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  #1  
Old 11-14-2012, 01:08 PM
Linden Arden Linden Arden is offline
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What would prevent Papa John's from deducting health insurance from employee pay?

When the new health care law goes into effect and I have over 50 employees I must offer (or buy?) health insurance for them.

OK, but why not reduce their pay for that cost? Anyone knows in the real world the cost will either be passed to customers or employees.

Does anyone here know the bill well enough to answer this?
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  #2  
Old 11-14-2012, 01:25 PM
Skammer Skammer is offline
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Quote:
Originally Posted by Linden Arden View Post
When the new health care law goes into effect and I have over 50 employees I must offer (or buy?) health insurance for them.

OK, but why not reduce their pay for that cost? Anyone knows in the real world the cost will either be passed to customers or employees.

Does anyone here know the bill well enough to answer this?
PJ employees are not well paid - I suspect drivers, since they collect tips, are probably paid below minimum wage. If you're already paying the legal minimum there is nothing left to deduct.
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Old 11-14-2012, 02:31 PM
Fuzzy Dunlop Fuzzy Dunlop is offline
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Originally Posted by Linden Arden View Post
OK, but why not reduce their pay for that cost? Anyone knows in the real world the cost will either be passed to customers or employees.
In the actual real world, it's completely unrealistic to pass all of a cost on to customers or employees. The only people who think that don't understand how the real world works. In the real real world, part of a new cost can be passed on and part is incurred by the business, making it marginally less profitable. In reality it's complicated, but in theory how much can or can't be passed on is based on relative elasticity.

In this case, Papa Johns is the consumer of labor, and they're fairly inelastic in their demand. They don't have the luxury of responding to a small increase in the cost of workers with a large decrease in demand for workers. Pizza is a business that requires workers. Therefore, they'll have to bear a relatively larger share incidental cost.
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  #4  
Old 11-14-2012, 02:35 PM
Baracus Baracus is offline
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Obamacare stipulates that if an employee is eligible for a subsidy, meaning they are paying more than 9.8% of their household income for health coverage, then their employer still has to pay the penalty.
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  #5  
Old 11-14-2012, 02:50 PM
md2000 md2000 is offline
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What rule says you can't deduct things like benefit costs if the result is pay below minimum wage? Is that health-care specific, or does it include things like if your work uniform deduction or whatever takes you below minimum wage?

I would think you earn the amount at minimum wage, then decutions for work-related reasons are still allowed.

Last edited by md2000; 11-14-2012 at 02:52 PM..
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  #6  
Old 11-14-2012, 05:12 PM
FatBaldGuy FatBaldGuy is offline
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Quote:
Originally Posted by md2000 View Post
What rule says you can't deduct things like benefit costs if the result is pay below minimum wage? Is that health-care specific, or does it include things like if your work uniform deduction or whatever takes you below minimum wage?

I would think you earn the amount at minimum wage, then decutions for work-related reasons are still allowed.
It's not a "rule", it's simple economics. If an employee gets so much taken out of his wages that he has little or no take home pay, it's not worth the effort to keep the job.
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Old 11-14-2012, 05:59 PM
Irishman Irishman is offline
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Originally Posted by md2000 View Post
What rule says you can't deduct things like benefit costs if the result is pay below minimum wage? Is that health-care specific, or does it include things like if your work uniform deduction or whatever takes you below minimum wage?
From the Department of Labor, here is the Fair Labor Standards Act that governs minimum wage. (Warning: pdf file.)

Sec. 207(b)(3)(C)

Quote:
(e) "Regular rate" defined

As used in this section, the "regular rate" at which an employee is employed shall be deemed to include all remuneration for employement paid to, or on behalf of, the employee, but shall not be deemed to include--

[snip]

(4) contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirment, life, accident, or health insurance or similar benefits for employees;
So, health insurance benefits cannot be used in calculating the compensation rate vs minimum wage.
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  #8  
Old 11-14-2012, 06:04 PM
Irishman Irishman is offline
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More broadly, the Fair Labor Standards Act of 1938, As Amended is the federal law establishing minimum wage, and defining all the rules that apply. The version I linked is posted at the Department of Labor website, and is Revised May 2011.

It does define things like uniform costs, costs of laundering uniforms, etc. It is a lengthy document that goes into detail.

