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Company to pay $1.3M for violating San Francisco's health care spending law

Company to pay $1.3M for violating San Francisco's health care spending law

SAN FRANCISCO—A janitorial services firm has been ordered to pay $1.3 million to nearly 300 current and former employees who were denied health care expenditures guaranteed to them under San Francisco's health care spending law.

San Francisco-based GMG Janitorial Inc. must pay $1.3 million to 275 current and former employees, plus a $67,000 administrative fine, according to city Administrative Appeal Hearing Officer Peter Kearns' May 1 decision. The company also was ordered to ensure future compliance with the 2006 law, which established employer minimum spending requirements for group health care benefits.

The ruling upheld the results of a city Office of Labor Standards Enforcement investigation, which determined that GMG's health care reimbursement program was not made available to its workers and, therefore, was not a valid expenditure under the law.

“This is a significant legal victory, not just for the employees who were systematically denied benefits to which they were entitled, but for all the competing businesses that play by the rules,” City Attorney Dennis Herrera, whose office prosecuted the administrative hearing against GMG, said in a statement. “This decision sends a strong message that San Francisco's Health Care Security Ordinance has teeth, and that city leaders are committed to enforcing it.”

It was unclear if GMG Janitorial intends to appeal the decision. Calls to the company's attorney in the case were not immediately returned.

Under the 2006 law, employers with 100 or more employees are required to spend $2.20 per hour per covered employee on health care, while employers with between 20 and 99 employees must spend $1.46 per hour. Employers with fewer than 20 employees are exempt.

Elements of the controversial spending law had been feverishly debated among city legislators until late last year, when the city's Board of Supervisors approved a measure requiring money contributed to health reimbursement arrangements to be made available to active employees up to 24 months after the contribution.

Most employers, though, meet the spending requirement by paying group health insurance premiums. The November 2011 change to the law was a reaction to a Labor Standards Enforcement report that indicated only 20% of the $62 million employers contributed to HRAs actually found its way to employees.

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