blue Plate is getting a great deal from someone.
This is just a way of complaining that they have to raise their prices in order to pay their employee’s wages. Like any other business they could simply raise their prices and more than likely no one would notice. Are YOU going to notice that your BLT costs 3% more than it did the last time you ordered it? By making this “expense” explicit on the bill their telling their customers that they’re being forced to raise prices. They’re inviting complaints and scrutiny.
SMH. Consumers want transparency and then when they get it, the result is a lawsuit. If Ashbach doesn’t like it, eat elsewhere. Frivolous lawsuits need to end. The fee was disclosed, end of story.
This. My only issue would be if the 3% DIDN’T actually go to healthcare for employees. When I got to Pig Ate My Pizza, they charge me 21% for a combined service fee (18%) and health and wellness surcharge (3%). Since I normally tip that much anyway, it’s not a problem. Quite frankly, they should all do it. If diners are going to be bothered about the cost of food, then the cost of doing business (including paying employees) should be built in as a surcharge. And if that bothers diners, they should eat at home. That’s the most cost-effective option, anyway.
This “disclosure” looks more like anti-labor political activism than transparency. They invented the charge and put it on the bill, and now they’re complaining that someone noticed it? whatever.
I think the lawsuit is silly and a cheap form of “gotcha” by a lawyer who needs better things to do with his time. The surcharge is on the menu, at least at restaurants I go to. Are they going to sue restaurants that have to pay entertainment taxes to the city here or elsewhere?
Why not sue auto dealers for adding delivery charges? Those also are not secret to anyone who looks at fine print, and they are listed on purchase agreements–but they are not featured in price advertising.
Sir, auto delivery charges are disclosed during negotiations, and before receipt of delivery.
That does not contradict what I wrote. I have purchased several new cars in my time.
As a general rule businesses only disclose what they are required to disclose. Blue Plate created this charge, and put it on the bill, rather simply raising prices across the board to pay this expense. They did this to highlight price increases they’ve always claimed they would be forced to implement in order to pay for new city requirements. They wanted their customers to know that their bill has increased because of new city regulations. Well, people noticed, and now one of those people is suing. Blue Plate fought these new requirements that they previously were not providing.
I’m not sure what the problem is. They’re not the only restaurant to clearly charge a fee for providing particular benefits to their employees. And it’s stated on the menu. Just because they kicked and screamed before doesn’t mean they need to be punished for complying. They’re not doing it differently than anyone else.
The menu item has nothing to with compliance, the surcharge is not a requirement. You want to see it, OK, we see it. If you don’t want us see, don’t put on the menu. You don’t get to put there for us to see, and then complain about how we respond to seeing it.
The nature of lawsuits and legal precedence is that if and when one case is decided, it effects other cases. The fact that this lawsuit filed against Blue Plate, and whether or not any other restaurant is following the same practice is almost irrelevant. If this case isn’t dismissed, the practical affect of suing Blue Plate is nearly the same as suing everyone. If BP were to be found liable for something, that force all the restaurants to change their policies as well.
This, along with the high taxes already added on to bills in Minneapolis are the reason I stopped going out to eat there. I’ll bet 10 to one a lot of good restauranteurs move to the suburbs. White Bear has a couple of really nice high end places that do well.
You say you don’t like it go somewhere else the restaurant will eventually move to the suburbs how are the city council members going to get their free meals if there’s no more restaurants in the Twin Cities
Speaking for myself, I’d have to see the disclosure on the menu to make a determination of deceptive business practices. I’ve often seen signs placed prominently above larger tables that disclose a 15% gratuity will be added to the bill for groups larger than “x”.
Most people understand the rationale for that. However, if the “wellness fee” is placed at the bottom of the menu in small print, the message people are getting is not letting them “know that we’re taking care of our employees”, it’s sneakily filching the cost of doing business from unwitting patrons.
Additionally, it must be said that 3% may not sound like much, but we must remember it is in addition to the 6.875% state sales tax, 2.5% gross receipts tax on liquor, 0.15% Hennepin County sales tax, 0.25% Transit Improvement sales tax, the 0.5% Minneapolis sales tax….and (we are not done) the 3% restaurant tax which applies to food and beverages sold by downtown restaurants.
Honestly, dining out in the TC is already too rich for my blood.
I don’t believe the lawsuit has much merit. That said, I agree with Paul when he asks why is this particular expense highlighted? If you are going to highlight health care costs, why not highlight the electric bill, and why we are at, let’s highlight how much is profit.
Frivolous lawsuit. Super lame that the restaurants are doing this and they deserve all the bad publicity they can get, but what a waste of time. When I tell clients it will take a long time to get their cases to court, I’m going to point to this as an example of the crap clogging up the system.