In general, there are some things that can be counted as compensation (meals, room and board) and some things that cannot. There are various and sundry details regarding tipped employees, from individual tips, tip pooling, and credit card charged tips.
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  #9  
Old 11-14-2012, 09:46 PM
Linden Arden Linden Arden is offline
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Quote:
Originally Posted by Irishman View Post
From the Department of Labor, here is the Fair Labor Standards Act that governs minimum wage. (Warning: pdf file.)

Sec. 207(b)(3)(C)



So, health insurance benefits cannot be used in calculating the compensation rate vs minimum wage.
Thanks. That is right to the point.
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  #10  
Old 11-14-2012, 10:31 PM
md2000 md2000 is offline
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See? I learn something new every day.

Thanks.
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  #11  
Old 11-14-2012, 11:00 PM
Mr. Slant Mr.  Slant is offline
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Originally Posted by Fuzzy Dunlop View Post
In the actual real world, it's completely unrealistic to pass all of a cost on to customers or employees. The only people who think that don't understand how the real world works. In the real real world, part of a new cost can be passed on and part is incurred by the business, making it marginally less profitable. In reality it's complicated, but in theory how much can or can't be passed on is based on relative elasticity.
At the end of the day, the cost of pizza at Papa John's goes up, but so does the cost of ALL OTHER RESTAURANT FOOD, so it's really a wash from their perspective.
Unless that 50 cents per pie just makes people cook at home, it's a red herring.
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  #12  
Old 11-14-2012, 11:18 PM
md2000 md2000 is offline
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Pap Johns - 598 restaurants, 2400 franchise restaurants, $1.2Billion income, net earnings $59M.

I liked Jon Stewart's Daily Show assessment - "You guys are just pissed of because you are in a business that can't export jobs overseas, it has to hire Americans."

Mr. Slant is right, it just means higher cost for Pizza. Same reason why pizza costs more than it might otherwise, because they aren't allowed to pay their workers only $1.50 an hour either. Maybe they won't give away a million free pizzas (or was it 2 million?) this year.
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Old 11-14-2012, 11:21 PM
filmore filmore is offline
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Originally Posted by Mr. Slant View Post
At the end of the day, the cost of pizza at Papa John's goes up, but so does the cost of ALL OTHER RESTAURANT FOOD, so it's really a wash from their perspective.
Unless that 50 cents per pie just makes people cook at home, it's a red herring.
This is exactly correct. By making all businesses bear the cost of healthcare, all the businesses will be under the same cost burden. Papa Johns is acting like they're the only company which will have to raise prices and Pizza Hut will make out like bandits. In reality, all pizza companies will need to raise their prices a bit to cover the cost of healthcare.

What companies need to do is start bragging that they're offering health care. Pizza Hut should have stickers on their boxes that say "Thanks for supporting healthy, full-time employees!" That way people understand why their pizza went up by $.50 or $1. Papa Johns will lose good employees and their quality will go down with their part-time, disgruntled, sick workforce.
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  #14  
Old 11-14-2012, 11:44 PM
Skammer Skammer is offline
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Originally Posted by filmore View Post
What companies need to do is start bragging that they're offering health care. Pizza Hut should have stickers on their boxes that say "Thanks for supporting healthy, full-time employees!" That way people understand why their pizza went up by $.50 or $1. Papa Johns will lose good employees and their quality will go down with their part-time, disgruntled, sick workforce.
As I pointed out in the related Pit thread, this is more or less what Papa Murphy's did on their Facebook page today:
Quote:
And now an important word from this Papa... Papa Murphy's Pizza provides a fun, dynamic and rewarding place to work because we value our employees and their basic needs, including the need for affordable healthcare. Papa Murphy’s abides by state and federal laws and will remain in compliance with healthcare reform. Together with our 550+ franchise owners across the country, we are working to implement any necessary changes while staying true to our goal: To provide a superior experience and product every day to every guest.
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  #15  
Old 11-14-2012, 11:55 PM
wheresmymind wheresmymind is offline
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Is the healthcare requirement for all employees, or only full-time or part-time employees who work above a certain number of hours? It seems to me that many minimum-wage or low wage service jobs are part-time gigs, filled by teenagers working ~20 hours per week.
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  #16  
Old 11-15-2012, 12:30 AM
Fubaya Fubaya is offline
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Do all franchises have to buy this much health care? I would have guessed the pizza delivery people were actually employed by John Doe, who owns the local Papa Johns restaurant and employes like 15 people and that Papa John would have to buy insurance for his corporate headquarters.

