ACA Impact on Hours Worked: Anecdotal Evidence

VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Impact on Employment/Economy >> ACA Impact on Hours Worked: Anecdotal Evidence (last updated 12.18.15)

Overview

Large employers with many part-time employees have announced plans to limit their employees to 25 hours per week in response to the ACA.

• The New York Times (2.20.14) reports: “cities, counties, public schools and community colleges around the country have limited or reduced the work hours of part-time employees to avoid having to provide them with health insurance under the Affordable Care Act, state and local officials say.”
• Wall Street Journal (4.13.14) reports: “Thousands of these so-called variable-hour employees—many of whom work on college campuses that don’t operate during summer months—could lose their benefits as employers use new formulas to classify workers as full time or part time. The distinction determines which employees are entitled to company-sponsored health coverage….A large portion of Sodexo’s 125,000 U.S. workers are variable, and about 10,000 of them are losing access to health insurance, paid vacation and sick days and other benefits available to full-timers….Other employers are likely to follow Sodexo’s lead in reclassifying workers as they get closer to the ACA’s Jan. 1, 2015 compliance deadline, said Gary Claxton, a vice president at the Henry J. Kaiser Family Foundation, who said that businesses sought clear guidance from government officials on how to handle workers with nonstandard hours.”
• Hillary Clinton (12.16.15) conceded in a campaign event that the ACA includes disincentives for full-time work: “there is a disincentive within our system that we need to deal with, and I’m really worried about it because there’s a trend to try to move more and more people into part-time work.”

IBD’s ObamaCare Employer Mandate list details 401 employers as of 2.3.14 (the constantly updated list can be downloaded into an (Excel file) that have cut work hours or jobs in response to the health law; the list includes more than 100 school districts.  IBD’s analysis shows that the number of such announcements steadily rose through June 2013, at which point they began to decline in the aftermath of the administration’s early July decision to delay the employer mandate for 1 year. The New York Times (2.20.14) reports: “even after the administration said this month that it would ease coverage requirements for larger employers, public employers generally said they were keeping the restrictions on work hours because their obligation to provide health insurance, starting in 2015, would be based on hours worked by employees this year.”  Moreover, “as some government officials point out, businesses at least have the option of passing along some of the additional costs to consumers.” The following codifies some of the largest employers to have taken this step, along with the publicly-stated rationale for doing so.

Restaurants and Fast-food Establishments

• Buffalo Wild Wings. According to CNBC: “Buffalo Wild Wings CEO Sally Smith said she’s not planning to drop health care coverage, but she will be watching worker hours more closely. ‘I think we’ll continue to refine our labor model,” Smith said. “I think you’ll see labor software coming out to help restaurateurs and retailers meet the demand for the hours, as well as what our team members need.'”
• CKE Restaurants, Inc. “CKE Restaurants Inc., owner of the Carl’s Jr. and Hardee’s hamburger chains, last year began hiring part-time workers to replace full-time employees who left and as a result has boosted its overall workforce, though the company declined to specify how much.”
• Darden Restaurants, Inc. (decision reversed).  According to CNBC: “Darden Restaurants, with 45-thousand workers, experimented with cutting back on full-time staffing at some of its restaurants last fall. After a public backlash, the chain said it would not change its staffing in 2014.”
• Del Taco. “Rod Carstensen, owner of 11 Del Taco restaurants around Denver, began in April converting his mostly full-time workforce into one comprising mostly part-time help to minimize his health-care costs. He estimates the costs could have climbed by as much as $400,000 a year without the change. Mr. Carstensen had 180 full-time and 40 part-time workers and is in the process of switching to 80 full-time and 320 part-time workers who clock no more than 28 hours per week.”
• Subway franchises. “Ken Adams has been turning to more part-time workers at his 10 Subway sandwich shops in Michigan to avoid possibly incurring higher health-care costs under the new federal insurance law.  He added approximately 25 part-time workers in May and June as he reduced some employees’ hours and replaced other workers who left.”
• Wendy’s franchises. “A fast-food chain is slashing employee hours so franchise owners don’t have to pay health benefits. Around 100 local Wendy’s workers have learned their hours are being cut. A spokesperson says a new health care law is to blame… The company has announced that all non-management positions will have their hours reduced to 28 a week. Gary Burdette, Vice President of Operations for the local franchise, says the cuts are coming because the new Affordable Health Care Act requires employers to offer health insurance to employees working 32-38 hours a week. Under the current law they are not considered full time and that as a small business owner, he can’t afford to stay in operation and pay for everyone’s health insurance.”
• White Castle. “White Castle Management Co., which has more than 400 burger restaurants, said it is considering hiring only part-time workers.”
• Whole Foods (decision pending). “”We can’t really calculate what it’s going to be like,” said John Mackey, Co-Founder and Co-CEO of Whole Foods, an outspoken critic of the Obama health reform law. His grocery chain already offers health care to workers at the 30-hour threshold. But he said the company may be forced to reconsider its full-time staffing levels, if the final employer mandate rules still being crafted by the Obama administration require companies to offer costly benefit options.

