To limit health care costs, Olive Garden parent tests keeping more workers on part-time status

NEW YORK — The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting costs from President Barack Obama’s health care law.

Darden Restaurants Inc. declined to give details but said the test is only in four markets across the country. The move entails boosting the number of workers on part-time status, meaning they work less than 30 hours a week.


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Under the new health care law, companies with 50 or more workers could be hit with fines if they do not provide basic coverage for full-time workers and their dependents. Starting Jan. 1, 2014, those penalties and requirements could significantly boost labor costs for some companies, particularly in low-wage industries such as retail and hospitality, where most jobs don’t come with health benefits.

Darden, which operates more than 2,000 restaurants in the U.S. and Canada, employs about 180,000 people. The company says about 75 percent of its 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 across the industry prepping for the new regulations to take effect.

In fact, Paul Keckley, executive director of the Deloitte Center for Health Statistics, noted that follow-up legislation might be needed to ensure that companies do not shift more workers to part-time status to avoid providing coverage.

“There’s not a company in those industries that aren’t looking at this,” Keckley said.

This summer, for example, McDonald’s Corp. Chief Financial Officer Peter Bensen noted in a conference call with investors that the hamburger chain was looking at the many factors that will impact health care costs, including its number of full-time employees.

Nationally, 60 percent of companies offer health benefits, but the figure varies depending on the size of the company. Nearly all companies with 200 or more workers offer benefits, compared with 48 percent for companies with 3-9 workers, according to the Kaiser Family Foundation.

Even beyond health care costs, however, Darden has made cutting labor costs a priority in recent years as sales growth has 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, as well as cut bonuses for general managers as sales have stagnated. Servers at Red Lobster now handle 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.

Starting next year, the company will change the way it offers health insurance to full-time employees, to keep costs more predictable. Instead of offering one insurance plan for all 45,000 employees, it will give workers a contribution toward buying coverage and then send them to an online health insurance exchange where they can chose from five medical, four dental and three vision plans.

More employers are looking at this concept, known as defined contribution health insurance, as a way to stabilize health insurance costs.

Darden said it decided to do it because a survey indicated that employees wanted more options.

I'll let someone else go first.

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That's a shame all that money and don't want to pay for healthcare for there employees

tip sharing? fuck that!

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Bull Shit.

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lemme get dem cheddar bay biscuits doe

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Fuck them and Papa Johns! I'm taking them both off my job's catering listing.

I don't eat at either place because the food is nothing to write home about. I want to see the numbers. Unless they are on the verge of bankruptcy I'm just going to assume it's just greed that they want to keep their workers poor while they are making money hand over fist.

They're in food service, they should run screaming towards any system that will keep their cooks and servers healthy and not passing on diseases to their customers.

I'm just spit ballin' here (probably what they do also to stretch out that last pot of soup) but I think they are using Obamacare as an excuse to screw their employees.

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Has nothing to do with the healthcare bill passed by President Obama.It's more like people aren't going to either resturant as they had been in the past.

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They are.

Yup. They're struggling and they're trying to blame somebody else.

Didn't mean to groan you but this has been going on for a minute the New York Times did a story the other day about tech start ups hiring people part time or as consultants to avoid paying benefits
They may not like obamacare but I'm sure they took the tax credit for hiring them.

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I expect to see more of this. Its really sad.

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This practice isn't due to Obamacare. Companies have been doing this for at least two decades, probably much longer. Full-time employees being entitled to employer provided health care did NOT start with Obamacare. That's been the rule for a long time now. WalMart is notorious for this. They move shifts around and cut people's hours to keep them below full-time and therefore ineligible for benefits.

I wonder how much their CEOs make, and what percentage of that income would cover employee healthcare costs for all full time employees.

People try and bemoan this kind of thinking as punishing success but when your success is contingent upon your employees being shorted in any way, therefore lowering their opportunities to make a life for themselves, then you didn't really earn your success, did you? You stole it off the backs of people who work much harder for much less.

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damn