Slicing more than the pizza: Companies cut jobs, blame new health care law

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From coal companies to home retailers to pizza makers to community colleges, employers across the United States have taken measures to fire workers, reduce their hours or postpone corporate expansion plans.

The reason, some of them say, is the re-election of President Barack Obama and the assured implementation of his 2010 health care reform law. And while some businesses have been more diplomatic in expressing concern with how Affordable Care Act compliance will affect costs, others are attacking the president more directly.

Papa John's CEO, John Schnatter, said the Affordable Care Act and the re-election of Mr. Obama would cost his business about $5 million to $8 million per year, meaning he'd have to increase the price of pizza and cut workers' hours so they don't qualify as "full-time" employees and become eligible for employer-provided health care coverage.

Last month, Robert Murray, chief executive of Murray Energy Co. in Pepper Pike, Ohio, laid off 150 employees, then blamed the layoffs on the president in a memo to employees. "The American people have made their choice," Mr. Murray said at the time.

And home-improvement retailer Menards decided not to open a new store in Missouri, saying, "We are a family-owned business and with the Obama administration scaring the dickens out of all small businesses in the U.S.A. at present, we have decided not to risk expansion until things are more settled."

Why make it a point to call out the Obama administration two years after the law was passed by Congress and months after the bulk of the law was upheld by the U.S. Supreme Court?

"Some of it's politics," said Larry Levitt, senior vice president for the Kaiser Family Foundation, a public health policy group based in Menlo Park, Calif. "But some of it's to keep the pressure on the administration as they write the regulations for the law."

While the law has been in place since 2010, regulations that support its implementation are still being drafted and issued, a process that will continue through 2013. Pressing the president on various issues could, Mr. Levitt said, result in some regulations that are more favorable to businesses as they go about trying to comply with the new law.

For example, the policy that most reliably "scares the dickens" out of businesses is the Affordable Care Act provision requiring companies with 51 or more full-time or full-time-equivalent employees to make health insurance available for full-time employees and their families -- or else pay a penalty of $2,000 or more per employee.

For the purposes of the law, any employee who works 30 or more hours a week, on average, is considered full-time, starting in 2014. If just one of the company's full-time employees is dumped onto the health insurance exchanges, or obtains a "premium credit" toward a private policy because the employer's health care offerings are not comprehensive enough, the penalties take effect.

The 30-hours-a-week threshold (or 120 hours a month) seems fairly straightforward. But what if an employee who generally works 25 hours a week gets pressed into extra hours for a month or two during the holidays, or because of an unexpected staff departure? What if he works 140 hours in both November and December?

"How you measure the 30 hours? Over what period do you look back? ... These regulations have not yet been issued," Mr. Levitt said.

The IRS has published notices that describe how those "look back" measurement periods may work, pending further guidance or regulations from the federal government. The "standard" measurement period will be a one-year look-back, which is one reason so many companies were tinkering with their workforce hours this year.

In other words, employees that are part time at the end of 2012 and remain that way over the next 12 months will be considered part-timers as of Jan. 1, 2014, when the law goes into effect. That's why numerous colleges and universities, including Community College of Allegheny County, have been exploring a reduction in hours for adjunct professors this year -- giving them fewer hours in 2013 means they'll count as part-time employees come Jan. 1, 2014.

But what about employees that are hired midway through 2013?

"The rules for new hires are less clear," said Alden Bianchi, employee benefits attorney with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C, of Boston.

They are so unclear that, on Tuesday, two members of the U.S. House Committee on Education and the Workforce sent letters to the U.S. Treasury, the Department of Labor and the Department of Health and Human Services asking for more clarity on how employee hours should be tracked -- and when that tracking should begin.

Regardless of how the regulations ultimately read, the net result of the 30-hour provision could be an acceleration of a trend already under way -- businesses trying to employ more part-time workers and fewer full-time ones. That may be particularly true in industries that already rely on part-timers, like retail and food service.

"If [businesses] want to reduce their health care costs, they could do so by hiring more people, but keep them all below that number of hours," said Robert Book, an economist and the senior research director at Health Systems Innovation Network, a Minnesota health consultant. That could have the effect, he said, of actually reducing the number of people who receive employer-provided care.

An increase in the number of part-time workers isn't a wholly bad thing, Mr. Book said.

"There are people who want a part-time job, who don't want to work full time [for] all sorts of reasons. For those people, it's fine," he said.

But, "For people who prefer to work full time, this is a potentially serious problem."

Employers may face their own problems if they try to shift too much work from full-timers to part-timers. As Darden Restaurants Inc. (owner of Olive Garden, Red Lobster and other popular chains) has discovered, shifting workers out of full-time employment can be unpopular, among employees as well as customers.

The Florida company "tested" a plan to shift some full-timers to part-time, but thanks partly to a publicity backlash, it announced this month that "none of its current full-time employees will have their status changed as a result of the new regulations."

Internal Darden surveys suggested both employee and customer satisfaction declined at restaurants where there were more part-timers.

"What that taught us is that our restaurants perform better when we have full-time hourly employees involved," Bob McAdam, Darden's head government affairs and community relations, said in an Associated Press article.

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Bill Toland: or 412-263-2625.


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