Complying with the Costly Affordable Care Act

Restaurateurs are searching for ways to mitigate increased costs when the Patient Protection and Affordable Care Act takes effect in 2014 and any restaurant with 50 or more full-time employees is required by law to comply. Those that do not provide insurance will be fined $2,000 for each full-time equivalent employee—and possibly as much as $3,000 per employee if coverage does not meet the requirements.

“Many folks in our industry consider themselves small businesses but are surprised to learn they are actually large because they have to combine the number of employees from multiple locations,” says Michelle Neblett, director of labor and workforce policy for the National Restaurant Association.

The nature of the industry, with its large part-time workforce, seasonal hiring, and high turnover, complicates the process.

“Over the course of a year, you need to figure out how many full-time employees work on average 30 hours or more in any given month…and also how many of your part-time employees work an average of 30 hours or more during any given month. That’s where it gets complicated,” says Neblett.

Zane Tankel, CEO of Apple-Metro, which owns 40 Applebee’s in the New York region, said the insurance would cost millions and, as a result, he would be forced to stop hiring and even lay-off some workers. But public outcry forced Applebee’s corporate to distance itself from the comments.

Darden Restaurants experienced a similar backlash after announcing it would move employees to part-time status to skirt the costs—but later reversed itself, announcing its 45,000 full-time workers would keep their status.

Randy Schoch, founder and CEO of Desert Island Restaurants, which operates full-service restaurants in Hawaii and the Southwest, is concerned about the overall effect on the industry.

“The money has to come from some place and the customer is going to give the industry the stiff arm,” he says. “They are certainly going to think twice about spending $100 on a bottle of wine they could drink at home for $40.”

Operators say the healthcare law could hurt their bottom line, but compliance will have to be calculated into the cost of doing business.