Small Business Advocates Slam San Francisco Law

Some small business advocacy groups are riled up about a San Francisco health care law and are fighting to overturn it in the courts.

The law, on the books since 2006, requires any private employer with more than 20 workers to contribute a minimum amount of money each quarter for employee health care or pay the city a fee based on the number of employees and hours worked.

The ordinance was challenged in Golden Gate Restaurant Association v. City and County of San Francisco. A federal district court ruled the ordinance invalid, saying it overreached the city's authority under federal law. It is now before the U.S. Ninth Circuit Court of Appeals.

The National Federation of Independent Business, the International Franchise Association and the National Chamber Litigation Center, which is affiliated with the U.S. Chamber of Commerce, have filed "friend of the court" briefs in the case urging the court to strike down the ordinance.

"Forcing employers to pay for health care benefits they simply can't afford is not the solution to our nation's health care crisis," said Karen Harned, executive director of the NFIB Small Business Legal Center.

To bolster its claims that the law harms small firms, the NFIB cited a June 2006 economic impact report published by San Francisco's Office of Economic Analysis that said some businesses likely would close as a result of the ordinance. The report also acknowledged that most of the burden for funding the law would fall to businesses that employ between 20 and 49 employees. The report added that if those businesses were not able to pass the increased health care costs to consumers, some employers would have to cut jobs or close.

The franchise association said franchised small businesses "would face a devastating patchwork of local mandates" if the San Francisco mandate is allowed to stand.

"No one knows better than small business owners the need for affordable health coverage," said association President Matthew Shay. "But such a mandate would have just the opposite effect. It would force some employers to have to reduce their workforces because they couldn't afford to meet the demands.

The Society for Human Resource Management and the National Association of Manufacturers are among other groups that also have filed briefs with the court opposing the law.

Last year, a similar law in Maryland mandating terms of health care coverage was defeated.

Small Business Readers: Do you think San Francisco was on the right track mandating that businesses pay a portion of their employees' health care costs?

By Sharon McLoone |  March 31, 2008; 7:00 AM ET Regulation Legislation
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I think this is just another example of how out of step San Francisco is with the rest of the country. If they can afford to, most employers will voluntarily offer insurance benefits to their employees. If they can't afford it, criminalizing it is not going to help anything. That's totally stupid! We need to come up with a way to truly lower the cost of health care so employers can AFFORD to offer the benefit to their employees.

Posted by: Eunice Montfort | April 1, 2008 4:10 PM

San Francisco is out of touch with reality.
They not only know little about business, it appears they don't like business very much. With the Healthcare Ordinance and the recently enacted Sick Leave Ordinance, San Francisco has dealt a one-two punch to San Francisco businesses.
It seems they've not given much thought to the fact that the Healthcare Ordinance weighs most heavily on small businesses.
It is not the number of employees or even the revenue of a business that should be the determining factor. For instance, there the City is rife with entities who are not affected by the Ordinance because of their low number of employees, yet they generate profits in many cases that are exponentially greater than the many, if not most, of the entities that have more employees.
I know of and read about businesses that have or are closing, some of which are moving out of San Francisco and others which will not open offices in San Francisco as a result of the Healthcare Ordinance, as well as because of the Sick Leave Ordinance.
This "tax" should be born directly, if at all, by everyone in the form of a City Sales Tax increase, not by businesses as currently structured.
One day not in the very distant future, there will be droves of commercial landlords protesting on the steps of City Hall because their buildings are running at occupancy levels below their break even points. The irony is two-fold. Most of these landlords are not affected by the Healthcare Ordinance or the Sick Leave Ordinance because they have too few employees. The second part of the irony is that alongside these protesting landlords will be hoards of angry employees without jobs as a result of these ill-conceived Ordinances.
What will the City then do? No doubt they will pass a special Ordinance requiring businesses to pay into a fund to aid the newly unemployed with their rent and food bills.

Posted by: Brian | April 11, 2008 6:50 PM

Brian could not have put it better.
I've thought about opening a branch office of our business in San Francisco. I am opening instead in Oakland, since my business would lose money in San Francisco.

Posted by: Kelly | April 11, 2008 7:02 PM

What is San Francisco thinking?
Why do they keep trying to cripple business.
I worked for a small company I loved and was recently let go because the company is planning to close and open in Burlingame.
Thanks Mayor Newsom!

Posted by: Andrea | April 11, 2008 7:04 PM

You've heard the lyrics, "I left my heart in San Francisco?"
Well, we've left our checkbook in San Francisco.
Run before Newsom takes your entire bank account.

Posted by: Scott | April 11, 2008 7:07 PM

Brian for mayor!

Posted by: Natasha | April 11, 2008 7:15 PM

I think healthcare should be an option but to increase the city tax ---NO! We already pay 1.5% of total salaries and people get paid a lot more than most. We seem to pay for all the exempt companies. Between the health care, workers comp, and the city tax, I don't know how a small business can stay in business.

Posted by: Reilly | April 24, 2008 1:14 PM

Despite the 9th Circuit's left - footed punt at legislating universal healthcare, the US Supreme Court will crush this ordinance.
The next issue will then be whether San Francisco will voluntarily return the money is euchred out of small business.

Posted by: Algernon | May 6, 2008 2:58 PM

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