Restaurant owners look for creative ways to escape health-law penalties

Restaurant owners facing the prospect of fines for not offering workers affordable health insurance are finding some creative ways to keep the number of eligible employees to a minimum.

While some companies are enrolling employees in Medicaid to avoid the penalties, which go into effect next year under the Affordable Care Act, others are considering changing their ownership structure. Franchisees who own more than one restaurant could use that tactic to keep their number of full-time employees below the threshold that activates the law, which is 100 full-timers as of next year and 50 as of 2016. Still other employers figure it’s cheaper to pay the penalty than offer insurance.

“One franchise partner said he’ll pay the fine and pay his workers more money so they can pay for insurance themselves,” said Andy Wiederhorn, chief executive of Fatburger North America Inc., which owns the Buffalo’s Café and Fatburger chains. “Some franchisees have already rearranged their ownership structure so that if there are two partners who own two restaurants, they each become owners of one.”

Paul Dalrymple wholly owns two Buffalo’s Cafes in Georgia and has a majority stake in three others. He’s considering either selling some of his restaurants or changing their ownership structure to reduce his number of full-time workers.

Half of his 200 employees are full-time, and he notified his managers earlier this month that he will stop providing them with health insurance starting on Oct. 31. Nor will he start offering hourly workers insurance next year. He’s cutting workers’ hours to reduce the number of eligible employees–the health law doesn’t require coverage for employees working less than 30 hours a week—but likely will face fines.

“The typical age range of my hourly employees is 17 to 21 and they don’t even want insurance. My turnover rate is 300% to 400%. I can’t afford to shoulder the burden of providing insurance for people who might not be with us in three months,” he said.

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