Franchise owners support 40 hours as full-time definition

Franchise owners in Louisiana who believe their companies will take financial hits from implementation of the Affordable Care Act are uniting behind a proposal that would define a full-time employee as working 40 or more hours per week for a given employer. The law currently defines “full time” as meaning more than 30 hours per week. The federal government has twice extended the deadline for complying with the law’s requirement that businesses with more than 50 full-time employees must offer health insurance coverage to those workers or face penalties. But like many other business owners, franchisers say this effort by the Obama administration to increase workers’ access to health insurance coverage will be costly to comply with and cumbersome to administer given that their current business models are predominantly based on a 40-hour workweek.

“Changing the definition from 30 to 40 hours would be tremendous for us,” said Dione Heusel, vice president of human resources and training for Metairie-based Smoothie King Franchises Inc.

The company, which has about 560 franchise stores in the United States and another 140 in other countries, derives much of its growth from franchisees who own multiple stores and, over time, expand their franchise ownership, she said.

Adding stores means adding employees, Heusel said, and under the Affordable Care Act, a franchisee could be penalized for growing beyond 50 employees.

“That puts a midsized franchisee who has five to seven stores at an economic disadvantage to someone who has one or two stores,” she said.

Heusel and several other franchisers spoke to The Advocate on Monday during the International Franchise Association’s annual convention, being held this week at the Ernest N. Morial Convention Center.

The association has made amending the full-time employee definition in the new health care law a legislative priority this year and supports several bills that have been introduced in Congress to address the issue.

One bill, called the Save American Workers Act (H.R. 2575), is expected to come to a vote by the full House of Representatives in March. If it wins approval, the association hopes to gain the support of key senators, including Sen. Mary Landrieu, D-La., to guide the measure through the Senate, an association spokesman said.

A fall 2013 survey commissioned by the association and the U.S. Chamber of Commerce concluded that the Affordable Care Act has already resulted in higher costs and fewer full-time positions as employers have sought to bring their full-time equivalent employee numbers below the law’s penalty thresholds.

The business owners said they are pleased that the Obama administration delayed until 2016 imposing penalties on businesses that do not comply with the employee coverage provisions of the law. But they want a more permanent solution to what they see as an arbitrary definition of “full time” and onerous administrative requirements.

“We’re all about health care and taking good care of our employees — that’s what builds our high referral rate — but this is going to slow down our franchise system growth,” said Kelly Rogers, franchise development director for Michigan-based Two Men and a Truck International.

The company has about 240 U.S. locations, including two franchises in the New Orleans area and one in Baton Rouge, and each location employs 20 to 30 people, Rogers said. While that number would not subject the owner of a single franchise to the requirement to offer health insurance, someone who wishes to expand ownership to multiple franchises could be deterred by the prospect of much-increased insurance costs, she said.

“I’ve got people sitting on capital, waiting to go into new markets (with more franchises), but they’re afraid to do it,” Rogers said.

All the franchisers who spoke with The Advocate said their companies currently offer health care and other benefits to full-time employees not because it’s required but because it’s crucial to holding on to good people.

“Every business wants to have the best talent,” Smoothie King’s Heusel said. “We’re a growing brand, and we have to have ‘bench strength,’ meaning we rely on our full-time employees to develop the skills, proficiency and knowledge we need to grow our business.”

Scott Taylor, president of Baton Rouge-based Last In Concepts, which owns seven Louisiana bars under the name Walk-On’s Bistreaux and Bar or Happy’s Irish Pub, said he thinks the challenge to businesses and the administration is to show that the Affordable Care Act can be a positive force for business growth.

He said that being forced to better manage employee hours could be a good thing for some businesses in the long run, provided they learn to do it efficiently.

Taylor, who recently became a member of the International Franchise Association because his company is considering the possibility of franchising, said the company’s establishments employ about 120 full-time workers and his focus is on retaining the best employees.

“Turnover cost by far outweighs the cost of insurance,” he said. “If you could (better) manage your training costs, you could pay for your benefits.”

Taylor said he thinks some managers in the restaurant industry are trying to figure ways to keep workers’ time on the job under 30 hours per week in order to skirt the Affordable Care Act’s requirements.

But even businesses that don’t try to reduce their full-time equivalents will face heavy reporting requirements imposed by the new law, which says they must regularly document their employees’ time on the job.

“Businesses are going to spend an awful lot of time trying to manage hours,” Taylor said.