Restaurant chain experiments with more part-time work to avoid Obamacare costs

Updated
An Olive Garden restaurant is shown in Hialeah, Fla., Thursday, Sept. 6, 2012.
An Olive Garden restaurant is shown in Hialeah, Fla., Thursday, Sept. 6, 2012.
Alan Diaz / AP

Darden Concepts, Inc.—the umbrella corporation behind Red Lobster and Olive Garden, among other chain restaurants—is experimenting with hiring more part-time staff in order to offset the cost of implementing the Affordable Care Act. Rich Jeffers, a spokesperson for Darden, said the company was working on finding the “optimal mix” for satisfying the law’s requirements while “address[ing] the cost implications of the Affordable Care Act.”

“We’re not moving people from full time to part time,” said Jeffers. Instead, Darden has been “bringing on more people in part-time roles” in the restaurants they’ve opened since February, when the experiment began. The question the experiment is supposed to answer, he said, is, “Can we continue to deliver our brand experience with more part-time?”

If the experiment is a success, the company overall could come to rely more on part-time workers. Those new employees would likely not enjoy the same health benefits that all employees currently do. “Today we offer health care to all of our employees,” said Jeffers. But under the Affordable Care Act, which sets minimum standards for the health care being provided, “we can’t offer that.”

Conservative and libertarian commentators have argued that the cost of the Affordable Care Act to employers would compel them to lower wages and hire more part-time employees. Darrell Issa, the Republican chairman of the House Oversight Committee, said as much in his July preview statement regarding hearings on the consequences of the law.

Saru Jayaraman, the director of Restaurant Opportunities Centers (ROC) United, alleged that Darden was using the Affordable Care Act as a mere pretext to cut back on labor costs. “Maybe they want to portray that that’s the cause of the issue, but it really isn’t,” she said. As In These Times reported in July, ROC has been engaged in a multi-city campaign against Darden for months over charges of wage theft, grueling hours, unpaid overtime, and even racial discrimination.

Jayaraman also said that Darden was wrong to claim it had not cut hours for full-time employees. “Since we’ve started the campaign we’ve received messages … from workers saying similar things saying their hours are being cut, their positions are being cut,” she said.

CNBC reports that Darden has been working to cut labor costs for years. In fact, in the past three years, the company has managed to whittle labor costs down from 33 percent of sales to 31 through policies like asking servers to handle more tables at once, and instituting a “tip sharing” policy, “meaning waiters and waitresses share their tips with other employees such as busboys and bartenders.”

The Economic Policy Institute’s health policy research director Elise Gould said that pivoting to a greater reliance part-time labor would also reduce costs, with or without the Affordable Care Act in place. “When I think about the incentives that firms have to have part-time versus full-time workers, there are already plenty without the ACA,” she said. For example, many companies have increased their reliance on part-time work since the recession because they can give part-timers fewer benefits, such as retirement benefits.

Indeed, the number of involuntary part-time workers in the overall workforce increased sharply right after the beginning of the recession. In December 2008, the Bureau of Labor Statistics reported [PDF] on a sharp rise in “involuntary part-time work”—that is to say, work done by people who would prefer to be in full-time jobs but were unable to find any. As the Wall Street Journal reported last week, “Part-time jobs now account for 6 percent of all jobs, double their share before the Great Recession.” Restaurant work in particular is disproportionately part-time; by Jeffers’ own admission, ”our overall workforce today is 75 percent part-time,” even before Darden sees the results of its experiment.

A recent study [PDF] by the Urban Institute found that the law’s provisions, once they all go into effect, would only increase large business’ overall spending by 4.3 percent. However, Jeffers argued that there are too many unanswered questions about how the bill will be implemented. “What we don’t know is how are we going to address the requirements for part-time employees, and we just don’t have enough information,” he said. When asked what additional information Darden needed, he added, “What are the regulations? What does it look like?”

Katie Niebaum, a spokesperson for the National Restaurant Association, echoed Jeffers’ concerns about uncertainty. “We have known for some time that the mechanics of the law are very difficult for the industry,” she wrote in an email. “As restaurateurs look to 2014, they are evaluating various options for implementing the law, while many of the regulations/details remain unknown.”

But Jayaraman suggested that major restaurant chains make similar arguments when confronted by any new regulation. “This is nothing new,” she said. “Every time there’s some kind of new regulation, they try to get the industry in particular exempted.” As an example, she pointed to industry’s success in securing a federal minimum wage for tipped service employees of only $2.13 before you factor in tips.

“It has nothing to do with the actual setup of this industry,” she said. “It has to do with the power of the lobby.”

Restaurant chain experiments with more part-time work to avoid Obamacare costs

Updated