With Eye on ObamaCare, Companies Move to Cut Workers’ Hours
The list of companies moving to cut hours for part-time workers continues to grow, as employers look to keep staffers below the 30-hour threshold set by the Affordable Care Act.
The Obama administration announced in July that it would delay the so-called employer mandate until 2015. ObamaCare requires that companies with 50 or more employees provide health insurance benefits to every full-time worker, considered to be anyone who logs an average of 30 or more hours a week.
Employers will be hit with a penalty for each full-time employee who isn’t covered and instead purchases insurance through a federally subsidized exchange.
Although the administration delayed implementing the rule until 2015, the penalties for that year will be based on staffing levels recorded in the second half of 2014 at the latest.
As a result, several large companies and a long list of smaller businesses have changed their policies to cap weekly hours at 29.
According to an April survey conducted by the Society for Human Resource Management, 41% of 603 small business owners said they have delayed hiring because of the federal healthcare law. One in five already cut hours, while 20% have reduced payroll.
Mercer, a human resources consulting company, said its own survey found that 12% of all U.S. employers reported plans to reduce workers’ hours as a direct result of the Affordable Care Act. The impact was more pronounced in the retail and hospitality industries, with 20% of employers saying they will cut part-time hours.
Most recently, theme-park operator SeaWorld Entertainment (NYSE:SEAS) revealed that it reduced its cap on weekly hours for part-timers to 28 from 32. The company does plan to add full-time hourly positions next year across its 11 parks, it said in a statement. Those full-time jobs will include healthcare benefits.
“The move is intended to bring consistency to the part-time designation across the SeaWorld Parks system,” SeaWorld said.
A company spokesperson didn’t comment beyond the statement when asked if the move was also intended to prevent part-time or seasonal employees from being classified as full-time under ObamaCare.
On Wednesday, the Huffington Post website reported that Trader Joe’s, which currently providers healthcare benefits for its part-time workers, sent out a memo to staff detailing the company’s plans to roll back the policy for employees who work less than 30 hours a week.
The California-based grocery chain determined that providing coverage for part-timers who log 18 hours or more will not be worth the cost under ObamaCare, since low-wage workers will be eligible for tax subsidies to buy insurance next year.
Also according to the memo, Trader Joe’s will cut a check for $500 in January to help cover the cost of insurance purchased on the subsidized exchanges.
A spokesperson for Trader Joe’s didn’t respond to requests for comment.
Wal-Mart Stores (NYSE:WMT) made headlines early in the summer when a Reuters survey revealed the world’s largest retailer was only hiring temporary employees in many of its stores, something it would normally do just during the holiday season.
Walmart said less than 10% of its workforce is temporary, compared to between 1% and 2% before this year. Chief Executive Bill Simon told a group of reporters in June that workers’ hours “flex by the needs of the business from time to time.”
Battling ObamaCare
Other companies have been more forthcoming, whether in public comments or internal directives, when it comes to ObamaCare’s influence in the decision to reduce hours.
Apparel maker Lands’ End has also turned to cutting hours to no more than 29 a week. WKOW in Madison, Wis., reported on a staff memo that notified employees of the change.
In the memo, Lands’ End told its workers, “For some of you, working less hours may be what you wanted. For others, these new governmental guidelines may be very difficult. These guidelines applies (sic) to all companies in the US (unless they have less than 50 employees or are non-profit).”
Lands’ End spokeswoman Michele Casper told FOX Business the company doesn’t comment on internal employee practices.
“We plan to continue to employ part-time employees to best match our workforce to our workload,” Casper added.
Regal Entertainment (NYSE:RGC) sent out a similar internal memo, according to a report from FOX News. The nation’s largest movie theater chain, which operates more than 500 theaters in 38 states, blamed ObamaCare requirements for capping hours below the 30-hour threshold.
“To comply with the Affordable Care Act, Regal had to increase our health care budget to cover those newly deemed eligible based on the law's definition of a full-time employee,” the company said in its memo. “To manage this budget, all other employees will be scheduled in accord with business needs and in a manner that will not negatively impact our health care budget.”
Regal Entertainment didn’t respond to a request for comment from FOX Business.
New England Motor Freight, a New Jersey-based trucking company, implemented in June an hourly cap for about 400 part-time employees, saying the company can’t afford to offer them health insurance benefits.
Ripple Effect?
Texas Senator Ted Cruz, a Republican, has been one of Washington’s sharpest critics of the Affordable Care Act. He recently remarked that the string of companies cutting hours is evidence of ObamaCare’s negative impact on workers.
He also highlighted congressional testimony from Federal Reserve Chairman Ben Bernanke, who told lawmakers that employers are hiring part-time workers to avoid the employer mandate.
“This is one instance in which Bernanke is right,” Cruz said.
Mike Montgomery, a senior economist at IHS Global Insight, said data has yet to show that the average workweek is getting shorter because the incentive structure works in both directions. Fewer hours for part-time workers can be compensated by an increase in hours for employees considered full-time under the law, he explained.
“We are not saying that no one is reducing workweeks, but that some may be raising the average but with fewer workers,” Montgomery added.
There is so far “absolutely no evidence that this is happening,” he said, referring to changes in the average workweek nationwide. But any shortening in the workweek now or in the future may be “invisible in the data since the data only exists to one decimal place and bounces around.”
The private sector isn’t alone in cutting hours for part-time employees, with more than 200 public-sector employers reducing hours to avoid ObamaCare penalties, according to a list compiled by Investor’s Business Daily.
In fact, the effect of ObamaCare thus far appears to be more pronounced in the public sector. Many U.S. towns and counties have joined in and cut part-time hours, and the business newspaper tallied 34 universities and colleges, including college systems, that are doing the same for part-time or adjunct faculty.
There have also been signals that the law’s impact stretches beyond headcount. At a Heritage Foundation seminar in March, Five Guys Burgers and Fries franchisee Mike Ruffer, a former Marriott International (NYSE:MAR) executive who owns eight of the restaurants in North Carolina, warned that consumers will pay a higher price in the long run.
“Any added costs are going to have to be passed on,” Ruffer said.