Oct 12, 2012
The world’s largest casual dining company is starting to trim hours from its labor force in response to healthcare changes being implemented as part of the Affordable Care Act (ACA), also known as Obamacare. Darden Restaurants, which owns Red Lobster, Olive Garden, Longhorn Steakhouse, and a number of other popular restaurant chains, is actively cutting the hours of many of its full-time employees to fewer than 30 hours per week, which puts these employees below the Obamacare coverage threshold.
The Orlando Sentinel reports that Darden has already begun implementing the changes in four test markets, and could soon expand the labor cuts nationwide. Darden says it is bringing many of its currently full-time employees to part-time status to “address the cost implications healthcare reform will have on [its] business.” Even though many of these mandates will not come into effect until 2014, Darden is experimenting now with potential cost-cutting options.
The company currently employs about 185,000 employees nationwide, 25 percent of who are employed at full-time status. At this point in time, Darden offers some kind of healthcare coverage to all of its employees, both part-time and full-time. But because Obamacare mandates will ban limited-benefit plans like the ones Darden currently offers to employees who work fewer hours, the company says it may have to develop a new strategy to keep down its labor costs.
“Even a modest jump up in the amount of employees that decide they want the insurance you’re offering could have a meaningful impact on your bottom line,” says Mark Kalinowski, an analyst for Janney Capital Markets. Kalinowski says Obamacare’s requirement that large companies offer full healthcare coverage to all employees who work an average of 30 hours per week could significantly raise labor costs for companies like Darden.
Darden says it is still unsure whether or not it will fully implement labor cuts across its entire business because there is much about Obamacare that is still not fully understood. Even so, many of the company’s restaurants are already limiting hourly workers to 28 hours per week in anticipation of the changes. And since these cuts will affect busboys, waiters, and even bartenders, many believe quality of service at Darden’s restaurants will significantly decline.
Meanwhile, the Sentinel reports that Darden’s political contributions over the past few years have jumped significantly, despite its supposed need to cut costs. Just in this current two-year election cycle, Darden’s political-action committee has reportedly contributed nearly $700,000 to increase its influence in Washington, which many claim is evidence that the company’s labor-cutting is an act of greed rather than need.
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This article was posted: Friday, October 12, 2012 at 2:36 am