Already in effect since 2010, the ACA’s most significant stipulations kick in beginning in 2014, and these regulations pose numerous challenges to restaurateurs and food service operators. For starters, under the act, restaurants with 50 or more full time employees or Full Time Equivalents must offer mandatory minimum health care coverage to full-time employees and their equivalents, including some seasonal and traditionally “part-time” workers. In addition, the new law also subjects large food service companies with 50 or more employees to potential penalties if they take unfavorable actions towards whistleblowing employees, such as reducing employees’ hours, or preventing them, in some way, from earning overtime, promotions, and other benefits. In the end, many restaurant owners are simply concerned that the additional costs posed by the ACA will adversely affect their profitability, long-term vitality and success, and the ability to retain all of their current, hard-working, and loyal employees.
This is the stance currently being taken by the National Restaurant Association, which is now working with Congressional leaders to modify some of the more concerning elements of the act that would result in cost increases for restaurants. As reported recently in QSR Magazine, the primary trade publication of the quick-service restaurant industry, Association board member Tom Boucher testified before the U.S. House of Representatives Energy and Commerce Committee’s Subcommittee on Health hearing examining the law’s impact on jobs. In his testimony, Boucher cited several problematic areas of the industry, which mostly consists of small businesses, a young and highly-mobile workforce, and low profit margins. In underscoring those comments, he said, “Changes in the law are needed, given the challenges employers such as restaurant and food service operators face in implementing it. Broader transition relief is needed for employers attempting to comply with the law in good faith, as time is short to make the significant changes required by the law. The duplicative automatic enrollment provision should be eliminated, as it could unnecessarily confuse and financially harm employees.”
So, with all of this being rather fluid, what can restaurant owners do now to navigate these recent legislative changes? Let’s investigate more closely…
Drawing a lot of attention, particularly by larger employers, are the parts of the ACA that pertain directly to companies with 50 or more full-time employees and their equivalents. The law outlines a specific way of determining if part-time and seasonal workers are full-time equivalents; this will be discussed in more detail shortly. In the meantime, for the purposes of the ACA’s “pay-or-play” requirements, restaurants with 50 or more employees must offer minimum health care coverage to their workers, and it must be “affordable.” Failure to comply with this regulation could result in hefty fines for the restaurant.
Obviously, this represents a significant added cost to food service operators, so it is understandable why restaurant owners, especially those who may already have troubled businesses, are quite concerned about how this will affect their cash flow. To prepare for these payments, many restaurateurs have already obtained loans or lines of credit (or increased lines they’ve already opened), while others have simply been building up their cash reserves in advance of the regulation going into effect.
In highlighting the challenges the restaurant industry will face from the ACA’s full implementation, the National Restaurant Association also raised concerns about the law’s definition of a full-time employee and the inclusion of full-time equivalents in those calculations. By “full-time,” the ACA refers to any individual who, on average, works 30 or more hours per week. The Association suggests the law should have “accurately reflect[ed] the general business practice of 40 hours a week as full-time employment.”
With respect to full-time equivalents, the law, for all intents and purposes, includes smaller businesses that employ lots of part-time and shift workers in its “large employer” category. With pressure already high for large restaurants, it is safe to assume that smaller food service operations will not fare much better. As a result, it is imperative that any restaurant, regardless of its size, be able to precisely determine how many full-time employees they have, as defined by the ACA. Obviously, this figure should also include full-time equivalents, so careful calculation must be done on that front so the business can ensure it is in full compliance.
So how are full-time equivalents calculated? First, take the number of employees who work less than 30 hours per week, on average. Then, add all their hours together for the calendar month and divide the total by 120. For instance, if your part-time employees, combined, work a total of 360 hours a month, dividing that total by 120 will get you 3. Add this to your number of full-time employees, and you’ll get the size of your full-time workforce. If the total is 50 or more, then you are required to offer coverage. Please note that some ACA provisions may apply to employers with less than 50 workers, so it is important to know the law inside and out to see exactly where a certain business stands. A restaurant without a dedicated human resources (HR) department or professional should strongly consider consulting with an attorney, an experienced HR consultant, or a payroll services company such as PAYDAY to determine the best course of action.
Later this spring, and to help clients navigate the complexities of the ACA, PAYDAY will help companies carefully identify and calculate full-time employees and full-time equivalents through its time labor management and payroll service platforms. Given all the confusion surrounding the letter of the law and maintaining compliance with the regulations themselves, many clients have asked us for much-needed help in this regard, and we’re more than happy to deliver!
PAYDAY Workforce Solutions provides a single database SAAS solution for Human Capital Management (HCM) including payroll, human resources, time management, benefits administration and onboarding to companies of all sizes and in various industries.
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