This week, the Affordable Care Act (ACA) is in the spotlight once again as the Supreme Court hears oral arguments in a high-profile case that could shake the very foundations of the healthcare law. As plaintiffs and defendant make their case before the high court, it's a good time for all of our leaders in Washington to give the ACA a full "check-up" and look specifically at some of its critical flaws that are impacting employers and employees alike.
As passed and signed into law, the ACA changed the definition of a full-time employee from someone who works the traditional 40-hour workweek to anyone who works 30 hours a week. This lower threshold for "full-time employment" has put many restaurants on the cusp of being classified as a large business — the result of which comes with a very steep price tag. As a "large business," a restaurant is forced to either pay for health insurance for many 30-plus hour employees who never had to be covered before or employers must pay a substantial fine.
In the hotel industry, serving our guests is a 24/7 operation, which makes flexibility in scheduling a critical component of a successful business. The current 30-hour definition not only undermines that flexibility, but provides an arbitrary threshold that would inevitably lead many businesses to reduce the number of hours below 30 per week. Many employees, forced to work less than 30 hours because of this definition change, will look to take second jobs to make up for the shortfall in earnings. The result: A nation of part-time workers with multiple jobs. This is not good for business and not good for workers.
Consider these firsthand accounts from a few long-established restaurants and hotels from across the country:
Steve Palmer, owner of Palmer Place Restaurant & Biergarten in La Grange, Ill.: "After weeks of number crunching, I have found that complying with ACA under a 40-hour full-time employee threshold is possible, but 30-hours per week would involve a major reworking of my business model or even rethinking of staying in the business altogether."
Mike Rastrelli, owner of Rastrelli's restaurant in Clinton, Iowa: "I'm not a large business. When labor costs dramatically rise, as they do under the ACA, something has to give. A $250 to $300 monthly hike per employee really increases the cost of a pizza or a banquet for my customers. The unfortunate alternative is to trim hours. Full-time employees will become a financial liability, as do part-time employees who work too many hours. And anyone who wants to pick up an extra shift or make some extra cash? That will soon be a thing of the past."
Andrea Carnevale, vice president of the Bedford Village Inn in New Hampshire: "We are a borderline 'large' employer and we have to do monthly calculations to determine if we meet the threshold of having 50 full-time-equivalent employees, which is burdensome in itself. If the [Bedford Valley Inn] were to be classified as a 'large' employer, our group healthcare costs would go up another 40 to 50 percent. ... No well-run business will tolerate double digit cost increases. Any time a cost gets out of line, changes have to be made to offset the increases, and these changes will not be good for employees."
Marian Barbieri, vice president of human resources at New Castle Hotels and Resorts: "The change in the definition of a full-time employee under the Affordable Care Act has created many challenges, from an H.R. perspective, from a payroll perspective and from a compliance perspective. Most importantly, it has limited our ability to provide employees with the flexible scheduling they seek in our industry."
Greg Dugal, president and CEO of the Maine Innkeepers Association: "Business in the Maine lodging industry fluctuates greatly due to the seasonal nature of the tourism industry in the state and as a result, our staffing models are constantly changing with the seasons. This law, as currently written, limits the flexibility innkeepers need to provide good benefits and operate at full strength during our peak season."
Before the ACA, over 178 million Americans, more than half of the population, received voluntary employer-based health insurance. The new definition of a full-time employment has slashed that number and hurt the income of millions of hard working hourly workers.
Even a prominent union leader proclaimed that the changing definition of full time under ACA will "shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class."
Fortunately, many forward-thinking lawmakers on Capitol Hill understand the problems ACA has created. The Forty Hours is Full Time Act has been championed in the Senate by Sens. Susan CollinsSusan CollinsGun-control supporters plan next steps versus NRA House Republicans pushing gun control bill The Trail 2016: Berning embers MORE (R-Maine), Joe DonnellyJoe DonnellyPost Orlando, hawks make a power play Overnight Cybersecurity: Senate narrowly rejects expanding FBI surveillance powers Senate narrowly rejects new FBI surveillance MORE (D-Ind.), Lisa MurkowskiLisa MurkowskiKerry visits Arctic Circle to see climate impacts Senate panel clears EPA spending bill, blocking rules Momentum slows for major energy bill MORE (R-Alaska) and Joe ManchinJoe ManchinGun-control supporters plan next steps versus NRA 14 dead in West Virginia flooding Bipartisan gun measure survives test vote MORE (D-W.Va.). Thirty other senators have also signed on as co-sponsors. In the House of Representatives, bipartisan legislation was passed earlier this year to change the full-time definition to 40 hours earlier this month.
Restaurants and hotels together employ millions of Americans, and are well-poised to continue to grow and create additional jobs. Yet this law jeopardizes our ability to contribute to our nation's continued economic recovery. To keep the country's financial outlook healthy, Congress and President Obama should practice some preventative care and fix ACA's full time definition now.
Sweeney is president and CEO of the National Restaurant Association. Lugar is the president and CEO of the American Hotel and Lodging Association.