Colleges That Rely on Part-time Instructors

• Community College of Allegheny County. “The Community College of Allegheny County in Pennsylvania announced late last year that it would cut the hours of adjunct professors and some other part-time employees to ensure they did not become full-time employees under ACA guidelines. Had the college not taken that action, officials said at the time, the college could face a $6 million hit under ACA.”
• Kean University. “A handful of colleges have cut hours because of the law, including …New Jersey’s Kean University.”
• Northern Virginia Community College. “Like many of his colleagues, the adjunct music professor at Northern Virginia Community College had managed to assemble a hefty course load despite his official status as a part-time employee. But his employer, the state, slashed his hours this spring to avoid a Jan. 1 requirement that all full-time workers for large employers be offered health insurance. The law defines “full time” as 30 hours a week or more….This month, the Obama administration delayed the employer insurance requirement until January 2015. But Virginia, like some other employers around the country that capped part-timers’ hours in anticipation of the initial deadline, has no plans to abandon its new 29-hour-a-week limit.”
• Palm Beach State College. “A handful of colleges have cut hours because of the law, including Palm Beach State College in Florida.”
• University of Arizona in Tucson. “The University of Arizona in Tucson will also have to pay closer attention to those workers termed variable-hour employees, said George Humphrey, interim assistant vice president for communications. Like UT-Austin, the University of Arizona gives benefits to employees working at least 20 hours a week. “While the Affordable Care Act’s 30-hour-a-week requirement will not affect us, the requirement to provide coverage to variable hour employees will require us to limit the number of hours our temporary employees may work during the course of a year,” said Humphrey. He said about 500 employees will be affected, but declined to speak about what sort of employees or further about an hour cap.”
• Youngstown State University. “Youngstown State University will limit the hours of non-union part-time employees to ensure that the university is not required to provide them with health insurance coverage under Obamacare. YSU, a public institution in eastern Ohio, announced to employees earlier this month that it is restricting part-time employees, including adjunct professors and lecturers, to 29 hours a week or less. “

Other Private Employers

• Regal Entertainment Group. “The nation’s largest movie theater chain has cut the hours of thousands of employees, saying in a company memo that ObamaCare requirements are to blame. Regal Entertainment Group, which operates more than 500 theaters in 38 states, last month rolled back shifts for non-salaried workers to 30 hours per week, putting them under the threshold at which employers are required to provide health insurance. The Nashville-based company said in a letter to managers that the move was a direct result of ObamaCare.”
• Sodexo. “A large portion of Sodexo’s 125,000 U.S. workers are variable, and about 10,000 of them are losing access to health insurance, paid vacation and sick days and other benefits available to full-timers…Sodexo, which is based in Gaithersburg, Md., and is part of Sodexo of France, informed workers of the new eligibility formula late last summer and in the fall. The company’s new formula takes a weekly average of hours worked during the 52 weeks from October 2012 to October 2013. Workers whose averages exceed 30 hours, the number at which the ACA requires employers to offer company-sponsored insurance, are now considered full time” (Wall Street Journal, 4.13.14).

State Government Employees

• Indiana. The State cut hours for part-time and temp employees from a maximum of 37.5 hours per week to fewer than 30.
• Virginia. “The state of Virginia already has done so — it has capped part-time workers’ hours at 29 hours a week. State officials have said it would cost more than $100 million a year to provide them all health coverage.”

Local Government Employees

According to Washington Post, “Some local officials said the cuts are happening now either because of labor contracts that must be negotiated in advance, or because the local governments worry that employees who work at least 30 hours in the months leading up to the January 2015 implementation date would need to be included in their health-care plans.”

• Long Beach, CA. “Consider the city of Long Beach. It is limiting most of its 1,600 part-time employees to fewer than 27 hours a week, on average. City officials say that without cutting payroll hours, new health benefits would cost up to $2 million more next year, and that extra expense would trigger layoffs and cutbacks in city services….The city estimates about 200 part-time workers will be among the most affected by a reduction in hours, representing about 13% of its overall part-time staff.”
• Brevard County, FL. “Brevard County Insurance Director Jerry Visco estimated the new mandate would cost the county $10,000 per part-time employee — or $1.38 million a year if all 138 part-time employees who work more than 30 hours a week are covered, he told Florida Today. The Brevard County libraries have already cut hours for 37 employees” (Washington Post).
• Dearborn, MI. “A new policy implemented by the city of Dearborn will reduce the number of hours part-time and seasonal employees can work during the week. The policy states that part-time employees cannot work more than an average of 28 hours per week over 52 weeks from April 1 to March 30 of the proceding year…”If we had to provide health care and other benefits to all of our employees, the burden on the city would be tremendous. Health care is one of the largest budget items that increases annually due to the rising cost from insurance providers,” O’Reilly continued.”
• Middle Township, NJ. “said it would reduce the hours of 25 part-time workers in order to avoid up to $775,000 in increased annual health-care costs” (Washington Post).
• Bee County, TX. “said it would limit its part-time workers to 24 hours per week when the new fiscal year starts on Oct. 1″ (Washington Post).
• Chesterfield County, VA. “We are trying to come up with alternative plans in each situation and try to find a way to get the hours under the threshold or otherwise find ways to cover the work,” said Chesterfield County Administrator James J.L. Stegmaier. Stegmaier said the county has worked part-time employees up to 32 hours a week, but is cutting them back to less than 30 hours a week, while trying to identify the potential effect on public services they deliver.” Washington Post (8.22.13) reports the county “is likely to cut the hours of “several hundred” employees, the county director of human resources told the Richmond Times-Dispatch earlier this year.”
• Lynchburg, VA. “administrators have cut hours for 35 to 40 part-time employees” (Washington Post).