Agree. Civilization is falling into chaos and collapse due to a global failure of self-governance and someone is suing about an extra dollar on a $30 tab. Doesn’t matter whether the restauranteur is in good faith or bad, this is no different from the other trivial irritations of modern life that a person deals with 50 times a day. Mr. Ashbach, take a breath and spend your time on something that matters.
They might consider adding an attorney fee surcharge to menus so their “guests” can discover how much they are paying to defend against this anti-employee stunt.
A better characterization of this might be a “plaintiff lawyer shakedown”.
Just add the costs to the price of the meal and quit trying to pretend that restaurants are “special businesses” that deserve consumer sympathy. You are either worth what you’re charging or you are not, the market will make that decision for you.
More class-action nonsense. What next, a class action claiming customers never read the menu’s disclosure of mandatory service charges for groups of X or more?
Assuming this idiocy goes anywhere, each member of the class should be limited to one bite at the apple. You can’t claim to have been defrauded after paying the fee once before, particularly if it was itemized on the check .
Mr. Farnsworth and his firm should be ashamed of themselves.
“You don’t want to pay more for a hamburger. That’s the bottom line,” Bartmann says.
This is an educational statement.
Ms. Bartmann has chosen to set up shop in a lefty dominated city. Her customers (and perhaps she) voted for the people that are piling taxes on and, unlike her wellness fee, the people running for office in the TC say what they plan to do right up front; everyone knows they’re gonna get taxed real hard. But her experience tells her these same folks are not willing to pay the tab for all that progressiveness when given the option.
She must know it’s only going to get worse when the $15 minimum wage kicks in. Good time to scout a new space in a less progressive municipality, in my opinion.
This is part of the hidden costs of our healthcare system. With Medicare 4 All, this wouldn’t be a problem.
On Thanksgiving, we enjoyed a buffet at the restaurant at Edinburgh Golf Course. Our bill came with this surcharge. We asked the server about it. She had been with a the previous catering company for 18 years at this location and when they lost the contract, she opted to stay at the golf course because the original employer didn’t have any other jobs in that part of town. She said that while D’Amico collects the charges employees must work for ONE YEAR before they are even eligible for health benefits. Yes, even those that were put in her position of a contractor at a public facility being changed, going to the same place for nearly two decades. I’d like D’Amico to open the books and show what they are doing with this money and who it is benefiting.
Exactly Ms. Smith! These guys whine about their low margins and fight living wages and benefits for years. Then when they have to pay wages and benefits they’ve been refusing to provide for decades they suddenly invent a new “surcharge” and drop in the bill?
You want people to notice this? You want people to ask questions? OK. We’re noticing, and we have some questions.
1). What does this wellness fee really pay for, and how much additional revenue does it collect?
2) does this money actually pay for health care, or does it simply cover the cost of paid sick days? I remind everyone, if you don’t pay foodworkers sick time, you will have ill food workers preparing and serving your food.
3) Where does this money go? Does it go into a special wellness account, or does it just flow into the regular expense account? This could be legally significant because if you end up with a surplus at the end of the year, and that surplus doesn’t somehow get directed into employee wellness somehow, it could be fraudulent to claim that your collecting it for wellness in the first place. You make up a new surcharge, put it on the bill, and collect the money, but if that money doesn’t get spent the way you claim to spend it, you’re lying to your customers and possibly committing fraud.
They could’ve tucked a little hike into the menu, no one would have noticed. But they decided to invent a new item and put it on the bill. We all live with our consequences.
By the way, since Blue Plate isn’t complaining about a huge drop in business since adding 3%, we can safely assume that the earlier claims that a 3% hike in their prices would kill their business was a bogus claim.
I have a friend who owns a very popular restaurant with over 10 million in sales. And he offers insurance to just 2 employees who are deemed important to support with health care. This has to stop. People thinking food workers are just burger flippers. Also Mn should have a tip credit. Wait staff and bartender make A huge late this appropriate amount of wage in the business than any other worker. They get 2 sources of income. Tips and wage. They want $10 hour plus 18% of the bill. Everyone needs to stop thinking that only wait staff work in restaurants
I believe the most disheartening aspect of this discussion, here and in other forums, is the implicit bias that those who prepare and serve others are undeserving of higher wages and/or even modest benefits. It seems as if we have legitimized a caste system where those who write code, run marketing campaigns or manage projects are somehow more worthy of high pay and perks than those who actually produce goods and services. There will certainly be a reckoning when the playing field shifts, I hear complaints from plumbers, electricians and other tradesmen now that they are more likely to be employed by “service companies” that are simply internet-enabled back ends that mimic Uber-type employment (and division of wages) that separate investors/management from workers on the front line. I believe the most disheartening aspect of this discussion, here and in other forums, is the implicit bias that those who prepare and serve others are undeserving of higher wages and/or even modest benefits. It seems as if we have legitimized a caste system where those who write code, run marketing campaigns or manage projects are somehow more worthy of high pay and perks than those who actually produce goods and services. There will certainly be a reckoning when the playing field shifts, I hear complaints from plumbers, electricians and other tradesmen now that they are more likely to be employed by “service companies” that are simply internet-enabled back ends that mimic Uber-type employment (and division of wages) that separate investors/management from workers on the front line. Those “knowledge workers” in IT and other easily interchangeable fields (admit it, your employer won’t fold if you leave tomorrow) are whistling past the graveyard when they complain of paying more for “simple” services being provided by hospitality and other service industry workers. After all, if you don’t get that 3rd quarter budget forecast in on time barely anyone will notice but if the saute cook is minutes behind with your fish the Yelp-rage may cost the business dearly. Perhaps we should value these servants of ours a bit better?
