The great health care debate: Ethically, should restaurant operators offer coverage to employees?

Jhonny Romo, a 29-year-old Mexican immigrant, has worked for Chipotle since 2008. And like so many of the 4 million full- and part-time workers in the fast food industry, he can’t afford the health care plans offered by the chain. Although the cheapest plan would cost him only about $11 a paycheck, the coverage was very minimal — $50 per coverage year with the plan covering 80 percent up to $1,000 a year — a waste of money, in Romo’s eyes.

So when Romo’s manager offered him a management position, he was relieved because, he says, it meant he would be eligible for plans available to only managers.  Those plans are more affordable and offer considerably more coverage, Romo added. Shortly after he started the training program, however, Romo found out he’d need a kidney transplant.

“That’s when my manager came to me and said that I probably wouldn’t be able to handle the extra work and for my own health, I should stay a crew member,” said Romo, who also pointed out that at the time, he was working a minimum of 40 hours a week and had missed only one day of work in a year.

Chipotle’s communications director, Chris Arnold, said Romo’s story isn’t accurate, and that although he has been employed as a crew member and cashier since 2008, at a unit in Algonquin, Ill., he has never held a management position. He also said that kitchen managers have the same access to health care as regular crew members – salaried employees do have other insurance options, however.

Romo, who still works about 25 hours a week at Chipotle, took a full-time job at Nick’s Pizza & Pub in Chicago because Owner Nick Sarillo provides health insurance to anyone working 30 hours a week. For Romo, the plan is more affordable and will cover 95 percent of his transplant costs.

Whoever is correct in this “he said, he said saga,” this case is just one example of the thousands of restaurant operators and employees facing similar issues. Business owners have struggled with how and when to offer employees health care coverage for years, but now that the Patient Protection and Affordable Health Care Act Obamacare — is taking effect in 2014, some of that decision will soon be out of their hands.

Obamacare requirements
Under the new law, employers with 50 or more full-time employees will be required to offer those employees and their dependents an "affordable" health benefits package starting that year. If they fail to provide the coverage, they may face penalties. "Affordable" is defined as not costing the employee (self-only) more than 9.5 percent of household income. 

The law doesn’t require employers to offer health care coverage to part-time employees or pay health care penalties for them. Fines to employers, however,  are imposed on workers who are not full-time employees, where a combination of employees working 120 hours per month (around 30 hours per week) count as one employee.

Ethics behind health care coverage
While many restaurant operators are educating themselves on the law to learn about the minimum requirements, others — like Sarillo — have been offering similar plans for years. Employees working 30 hours a week at Nick’s Pizza have access to full coverage. Although he has only 180 employees and two restaurants, Sarillo sees it as his duty to take care of his employees.  

“I am a fan of Obamacare because it’s going to put restaurants that are much bigger than mine on the same playing field,” he said. “I’m already doing this; they should, too. I believe it’s our responsibility.”

Sarillo doesn’t only offer health care to employees out of the goodness of his heart; he said it also gives him access to better employees and gives those employees motivation to work harder.


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“Most owners are just so bottom-lined focused, but if you take care of people, they stay longer, work harder and are more productive,” Sarillo said.

Sarillo also believes that many restaurant owners can more than afford to offer coverage; they just don’t want to do it. The total projected 2012 revenue for the U.S. fast food industry is $195 billion, according to IBISWorld. By 2016, it predicts revenue to increase to $210 billion. 

What’s even more frustrating to Sarillo is that some of the restaurant owners enjoying growth are some of the loudest protestors of providing benefits. For example, Papa John’s has been criticized lately for CEO John Schnatter’s post-election comments reiterating the costs and consequences that Obamacare will have on the company. Although the chain is set to open 1,500 new units — 300 in North America — in the next six years.

Schnatter told a crowd on Nov. 7 that the law will increase his business costs between $5 and $8 million annually and possibly result in a cut in employee hours. He later clarified those remarks, saying it is "good news" that 100 percent of full-time workers will get health insurance and "we're all going to pay for it. There's nothing for free. And this way I get to provide health insurance and I'm not at a competitive disadvantage ... our competitors are going to have to do the same thing."

