As restaurants scramble to comply with a law requiring access to health insurance for most full-time workers, one approach is attracting attention: Have fewer full-time workers.
Across the nation, some restaurateurs are looking at cutting back on the number of workers who put in 30 or more hours a week – the Affordable Care Act threshold for full-time status.
Employees at some chains say workers already have seen their weekly hours cut from 35 or 40 to, in some cases, fewer than 20.
The National Restaurant Association, which has been vocal in its opposition to the law that’s often called Obamacare, is backing the Forty Hours Is Full Time Act of 2013, which was introduced in the House earlier this month.
The Department of Labor leaves it up to employers to determine their workers’ full-time status, but the Fair Labor Standards Act requires overtime to kick in after 40 hours.
While legislators sort it out, full-time restaurant jobs may be harder to find.
“We’re going to open nine restaurants this year,” said John Harkey Jr., chief executive of Dallas-based Consolidated Restaurant Operations Inc. It owns 10 brands, including Cantina Laredo, Cool River Cafe and III Forks.
“I’m probably going to hire 500 people this year. In that process we are consciously trying to minimize the number of hours of the new employees that are hired, because we are unsure of the health care legislation.
“We haven’t reduced hours artificially,” he said, “but we have taken the step of hiring fewer full-time people.”
While some restaurateurs and retailers have complained about both the sum and the parts of the Affordable Care Act, the 30-hour feature has been particularly vexing.
“The 30-hour threshold was a key element of the law that provided unique challenges for the chain restaurant industry in particular and for restaurant franchisees,” said Rob Green, executive director of the National Council of Chain Restaurants. “It’s a concern to a large number of companies within the industry.”
That’s because in both restaurants and retailing, many employees work fewer than 40 hours and had been considered part time.
If health benefits were offered to the part-timers, they often were 100 percent employee-paid.
Under the Affordable Care Act, employers with 50 or more full-time-equivalent workers will be required to offer access to affordable health care to staffers who clock in with 30 or more hours a week.
The restaurant association has said costs to employers will go up under the law, but the trade group does not have an estimate of how much.
Harkey said his costs could go up by $2,800 yearly per newly covered employee. He said he does not think the ratio of his workers taking health insurance will initially grow much beyond the current rate of about 4.5 percent.
The original “employer mandate” deadline of Jan. 1, 2014, was delayed, giving employers another year to plan.
Some employers already are eyeing worker time cards.
Earlier this year, the Cincinnati-based parent of the Frisch’s Big Boy restaurants said that “among other responses to mitigate medical insurance costs … the level of full-time hourly employment may potentially be decreased in favor of increased part-time employment.”
Jim Araby, an executive with the United Food & Commercial Workers International Union, called employer proclamations that they can’t afford the new health care costs “a bunch of bull,” noting that larger employers can bargain with insurance companies for lower prices. He predicted employer reluctance to offer coverage will swell the Medicaid ranks.
“If employers dump their responsibility, the ones that are left are individuals and the government,” he said. “Especially in the low-wage economy, in restaurants, in hotels, in retail stores, where workers don’t make enough money to qualify even for the (government-run) exchange, they then go on state assistance and Medicaid.”
And they try to make ends meet with smaller paychecks.
At Dave & Buster’s, where some employees have complained about hours being cut, executives declined to comment specifically on schedule changes.
“We take all decisions that affect our team members’ hours seriously,” Margo Manning, senior vice president of human resources for Dave & Buster’s, said in a statement. “Like many companies, D&B is in the process of adapting to upcoming changes associated with health care reform.”
Orlando, Fla.-based Darden Restaurants Inc., which owns the Red Lobster and Olive Garden chains, took heat from consumers late last year based on what the company called erroneous news reports. Articles indicated the company was holding some workers to 28 hours a week and planned to hire more part-timers.
The reports stemmed from a “misunderstanding of what we did as part of a test with a handful of restaurants,” spokesman Rich Jeffers said.
To help “address the cost implications of health care reform,” Darden tested “hiring more part-time employees to backfill full-time attrition,” he said. “We found it just didn’t work.”
About 50,000 of Darden’s 200,000 employees work 30 or more hours a week.
Jeffers declined to say how many have health care coverage now, or what the estimate is for next year.
“There’s no way to know how many will accept it,” he said.