Over the past 15 years, my wife and I have overcome many of the challenges that come with running a small restaurant business. Despite the obstacles, we persevere and continue to dive in and grow jobs as part of our belief that if you work your tail off you can achieve your part of the American dream.
Today, I am seeing that dream being taken away by one government mandate after another, particularly the Affordable Care Act. Despite the delays and assurances from the government that things will get easier, the simple fact is that the ACA is going to hurt my business and my employees no matter when it goes into effect.
The ACA has two main problems, as I see it. The first is the formula used to decide which businesses are “large” and which are “small.” The second is the law’s definition of full-time employment to mean 30 hours or more per week.
In the eyes of the ACA, any business with more than 50 full-time employees (or full-time equivalents, when part-time employees’ hours are added together) is a “large” employer. These businesses must offer health insurance to their full-time employees and their dependents.
That number, however, is an arbitrary distinction that unfairly penalizes businesses that are not “large.” In reality, a 50-employee business is nothing more than a popular local restaurant or a franchisee with two or three restaurants in a single town.
The ACA treats these businesses as if they’re no different from Microsoft or Wal-Mart. As a result, the law ignores that some businesses — restaurants in particular — can’t afford to surpass the 50-employee limit if they are then going to be responsible for every employee’s health coverage.
It’s simple math. Small restaurants like mine are high-labor, low-profit businesses. We already offer benefits to our managers and full timers, and it is included in their salary packages. But our profit margins run in the low single digits.
Clearly we want to treat our employees as best we can, but the government has offered no clear guidelines for compliance with the ACA. Based on what we have to work with, the obvious option may be to cut employee hours in order to stay in business. That’s where the ACA’s redefinition of a full-time workweek starts to hurt.
Putting aside that the redefinition of full-time as 30 hours undermines the 40-hour workweek, it also means that businesses looking to stay in the black will shave some employees’ hours to under 30. Some employees may find themselves working 29 hours or less.
There are efforts by some — such as Sens. Susan Collins, R-Maine; Joe Donnelly, D-Ind.; and Todd Young, R-Ind., and Rep. Dan Lipinski, D-Ill. — to fix this and re-establish the 40-hour workweek through legislation, but ACA defenders want none of it.
This means that full-time employment will be slowly replaced by part-time employment. Even where full-time employment still exists, it may mean only 30 hours per week. Even if these employees receive the best health care in the world (which they won’t), they’re going to lose the flexible scheduling they enjoy now while taking home less pay and having fewer options for career advancement.
Nowhere will this be more severely felt than in the restaurant industry. Many servers will drop to 29 hours, causing service to suffer. Extra shifts will become a thing of the past: They might push a business like mine over the 50-employee limit. At that point, we’re on the hook for a substantial amount per employee per year for health coverage. If we don’t want to do that, we can pay a $2,000-per-employee fine.
Neither option helps a restaurant keep its door open — and the math makes it cheaper for small employers like me to drop employer-sponsored health care altogether and just pay the government a fine if we end up with more than 50 employees.
My business is sitting on the cusp of the 50-employee threshold. This means any attempt I make to expand my business and thereby create more jobs and give back to the economy will be met with a sudden spike in costs. This perversely keeps me from pursuing new growth options, the same options that have made small businesses like mine the engines of economic growth over the past 100 years. Such is the price of success today.
At the end of the day, I can say with complete certainty I’m not able to afford the Affordable Care Act. My options are downsizing, automating and creating part-time jobs that aren’t careers. Or, the American dream could become my worst nightmare, and I could have to close my doors.
The goal of the Affordable Care Act is laudable, but its implementation runs against everything I believe in and for which I have worked hard.
Bob McCafferty owns the North Country Brewing Co. in Slippery Rock.