Darrell McCall, 29, worked full time as a salesperson at Juicy Couture’s flagship store in New York City for two and a half years. He had health insurance and a 401(k). “It was one of the few good jobs on Manhattan’s tony Fifth Avenue,” he says. “I was able to get by.”
That changed last year when Juicy started letting full-time workers go and replacing them with part-timers who accepted lower pay and no benefits, McCall says. According to Yana Walton of the Retail Action Project (RAP), an organization of retail workers dedicated to improving labor conditions, nearly half the employees at the Juicy flagship used to be full-timers. Now, only 19 of the store’s 128 employees work full-time. Juicy Couture could not be reached for comment.
Last Thursday, RAP staged a protest outside of Juicy Couture’s flagship store in response to the widespread “part-timing” of workers. In addition to Juicy Couture, other retailers like DSW, J.C. Penny and Abercrombie & Fitch have adopted similar policies, says Walton.
The “part-time only” trend picked up steam during the recession, but even though the economy has begun to recover, full time jobs have not. Analysts say one reason is the passage of the Affordable Care Act—commonly called Obamacare—and the mandate that businesses with 50 full-time employees or more must provide health insurance, which has become even more expensive. In January 2006, there were about 4.6 million involuntary part-time workers. In January of 2013, there were about 8.6 million—almost double, according to the BLS.
“Many employers are looking to make the employment relationship more flexible, and so are increasingly relying on part-time work and a variety of arrangements known as ‘contingent work,’” said Federal Reserve Governor Sarah Bloom Raskin in a speech last month. “[It’s] a sensible response to today’s competitive marketplace…and allows firms to maximize workforce flexibility in the face of seasonal and cyclical forces.”
Before Obamacare, there was no standardized or legally accepted definition of full- or part-time. Under the new act, which takes effect on January 1, 2014, a worker is considered full-time if he or she works at least 30 hours per week.
The practice isn’t limited to the retail industry: Many fast food franchisees of chains such as Burger King, McDonalds and Taco Bell are considering a shift in hiring structures to circumvent the new rules. A 2012 study by the Mercer consulting firm found that of retail and wholesale firms that don’t currently offer insurance coverage, 67 percent “are more inclined to change their workforce strategy so that fewer employees meet that [30 hour a week] threshold” specified in the ACA.
Low-wage jobs have been growing at a particularly fast clip during the economic recovery, with eating and drinking establishments accounting for almost one in 13 of all American jobs in March. The retail sector employs an additional 14.8 million people, and about 654,000 new retail jobs are expected to be created between 2008 and 2018, according to the National Retail Federation. If more employers reevaluate their workforce strategy, as the Mercer study suggests, more workers will be affected.
More part-time workers could also mean fewer employment protections, notes Raskin. Part-time often receive less pay and fewer benefits than traditional workers, and are much less likely to benefit from labor and employment laws. “[They] often have no real pathway to upward mobility in the workplace,” she said.
Although Obamacare doesn’t take effect until 2014, Walton explains that there’s a “look back” period to determine eligibility for employees starting in January of next year. Employers can decide to use the past 3 months, 6 months or year to measure their number of full-time employees. It makes financial sense for many retailers to start tracking the data now, when shopping is relatively slow. That way, when their workers’ hours are eventually averaged out, few will average more than 30 per week, even if they work extra during the holidays.
“Operators can’t be as casual about workers’ total hours as they could before because there are fines and penalties and costs associated with it,” Scott DeFife, executive vice president for policy and government affairs for the National Restaurant Association, told The New York Times. “You can’t accidentally let them become full-time without a specific purpose.”
Joe Olivo, co-owner of the family business Perfect Printing in Morristown, New Jersey, has 49 full-time employees. He provides high-deductable plans to his employees already, but has seen insurance rates rise as much as 40 percent in recent years. He’s worried because Obamacare, he says, “is doing everything it can to discourage high deductible plans.” As a result, his current plan will no longer be an option, and he doesn’t have a sense of how much an alternative plan will cost. The recent insurance rate hikes “have certainly hurt my employees,” Olivo says, “and have taken the place of a lot of wage increases I’d typically give. Since I’m paying more for their insurance, it’s definitely affected my ability to give raises.”
With the new legislation, Olivo is desperately trying to stay under the 50 employee mark: “I’m doing everything I can to avoid that—hiring temps, part-timers, keeping them under 20 hours a week. It’s a nightmare to manage a business that way.” Olivo has been hiring temporary employees from staffing agencies, so they don’t count toward his total.
Similarly, Bob Bellagamba of Concorde Worldwide, a ground transportation business in Freehold, New Jersey, says with Obamacare, he has no idea what his costs are going to be next year. Concorde Worldwide offers health insurance to its roughly 75 full-time employees, but only about 20 employees have chosen to be on the company plan. Bellagamba anticipates that after Obamacare takes effect, more employees will choose to accept the company’s insurance—but he has no idea how many that will be. Currently, he is paying about $60,000 a year for his employees’ insurance coverage. “What happens if that amount goes up to $100,000?” he asks. To prepare for the new legislation, he’s cut staff as people have left or been terminated and redistributed work. “We’re trying to do more with less.”
Although it’s tempting for some employers like Olivo to take their workforce more part-time to avoid Obamacare’s requirements, Christine Pollack, the vice president of governmental affairs at the Retail Industry Leaders Association says that in many cases, shifting to a workforce of part-timers wouldn’t be prudent. For example, that would mean hiring far more workers, training them and managing all of their schedules, all of which have overhead and problems of their own.
Last year, the Florida-based Darden Restaurants – owner of Olive Garden and other national chains – experimented with reducing hours at some of its restaurants in response to rising health care costs. After trying it out, Darden Restaurants reversed the policy and announced that it wouldn’t cut hours from any full-timers in response to the Affordable Care Act. According to Entrepreneur magazine, Darden’s CEO Clarence Otis cited declining guest satisfaction and employee engagement when they had more part-time workers.
“[Obamacare]has changed the way all employers are thinking about their benefits structure and how they will grow as a business. There are a lot of business implications, but it isn’t as cut-and-dry as cutting everyone’s hours,” says Pollack.
Blaire Briody contributed reporting.