March 9, 2010

AP: House Dems’ ObamaCare Iteration to Penalize Businesses Using Part-Time Workers

Obama3Rush mentioned this on the air as his show opened.

It comes from the Associated Press, in a later paragraph of an Obama cheerleading item (“Obama pitches health plan in spirited appearance”; AP picture at right is from that story) by Julie Pace and David Espo.

The paragraph in question opens by giving readers the impression that either Pace, Espo, or another AP person has actually seen language in whatever iteration of ObamaCare happens to be floating around House chambers these days. But then it backs down and says it’s only “described by a Democratic aide,” meaning that the wire service is willingly serving as a trial-balloon enabler:

In a new change sought by House Democrats, the fix-it bill would require businesses to count part-time workers when calculating penalties for failing to provide health coverage for employees. Smaller businesses would be exempt. The Senate bill would count only full-time workers in applying the penalties, but under the change, described by a Democratic aide, two part-time workers would count as one full-time worker. Businesses say that’s unduly burdensome, but Democrats contend it would prevent businesses from avoiding penalties by hiring more workers part-time.

A graphic of the paragraph in question, in case it’s revised, is here.

This would serve to penalize businesses that rely almost entirely on part-time or seasonal help. Just a few examples: amusement parks, fast-food operations, much of retail, and call centers. These businesses would have to pay a tax for not offering health care coverage to employees who are not and never have been eligible for full-blown company-provided benefits.

This is beyond bizarre. It’s as if there’s something wrong with having employees who have of their own free will committed to not working 40 hours a week.

As to the expected business reaction of going to more part-timers in the absence of such a provision — My gut reaction is that this idea would destroy hundreds of thousands of jobs and and thousands of businesses and more than a few industries in one fell swoop, meaning that there would be few businesses of any kind to worry about, period. It’s almost as if they want to accomplish just that.

I’m sure commenters will have other insights based on their understanding of the circumstances of other businesses.

Cross-posted at

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  1. “I’m sure commenters will have other insights…” Okay, here are some:

    Manufacturer ABC uses Temp Agency XYZ to obtain a two part-time short-term workers. Who pays the health care penalty: the Manufacturer or the Temp Agency? If not carefully worded, both companies could be assessed a health care penalty.

    The Temp Agency is the employer for W-2 or 1099 purposes, so let’s assume only the Temp Agency would pay a penalty. This creates lots of unintended consequences for how the Temp Agency choose which of its pool of workers to inform of work opportunities.

    The Post Office, UPS, et cetera have seasonal hires for the Christmas season. Would these have to pay the penalty?

    A student is employed part-time at the university. Is the university penalized for not offering a health plan?

    A student is studying to become a kindergarten teacher, and has a part-time job at a local daycare center. Should the daycare center be penalized? It’s practice of hiring young, child-centric students from the local university has kept its costs low and its quality high. It is also a church-affiliated daycare, and might have religious objections to a federal abortion-providing insurance mandate.

    The student is young enough to be eligible for his/her parent’s insurance. Instead of penalizing the student’s employer, should we penalize the parents for not retaining their adult child on their policy? If the parents are divorced, which parent would be assessed the health care penalty?

    Bottom line: The good intentions to cover part-time workers would create lots and LOTS of unintended consequences. No wording could possibly cover all the potential loopholes and all the potential perverse incentives. The financial advise columnists would be busy for months providing examples of how employees and employers could frame their decision matrices.

    Comment by Cornfed — March 9, 2010 @ 1:56 pm

  2. #1, You of course raise a ton of good points.

    But look at the bright side. We can start up a totally non-value-adding consulting business advising people how to deal with all the new complexity! We won’t produce anything of real value that advances people’s standards of living, but we’ll make a killing in the process.

    And you can be darn sure WE aren’t going to take on any employees in the process.

    Comment by TBlumer — March 9, 2010 @ 5:40 pm

  3. Suddenly, your waiter is not an employee of the restaurant, but is instead a contracted self-employed individual that receives a 1099. Now all those cash employees who pay ~$0 in taxes are going to have a whole lotta fun as they start filing with all their 1099 info.

    Comment by NewEnglandDevil — March 9, 2010 @ 8:26 pm

  4. #3, ideally yes, but the IRS has very strict rules about who has to be considered an employee. One of the keys is whether or not you dictate their hours. In a restaurant, you almost have to.

    But you can expect very aggressive moves into attempts to do this, plus an explosion in employee leasing from places like Administaff.

    Comment by TBlumer — March 9, 2010 @ 11:43 pm

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