Yep. Honestly, if people want an inexpensive meal, they should eat at home. Looking down your nose at the level of skill a server at a restaurant needs ignores the fact that it’s hard work and worthy of decent pay. And, in any case, despite my level of skill in my field and my level of education, I do not have the skill to be a good server at a restaurant. That’s probably true of many of the people who go to a restaurant.
I honestly don’t know what the best model is for running a restaurant and paying employees. Clearly, relying on customer tips is a failure. At the same time, charging “too much” for food meets resistance from customers. It seems like this surcharge approach is the most transparent way to deal with cheapskate Americans who believe that they should be able to dine without an upcharge. And don’t use the “but if I don’t eat out, those employees would be unemployed” argument. If their pay doesn’t cover their time because you’re cheap, then you haven’t done them any service whatsoever. Go home, cook for yourself, and serve yourself.
This has nothing to do with transparency, and in terms of business models it’s a solution in search of a problem. I draw your attention to the fact that the restaurants adopting this model are NOT struggling for business nor are they swamped by patrons demanding explanations.
Restaurants have a number of expenses they charge you for, and none of them are itemized on your bill for the sake of transparency. As a general rule business keep their expenses to themselves because they don’t want to advertise their mark-up. Why does THIS expense warrant special treatment? Where’s the liquor surcharge or the bread surcharge or the electricity surcharge?
This wasn’t put on the bill to promote transparency, it was put on the bill to spark outrage. You’re supposed to look at this and bemoan the additonal costs that onerous MPLS regulations are forcing upon the restaurant and it’s customers.
The next time I go to a Blue Plate I will ask to speak to the manager so I can tell them that I appreciate the fact that they no longer expect ill food workers to show up and prepare and handle my food. (We know that something like 90% all restaurant outbreaks are caused by ill food workers who can’t afford to stay home when they’re sick.) I’ll also point out the fact that while it’s nice of them to collect money to pay for keeping ill food workers away from my food, if their patron’s well being were the priority they claim to, they would have adopted this policy long ago voluntarily rather than having to forced into it by the city. If an additional 3% is all it costs, they should have done it on their own long ago for the sake and safety of their customers.
My wife and I go to restaurants all over the place. I have no idea whether a burger at the Red Cow in Edina costs more or less than the one in MPLS, we go to both. As far as we’re concerned the Fish n Chips at Brit’s Pub is the best in the State, and if we pay 3% more so their food workers can make a living wage and stay home when their sick, we perfectly willing to do that.
I think if you’re sitting around comparing taxes on the bill between one city or another you’re NOT a typical consumer.
I think the more these business guys try to make a big deal out of having to pay for living wages and sick time the more ridiculous they’ll look. What they’re really telling us is that 3% is all they need to charge to cover these expenses. That hardly an onerous requirement, and obviously the vast majority of their customers don’t have a problem with it.
Not to belabor the point, but Blue Plate created this charge and put it on the bill hoping that customers would notice it and complain. That way BP could say: “Look what the city made us do”. This is activism not transparency. So someone noticed, and they’re complaining… this is what BP wanted right?
Dave Schultz is probably better than most at recognizing deception.
These corporate restaurants are after such high profit margins, they have some nerve complaining about labor costs. Individually owned restaurants are always better, at least for the customer. I’m glad he’s suing and I hope he wins. The nerve of her.
Employee benefits surcharge? How about a water surcharge? A sanitation fee? How about a “food cost” surcharge? The fact is utilities, food costs, health department compliance, and yes employee benefits are part of the costs of doing business. Why stop at the hospitality industry? What if Target decides to add a “benefits surcharge” to every purchase? It’s dishonest and a way of hiding a price increase. We would not put up with this from other industries — why do restaurants get a pass?
There are the owners, there are the workers. The money is suppose to be for healthcare. The easiest solution might be Medicare for all. End of discussion.