The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.
Darden Restaurants [DRI 55.31 0.57 (+1.04%) ] declined to give details but said the test is only in restaurants in four markets across the country. The test entails increasing the number of workers on part-time status, meaning they work less than 30 hours a week. Under the new health care act, companies will be required to provide health care to full-time employees by 2014. That would significantly boost labor costs for businesses.
About 75 percent of Darden's employees are currently part-timers.
Bob McAdam, who heads government affairs and community relations for Darden, said the company is still learning from the tests, which was first reported by The Orlando Sentinel.
"We're not at a point where we have results," he said. McAdam also noted that Darden is not alone in looking at ways to keep labor costs in check, with companies industry wide prepping for the new regulations to take effect.
Darden, based in Orlando, Fla., has made cost cutting a priority in recent years as sales growth and traffic have stalled at its flagship chains. In the most recent fiscal quarter, the company's restaurant labor costs were 31 percent of sales. That's down from 33 percent three years ago.
The reduction was driven by several factors. Given the challenging job market, Darden has been able to offer lower pay rates to new hires. Bonuses for general managers have been reduced as sales have stagnated. Servers at Red Lobster are handling four tables at a time, instead of three.
And last year, the company also put workers on a "tip sharing" program, meaning waiters and waitresses share their tips with other employees such as busboys and bartenders. That allows Darden to pay more workers a far lower "tip credit wage" of $2.13, rather than the federal minimum wage of $7.25 an hour.
Darden isn't the only restaurant chain looking at managing labor costs.
This summer, McDonald's [MCD 92.99 0.88 (+0.96%) ] Chief Financial Officer Peter Bensen noted in a conference call with investors that the fast food company was looking at the many factors that will impact health care costs, including the number of full-time employees.
Darden operates more than 2,000 restaurants in the U.S. and Canada, including its LongHorn Steakhouse. It employs about 180,000 people.
Under Obamacare you will be forced to buy insurance or be fined. Right now the employer will pay for part of the cost. Through the government single payer system the entire cost is on the waiter.
What a nice thing Obama did to the waitress probably supporting several children and giving her the option of buying a bare bones policy for her and her family at a steep cost that covers almost nothing because her employer subsidized plan has been dropped or pay a fine.
No. The hypothetical waitress never received health benefits from Red Lobster. If she has health benefits, they are likely provided by Medicaid through her children.
Under the ACA, Red Lobster is required to provide health care benefits (and receive the associated tax benefit) or pay a fine. The fine is used to offset the subsidies the waitress will receive when she purchases insurance on the exchange. The fine is an added incentive, on top of the existing tax benefits, to employers to provide insurance to employees.
What Red Lobster is doing is trying to reclassify employees to avoid providing health care and to avoid paying the fine. Just like they did with the tips. Just like many employers try to do to avoid paying overtime. This type of labor abuse is nothing new and not confined to the ACA. Mostly, it's another reason to not go to Red Lobster or the Olive Garden. (if you needed one. Support your local small businesses and go to a real restaurant).
Whatever Red Lobster does, however, the waitress and her children will have an easier time getting health insurance--either through the exchanges or through the Medicaid expansion.
Additionally, the ACA does not create a single payer system. Medicare is a single payer system. If the ACA was a single payer system, the waitress would get health insurance from the government at low or no cost just like seniors get Medicare from the government at low or no cost. The waitress, however, will get health insurance from a private insurer, either through her employer or by purchasing it on the exchange.