Obamacare To Cost Some Restaurant Employees Their Full Time Status
Red Lobster. Olive Garden. Longhorn Steakhouse. White Castle. As restaurant owners approach the full roll out of the Affordable Care Act (AKA - Obamacare) and the costs associated with it, they are making changes to maintain the profitability of their company. Primarily those changes mean a reduction of hours and full-time status for their employees.
Two specific examples have come to light this week as Darden Restaurants - which owns Olive Garden, Red Lobster, and Longhorn Steakhouse - as well as the owners of White Castle Hamburgers - have announced plans to reduce the hours of some of their staff to make sure that they don't meet Full Time Equivalency. Under Obamacare, employers would have to provide health insurance benefits for all full time employees or pay a fine of up to $3,000 per employee.
Early critics of Obamacare suggested that many businesses that were faced with these mandates would choose to reduce their workforce or cut the hours back on current employees.
Darden, the world's largest casual-dining company and one of the nation's 30 largest employers, said it offers health insurance to all its approximately 185,000 employees. Many are offered a limited-benefit plan. That type of coverage is being phased out under health-care changes, which will ban annual limits for most plans.
About 25 percent of Darden workers are full time, meaning they work more than 30 hours a week. Though employees say Darden already offers traditional health insurance to full-timers, Janney Capital Markets analyst Mark Kalinowski said the cost of providing that could become higher for Darden under the Affordable Care Act. Because that law requires everyone to have health insurance, more workers will likely choose its coverage, Kalinowski said.
"Even a modest jump up in the amount of employees that decide they want the insurance you're offering could have a meaningful impact on your bottom line," he said.
Under the system Darden is testing, employees are to be scheduled for no more than 28 hours each week. They can run over that if things get busy, but Darden acknowledged they are not supposed to exceed 30 hours.
Obamacare survived a Supreme Court litmus test earlier this year, as the high court ruled that the controversial law was constitutional. The health care ruling has also provided to be a lightening rod during the current presidential election.