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

1/9/13 11:34AM EST


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]


The arguments of this article sounds pretty weird.....

1. Benefiting the singles doesn't mean to penalize the married. Can we say that giving out tax cut and tax return to the married households is to punish the singles and force them to be married? No! There is always a particular class of people who can benefits the most from a particular policy. 

2. No insurance out there is always guaranteed that the premium will not go up and always stay the same. If it goes up and beyond people can afford, people sign off and that's it.

3. I don't know what were you implying. Were you implying medical reimbursement rate needed to be reviewed? Or, you were implying we shall call off the Obamacare and kick those Americans who could not afford medical attentions before back to where they belong so that the system can be back to "normal" again?

4.  I am not the expert at this matter but Im wondering if there is any option other than having ACOs in promoting such a national-wide scheme of health care thing. 

5. In the employers' eyes, anything makes them pay more in business motivates them to cut costs including employees' hours. Corporate tax does that, minimum wage does that, insurance for workplace does that and now Obamacare might do that too.  The question is it is worth doing it or not. The way I see it is, it protects more working class people from health related issues and frees them from saving money for future medical expense, which results to a greater productivity in workplace and more consumption spending in economy. They are the intangible benefits you'll miss if you only look at the small picture.