This clarification, however, doesn't diminish his comments made during the summer, prognosticating pizza price increases of 10 to 14 cents each to "protect shareholders' best interest."

"We're not supportive of Obamacare like most businesses in our industry, but our business model and unit economics are about as ideal as you can get for a food company to absorb Obamacare ... If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect shareholders' best interest."

A social media firestorm has since erupted around the brand, with Facebook fans "unliking" the Papa John's page and promising boycotts.

An op-ed in Opposing Views supported a boycott, writing: "Yes, 14 cents per pizza is the cost of health care for his employees so they can remain healthy and be more productive. This is nothing more than corporate greed at its worst ...."

However, the Louisville, Ky.-based company has also gained its share of supporters following Schnatter's comments.

One Facebook fan wrote: "I'll be supporting Papa John's and any other company who will have to make similar sacrifices. The government should not be allowed to tell you how to run your business."

Papa John’s is definitely not alone when it comes to being a successful, large chain not covering health care for employees. In fact, it’s pretty common, according to CNN, which recently published a story saying that Subway doesn’t require its franchisees to offer a health insurance option for their employees. Individual owners are free to offer a plan if they choose, according to a Subway spokesperson. Although McDonald's has different levels of plans, the most affordable is a "mini-med" plan, which charges employees $727 a year for $2,000 worth of coverage, according to CNN. The nation’s Top 10 largest food chains, including Burger King and Dunkin Donuts, offer similar plans.

Restaurant lobbyist groups weigh in
Restaurant lobbisty groups, including the National Restaurant Association and the National Council of Chain Restaurants, have spoken out against Obamacare, saying it will hurt restaurant owners.

Restaurant owners have been looking for solutions to provide better health care coverage options for years, said Scott DeFife, NRA’s executive vice president of policy and government affairs, however he cites the industry’s “unique workforce demographics that don’t exist in many other 9-to-5 environments” as a reason for not supporting the law. 

“Operators are concerned that this plan will impose excessive costs and regulatory burdens that threaten their very business,” DeFife said. “..The cost of such coverage or the penalties could threaten the very slim profit margin on which most restaurants operate.”

Not all large chains agree. Starbucks is on record as supporting Obamacare. The chain covers all employees, working an average of 20 hours per week. In the U.S., all employees — regardless of part-time or full-time status —  and in all locations, whether in a store, roasting plant or a corporate office, “adhere to the same eligibility requirements for health coverage and have access to the same comprehensive health plans,” according to a Starbucks spokesperson.

Although many companies don’t offer health care coverage to eligible part-time employees, Starbucks has since 1988. 

“Our total pay package rewards partners for their contributions, adds to a great work environment and promotes a shared responsibility between Starbucks and each partner for individual and company success,” the spokesperson added.

Sarillo agreed, saying that if restaurant operators want people to work hard for them, the least they could do is take care of them.

“I’m going to take the risk and open my own business, but with that risk comes a responsibility to take care of the people getting up everyday who are giving you their best. They can work for anyone, and they are coming here. It’s just the right thing to do.”  

What do you think? Ethically, should restaurant owners be required to offer employees health insurance? Why or why not?

Cover photo: Jhonny Romo works at Nick's Pizza.

Alicia Kelso contributed to this story.

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User Comments – Give us your opinion!
  • Mike Cline
    43395916
    This has nothing to do with ethics, its about business. You can have the healthist employees in the world, but if the cost of doing business exceeds the value your customers are willing to pay for (for whatever reason), its over. Think TWINKIES
  • Gary Wilcox
    43391467
    Market demand...potential customers with the money and motivation to buy your product. If the cost of health insurance, in combination (for example) with increased commodity prices due to ethanol policy and drought conditions, drives prices to a level where your potential customers can't afford you product, thus lowering demand...sustainable profitability (required to remain in business) becomes impossible. Communities with wealth will be fine. Not so wealthy communities will suffer.
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