The Spectacle Blog

California Plays Regulatory Whack-a-Mole

By on 6.20.13 | 1:11PM

Step right up to play regulatory whack-a-mole. Here's how it works: Government passes an enormous law that hits businesses in their pocketbooks. Businesses find a loophole to avoid increased costs. Government passes another law to close the loophole. Businesses find another loophole to...

The latest iteration involves—what else?—Obamacare. Large businesses, especially those that own restaurant franchises, have been scaling back worker hours to avoid falling under a provision of the health law, which requires employers to provide health insurance for employees working more than 30 hours a week or pay a $3,000 fine. If low-wage workers can't get insurance through their employer, they generally get dumped into Medicaid. So restauranteurs have been reducing workers to under 30 hours, saving them the financial pain of providing insurance and forcing the government to pick up the tab.

Now California is stepping in with a rubber mallet and one restaurant company is trying to avoid finding another hole:

A California bill that would fine large companies whose employees rely on Medicaid has Darden Restaurants so worried that the company's chief executive officer recently visited state lawmakers to lobby against it.

The Orlando-based owner of Olive Garden and Red Lobster confirmed Clarence Otis went to Sacramento last month to weigh in on the union-backed bill (AB 880). A spokesman for the bill's sponsor, Assembly member Jimmy Gomez, said lawmakers expect to vote on the measure this week.

What's the problem with the bill?

[T]he California legislation does not limit fines to employees whose hours have been reduced to less than full time. Under the law, fines kick in for employees who work more than eight hours a week.

Darden said it could face fines even for workers who are eligible for company insurance, but don't pay for it and use the state's Medicaid system instead. (Emphasis added.)

Obamacare is driving premiums up (especially in California). Businesses naturally want to avoid the costs. So California dreams up another law that punitively forces businesses to endure the costs. Whack-a-mole may be too kind a metaphor; it's more like tying a businessman further and further down until he can't move—and then taking his money.

California often sets progressive trends for other states, but even with a law like this, it may be too late to stop the shift towards part-time labor. According to the Labor Department, the number of part-time employees in the United States is steadily rising even though the economy is recovering, albeit anemically. Other companies that have considered reducing worker hours include Walmart, Papa John's, and—ironically—many state and local governments.

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