Fatburger Franchises Sharing Employees To Skirt Obamacare, CEO Says

07/09/2013 09:32 am ET | Updated Jul 10, 2013
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Fast food companies have apparently found another novel way to skirt Obamacare.

Fatburger CEO Andy Wiederhorn told CNNMoney Monday that some owners of his company's franchises have begun sharing workers in an attempt to avoid providing them with health insurance, under President Obama’s health care reform law. Under the franchisees' plan, some employees would work less than 30 hours at any single Fatburger franchise, but upwards of 30 hours per week in total for the chain.

By keeping employees working less than that that 30-hour threshold at each eatery, the franchises can avoid covering their workers under the new health law, commonly known as Obamacare, which requires large businesses to provide health insurance for those working more than 30 hours per week, or face a penalty.

The practice, known as “job sharing,” has been around and controversial since at least the 1940s. But in many cases, franchises shared employees in order to keep them working more than 40 hours a week, but avoid paying them overtime.

The Fatburger scheme is legal, as long as the franchises technically have different owners, according to Catherine Ruckelshous, the legal co-director at the National Employment Law Project, a low-wage worker advocacy group. What would not be allowed is an owner of multiple fast food franchises dividing employees among them to skirt the law, she said.

Fatburger's CEO declined to comment through a spokesperson. But Matthew Haller, a spokesperson for the International Franchise Association, which represents franchise owners nationwide, said sharing employees is one of the many ways franchise owners are coping with the burden they say Obamacare will saddle on their businesses.

"Our members are looking at myriad ways to manage their costs as they seek to deal with Obamacare and one of those ways may be to share hours or to reduce hours," he said.

The Obama administration announced earlier this month that they would delay implementing the employer mandate for another year.

Multiple fast food chains and franchises have slashed workers’ hours to avoid providing them with health insurance under the law. But most employers don't actually plan to cut their workers' hours as a result of the law, a recent study from the Minneapolis Federal Reserve found.

In some cases, franchises may be reacting to perceived requirements that actually won't affect them because they have fewer than 50 employees, according to Saru Jayaraman, the co-founder of ROC United, an advocacy group for restaurant workers. Even some large chains, which will have to cover full-time workers under the new law, have said the burden might not actually be as large as they originally thought, a recent analyst note from Barclays found.

"It's a lot of overreaction, frankly," Jayaraman said.

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