I know a guy that owns 20 McDonald's in the area. Does he provide health insurance or does McDonalds Corp?
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  #17  
Old 11-15-2012, 08:18 AM
Fuzzy Dunlop Fuzzy Dunlop is offline
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Quote:
Originally Posted by filmore View Post
This is exactly correct. By making all businesses bear the cost of healthcare, all the businesses will be under the same cost burden. Papa Johns is acting like they're the only company which will have to raise prices and Pizza Hut will make out like bandits. In reality, all pizza companies will need to raise their prices a bit to cover the cost of healthcare.
My point was that the businesses do bear some of the cost. People are fond of imagining that if a business incurs $1,000,000 in new fees, like from providing healthcare to employees, they simply raise prices by $1,000,000. "Pass it on to consumers." They'll (probably) raise prices and pass some of the burden on to pizza eaters, but it's really clueless to think they can pass all of it on and be completely unaffected.

Of course it's a great point that it effects the entire industry equally.
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  #18  
Old 11-15-2012, 08:40 AM
md2000 md2000 is offline
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Franchisees are a separate company that pays the corporation - Papa Johns or McDonalds, for example - a set of franchise fees. But, the paycheques will be issued by the owner's company, FredFoodCo, and the employees work for that company.

However, Papa Johns, like McDonalds, has some "company stores", restaurants that are not franchises run by the same company as the head office and the big warehouses, etc. According to PpJ's Annual Statement, they have 598 such restaurants in USA.

Depends how the rules are written. A restaurant like a PpJ or McD will likely have 40 to 80 employees unless it is a hole in the wall, but most of those will be part time. I can't see any such restaurant avoiding anything with "we have less than 20 employees" unless they are counting full-time equivalents, then it would be close.
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  #19  
Old 11-15-2012, 08:44 AM
Mdcastle Mdcastle is offline
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Act like the airline, rental car, or telecom industries and advertise a $9.99 pizza, then add a $1.00 "employee healthcare impact fee"?
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  #20  
Old 11-15-2012, 09:37 AM
Amateur Barbarian Amateur Barbarian is online now
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As md2000 put it, it's a matter of employee eligibility. Having 50 part-time employees does not necessarily mean the business crosses the threshold; there are formulas that equate things to full-time employee equivalents. Then there is usually an eligibility threshold; a 20-hour employee is not necessarily eligible for employer healthcare, even under ACA.

I suggest that someone running a pizza franchise with 50 employees can get legally reliable information from many sources, starting with the franchise corporation. Not that it's the case here, but I am staggered at how many mid- to large businesses owners are squawking in fury and repeating nonsense they 'heard somewhere' about their requirements and obligations. It's not a matter for what you half-heard on the radio, read in a mass-market article or think you know any more than are other business regulation, tax and operating issues.

Get professional advice and answers.

Last edited by Amateur Barbarian; 11-15-2012 at 09:39 AM..
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  #21  
Old 11-15-2012, 09:48 AM
Mr. Slant Mr.  Slant is offline
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Originally Posted by Mdcastleman View Post
Act like the airline, rental car, or telecom industries and advertise a $9.99 pizza, then add a $1.00 "employee healthcare impact fee"?
That probably doesn't work unless it's a hassle to shop around or switch pizza shops.
At the end of the day, if I spend $12 at Domino's and $13 at Papa John's for equivalent product, I'm going to remember the difference.
I don't have to line up my pizza with my air travel plans, and I don't have to spend an hour transferring phone numbers to my new pizza if I decide to change to East Of Chicago from Papa John's.
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  #22  
Old 11-15-2012, 03:02 PM
Irishman Irishman is offline
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If I get a bill from a pizza shop doing that special fee crap, that is going to stick out and annoy me that they are charging more than their advertised price. Given the ease of pizza shopping, that is a strong disincentive to shop there again. If their advertised price goes up a buck, I may notice, but at least I will know the cause and know they are being straight with me. And I can easily compare to the buck increase on the pizza shop down the street.
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