Not So Fast: 10 Companies That Threatened to Cut Worker Hours to Avoid Obamacare Are Rethinking Or Backing Off
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During the runup to the 2012 general election, some business leaders were feeling antsy. “Everyone’s looking for a way to not have to provide insurance for their employees ,” said John Metz, who is an owner of at least 45 fast food restaurants, in a Fox News interview soon after President Barack Obama’s re-election. “It’s essentially a huge tax on all us business people.”
During and immediately after the election many employers in the low-income service sector warned about dire effects the Affordable Care Act would have on employment and prices. The jerry-rigged, patchwork healthcare reform Obamacare tries to mend America’s long-standing coverage gaps with a variety of tools, including expanding Medicaid, establishing state-based exchanges supported by public assistance, and granting small businesses (25 or fewer employees) subsidies to provide insurance for their employees. But larger businesses (50 employees or more) are incentivized to provide coverage with a stick: Pay a $2,000 fine per employee who works more than 30 hours and lacks insurance.
Mandated insurance without goverment subsidy essentially represents a transfer of wealth from business owners to their employees, specifically those in the low-income service sector who don't already provide coverage. mostly in the low-income service sector, to their employees. During the presidential race Jimmy John Liautaud, founder and CEO of the sandwich company Jimmy John’s, mentioned in a Fox Business News interview that his company would cut hours if the ACA was enacted. “We're not doing it now, but we have to bring them down to 28 hours. Yes, we have to do that. There's no other way we can survive it, because we think it will cost us 50 cents a sandwich. That’s just the actual cost.”
But are businesses actually following through on the apocalyptic predictions of the soon-to-be moderately less-wealthy large business owners of America? AlterNet contacted the business owners who have threatened to cut employee hours or positions in the face of their new federally required responsibilities. While the likes of Metz and Liautaud cried wolf long and loud in 2012, many companies are now hedging.
1. John Metz' Denny's and Hurricane Grill and Wings
Metz owns 40 Denny’s Restaurants and is the chairman and CEO of Hurricane Grills and Wings, a Florida-based company. In his Fox News interview, he announced that most of his 1,200 workers will be facing a decline in work hours. But Denny’s chief executive quickly smacked Metz down, distancing the parent company from its franchisee’s statement. "We recognize his right to speak on issues, but registered our disappointment that his comments have been interpreted as the company’s position," said Denny’s chief executive John Miller in an email to the Huffington Post. Metz quickly announced that he regretted that his personal views were interpreted as a company-wide policy.
“In the third and fourth quarter of last year, an awful lot of things backfired on a lot of people and a lot of things were said in pure speculation because no one really understood what the Obamacare bill was going to be,” says Martin O’Dowd, president of Hurricane Grill and Wings (he is unrelated to the Denny’s franchises and Metz is currently traveling and unavailable for comment). “I can tell you what we are not doing. We are not adding on to the guest check, we are not going to be manipulating the employees hours. We’re simply going to find more efficiencies in our business.”
2. Darden Restaurants
In 2012, Darden, which owns both the Olive Garden and Red Lobster chains, experimented with replacing full-time labor with part-timers in reaction to ACA requirements. Intense public backlash followed and in the months following the experiment the company’s net income fell by 37 percent, according to the Associated Press.