Wendy’s Franchise Plans To Cut Employees’ Hours To Avoid ObamaCare

1/9/13 11:34AM EST

wendys Wendys Franchise Plans To Cut Employees Hours To Avoid ObamaCare

The owner of an Omaha, Neb. Wendy’s franchise has announced plans to cut 300 employees’ hours to part-time in order to avoid providing health care coverage to be mandated by the Affordable Care Act. According to Gary Burdette, vice president of operations for the franchise, the cuts are necessary because the ACA requires employers to offer health insurance to employees working more than 30 hours per week. As a small business, the owner cannot afford to operate and pay for health insurance, and therefore is forced to reduce hours of “non-management” employees to 28 per week.

Under the Affordable Care Act, US businesses with more than 50 employees are required to offer health insurance to “full-time” workers. Many businesses have threatened to reduce employee hours to avoid the additional costs, but such announcements have proven detrimental in some cases.

Darden Restaurants, for example, retracted its threat to cut employee hours in December after heavy media coverage led to a 37-percent drop in company profit for the parent company of Olive Garden and Red Lobster. Papa John’s also faced a backlash after its CEO made derogatory statements regarding the ACA.

Employers’ actions to dodge insurance requirements are an unfortunate side-effect to the Affordable Care Act, which was designed with employees such as retail and food service workers—those who work in industries where a health plan isn’t provided, is inadequate or simply too expensive—in mind. According to a Kaiser Family Foundation survey, retail workers are the least likely to have access to job-based health benefits, with only 45 percent of retailers offering health insurance to employees compared to a national average of 61 percent.

Reducing hours is an option that hasn’t gotten a lot of traction at the moment but I would expect that to be a real consideration,” especially for retail, restaurant and grocery chains, Towers Watson senior consultant Jeanne Wyand told the Huffington Post.

Underemployment is already a widespread problem in the United States, as many—especially in the retail and food service industries—have a job but are not offered enough hours to support themselves and their families. According to the Employee Benefit Research Institute, the percentage of employees who are part-time workers increased from 17 percent in 2007 to 22 percent in 2011. And, according to the Henry J. Kaiser Family Foundation, only 28 percent of all companies offer health benefits to part-time employees.

The percentage of part-time workers has been increasing for the past four or five years, and that’s happening because of business conditions,” Paul Fronstin, a researcher at EBRI, a nonprofit that tracks trends in workplace benefits, told the Huffington Post. “That’s something that may happen anyway, even independent of the Affordable Care Act. Or maybe the Affordable Care Act will cause it to happen even more.

According to the Urban Institute, however, the ACA will have little impact on business costs, and may actually reduce costs for small businesses while large companies will likely be unaffected.

[Image via Clotee Pridgen Allochuku/Flickr]

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