Obamacare may force White Castle to seek part-timers

The maker of onion-steamed mini-burgers says it won't cut current hours or benefits, but can't afford to cover newcomers.

By Jason Notte Jul 25, 2013 3:31PM
A White Castle restaurant in Columbus, Ohio (© Jay LaPrete/AP Photo)If the burgers are smaller, maybe the hours of the workers making them can shrink as well.

Treading ground already well worn by Papa John's (PZZA), Wendy's (WEN), Dunkin' Donuts (DNKN) and Darden Restaurants (DRI), an executive from Northeast and Midwest onion-steamed mini-burger chain White Castle told National Public Radio his restaurants may hire only part-time workers in the future to avoid the costs of the new health care insurance mandate. White Castle vice president Jamie Richardson says his company's health care costs will rise by 24% once the law is implemented.

The Affordable Care Act, often referred to as Obamacare, requires businesses to offer health insurance to all full-time employees or face significant financial penalties. Earlier this month, however, the Obama administration announced that implementing the corporate insurance measures would be delayed until 2015.

Unlike its fast-food and casual dining cohorts, however, White Castle refuses to cut current workers' hours, fire them or slash benefits to comply with the new health care laws. White Castle employs roughly 9,600 workers nationwide, about half of whom are full time and already covered under the company's health care plan. "If you're full time at White Castle, you're going to stay full time at White Castle," Richardson told NPR.

Judging by employers' reaction to the new health care rules so far, White Castle's restrained reaction falls well within the majority. According to a March survey from the Minneapolis Federal Reserve, nearly 90% of employers won't shift full-time workers to part time once the new law takes effect.

The International Foundation of Employee Benefit Plans, an organization of human resources professionals, found that more than two-thirds of companies definitely plan to offer health benefits to full-time workers after the ACA is implemented. Just 0.5% said they definitely will discontinue coverage. More than 90% of companies surveyed currently offer health benefits to full-time workers.

Still, White Castle's Richardson notes that the fast-food industry's margins are far tighter than those of other industries. The profit per employee in restaurants is only $750 per year, he says, which makes adding health insurance as a benefit for all employees over 30 hours, as the health care law requires, particularly painful.

It would take some Harold-and-Kumar-size hunger for Crave Case suitcase boxes of White Castle sliders to compensate for the cost of increased coverage.

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