Restaurant operators fear that the Affordable Care Act — ObamaCare — will be a difficult pill to swallow, and with good reason. It suffers from numerous defects that will adversely affect the millions of people that restaurants employ across the nation — including the 192,000 such employees in Nevada.
These employees are why the law so desperately needs to be fixed. There are three key areas of the ACA’s language that need significant modification: the definition of full-time employees; the determination of what constitutes a large employer; and the auto-enroll mandate.
The ACA’s description of a full-time employee as someone who only works 30 hours per week is a problematic definition that hurts the employees by limiting their flexibility in the workplace.
Restaurants only have single-digit profit margins, averaging around 4 percent. This means they have a finite amount of money to use for employee benefits. When that pool of money is used up, as it will be when every employee who works more than 30 hours receives health care, part-time workers looking to pick up hours — as well as full-time workers looking to put in some overtime — will find that the restaurant can no longer afford to give them that opportunity.
The only other option is for the restaurant to pay the $2,000 penalty per employee and not provide health care — an equally untenable position that will have the exact same limiting effects on employees.
The problem with the full-time employee definition is further compounded by the ACA’s definition of a “large business” as one that employs 50 or more full-time equivalent employees. In reality, a 50-employee business isn’t “large” at all; it can actually be a popular local eatery, or perhaps a regional chain with only two or three stores.
Unfortunately, the 50 full-time employee equation is more convoluted than it first appears. The ACA’s definition of a large employer applies to those with 50 full-time equivalents, rather than just the simple number of employees. For the restaurant industry, which has significant turnover, this means that many restaurants employing fewer than 50 employees will still be treated by the law as a large employer, provided those employees work more than the base 30-hour work week.
At that point, it becomes a numbers game in which businesses have to cut through red tape just to figure out whether they meet the 50-person requirement. The end result is administrative costs that further inhibit employee opportunities.
The ACA thus perversely incentivizes restaurants to limit their financial exposure under the law. This inevitably means that employees who have enjoyed access to more hours and wages when they want them will now not be able to find those extra shifts.
The auto-enroll mandate hits businesses that have 200 or more full-time employees.
However well-intentioned this provision is, the people it harms are, first and foremost, employees. The auto-enroll system shows a disregard for the intensely personal nature of health care. As a result, employees will find themselves auto-enrolled in health care plans that might not fit their needs. Many employees, for instance, are already covered by insurance through spouses. Others prefer to buy individual insurance as opposed to company insurance, especially if they are young and healthy.
Restaurant operators are hamstrung in their ability to meet these employees’ needs, because the ACA simply dumps everyone into the same system. As a result, both employers and workers will have to waste time reversing the effects of auto-enrollment and making sure that their health care actually works for the people it’s supposed to help. This is a time- and money-consuming hassle that need not exist.
As it stands, these three portions of the law are essentially a dagger aimed at the heart of the restaurant industry. The right reforms, however, will ultimately be to the advantage of both employees and employers, and thus the economy as a whole. Without such change, many restaurants across the nation — as well as businesses in other fields with similar workforces — will be unable to create jobs and offer the employment opportunities that have kept the industry growing, even as the economy around us has continued to suffer.
No one wins in that situation — and there’s certainly nothing affordable or caring in an act that puts restaurants out of business and people out of work.
Jeff Ecker is the corporate general manager at Paymon’s Mediterranean Cafe, and is also on the board of directors at the Nevada Restaurant Association.