February 7 2013
Excuse Me, Darden...Let Me Clarify
Last night I joined Fox Business Network's Charles Payne to talk about the impact of ObamaCare on jobs. As many readers will recall, President Obama insisted repeatedly that “if you like your health care plan you can keep it;” but we know now that he was being dishonest with the American people.
Beginning in 2014 a lot of businesses are going to have to make some tough decisions. Health and Human Services have written in lots of new regulations, but one in particular stands out: ObamaCare requires that employers of more than 50 workers must provide their employees with health insurance coverage that is consistent with the law’s “minimum essential requirements.” Failure to do so will result in a penalty of $2,000-$3,000 per worker.
To stave off these health care increases, several major restaurant chains have already decided to employ fewer full-time workers in exchange for more part-time labor. And last night I used Darden Restaurants (parent company of such well-known chains as Red Lobster and Olive Garden) as an example, noting that Darden plans to transfer “people from full-time jobs to part-time jobs to get out of paying for healthcare.”
In an email this morning, Darden suggested I shared “some incorrect information regarding our company’s approach to healthcare.” So since news shows don’t always afford you time to elaborate, I’d like to clarify my response here.
As the Associated Press reported back in October, Darden did undergo tests in which they put more workers on part-time status to see if they could reduce costs expected to come from the pending new health care law:
Darden Restaurants Inc. declined to give details but said the test is only in four markets across the country. The move entails boosting the number of workers on part-time status, meaning they work less than 30 hours a week.
Under the new health care law, companies with 50 or more workers could be hit with fines if they do not provide basic coverage for full-time workers and their dependents. Starting Jan. 1, 2014, those penalties and requirements could significantly boost labor costs for some companies, particularly in low-wage industries such as retail and hospitality, where most jobs don't come with health benefits.
And while Darden explains in a recent press release that it has no plans to cut existing full-time employees, it’s not clear that they won’t be hiring more part-time employees moving forward to help save money.
Darden aside, there are plenty of other food service employers who will feel the pinch as a result of ObamaCare and be making changes to their workforce. John Metz, owner of about 40 Denny’s restaurants, announced last year that he will offset the costs of ObamaCare by implementing a 5 percent surcharge to all meals and cut worker’s hours in order to ensure he has more employees working under the 30-hour mark. Similarly, John Schnatter, Founder and CEO of Papa John’s pizza chain has announced that the company will add a surcharge of 15-20 cents per order to offset new ObamaCare regulations.
It’s true that some businesses will be able to absorb these costs. McDonald’s reported that “ObamaCare will cost stores $10,000-$30,000, and that the company is not worried about it.” But the same is certainly not true across the board.
Human resource giant Mercer conducted a survey and concluded:
“retail/wholesale employers not currently offering coverage to all employees working at least 30 hours a week are more inclined to change their workforce strategy so that fewer employees meet that threshold – 67%, compared to just 41% of manufacturing employers likely to take this approach.”
Darden might want to quibble with how I phrased things on the show last night – and I'm open to criticism and will work on being clearer next time -- but the reality is many American employers cannot afford to provide the one-size-fits all mandated coverage ObamaCare will require without hurting their bottom line.