Mayor Ed Lee on Tuesday issued his first veto since taking office in January, describing legislation intended to close a loophole in San Francisco's law requiring employers to provide some funding for their workers' health care expenses as bad for business.

"This legislation aims to solve an important problem, but imposes an overly broad approach to solving a discrete set of issues," Lee said in his veto letter.

The Board of Supervisors approved the proposal on a 6-5 vote last week, setting up a showdown with Lee just weeks before the Nov. 8 mayoral election, in which polls show him as the front-runner in a field of 16 candidates.

Four of his rivals, Supervisor John Avalos, City Attorney Dennis Herrera, city Assessor-Recorder Phil Ting and state Sen. Leland Yee, have signaled they will make Lee's veto a campaign issue, having rallied on the steps of City Hall this month urging him to support the plan.

It's unlikely sponsors of the legislation will get eight votes to override the veto. But Supervisor David Campos, chief sponsor of the legislation, said Lee "is taking San Francisco in the wrong direction" by limiting the funding uninsured workers can access to pay for their health care needs.

Campos said he is considering taking his proposal to the voters. It takes four supervisors to place a measure on the ballot.

The Campos plan targets the provision in the city's groundbreaking health care law that allows employers to set up individual health care reimbursement accounts for uninsured workers. Participating employers contribute up to $4,252 annually into each worker's account, but any unused money at the end of the year can go back to the employer.

Last year, 860 businesses out of the approximately 4,000 covered by the law contributed a combined $62.5 million into the reimbursement accounts, but just $12.4 million was used by workers. Employers pocketed the rest.

Under the Campos amendment, the unspent money would accrue in the accounts. Only after a worker has been off the payroll for 18 months could an employer get the money back.

Business owners and their trade association said it would force them to lay off workers, shelve expansion plans, move out of the city or close.

Lee said that while he agrees the proposal would be bad for business, he believes changes are needed.

One of his goals, he has said, is to get businesses to be less restrictive on how the money can be used. Some employers, for example, won't reimburse workers for health insurance premiums or for enrollment in a city plan that makes use of public clinics and hospitals.

The Campos amendment, he said, would not increase access to health care or protect jobs. "Moreover, this cash, pulled out of our local economy, will not be available to pay wages or grow businesses," Lee told supervisors.

The mayor formed a working group to see whether a compromise could be brokered and Lee said in his veto letter that he is "confident there is a legislative path forward."

Meanwhile, Board of Supervisors President David Chiu has offered a different amendment to address the loophole. Under his version, at least a year's worth of unused employer contributions must always be available to avoid a use-it-or-lose-it scenario.

The board was to vote on Chiu's plan Monday, but, at his urging, delayed consideration for one week.

Chiu, Campos and Lee all agree that employers should do a better job of telling workers how to access the reimbursement funds, and also want to prevent restaurants from placing a surcharge on their patrons' bills for employees' health care unless the money is actually used for that purpose.

"Once we're past this week, I'm looking forward to working with my colleagues to find a solution," said Chiu, who also is running for mayor.