Applebee's under fire for franchise owner's remarks on health law

CBS

The restaurant chain Applebee's is one of the latest companies to come under fire for grim predictions relating to President Obama's health care law, after one of its franchise owners suggested he'll have to stop hiring or cut workers' hours because of the law.

Apple-Metro CEO Zane Tankel said Friday on the Fox Business Network that the new rule requiring businesses with over 50 employees to provide health insurance or pay fines will "in a best-case scenario... only shrink the labor force minimally."

"We've calculated it will be some millions of dollars across our system," said Tankel, who runs 40 Applebee's franchises, each with between 80 and 300 employees. "So what does that say? That says we won't build more restaurants, we won't hire more people -- exactly the opposite effect" of what Mr. Obama intended.

Tankel was addressing a specific rule in the 2010 Affordable Care Act that goes into effect in 2014. At that time, businesses with more than 50 full-time employees that don't offer insurance -- and have at least one employee getting health care subsidies -- will have to pay a fine of $2,000 per worker (beyond the first 30 workers). In subsequent years, the fine will increase to match growth in per capita insurance premiums.

"If it's possible to do without cutting people back, I'm delighted to do it," Tankel said. "But that also rolls back expansion, it rolls back hiring more people."

Tankel's remarks sparked some backlash online, prompting Applebee's president Mike Archer to release a statement saying that Tankel's remarks "were not the views or opinions of either Applebee's or other franchisees, although we respect his right to speak freely as an American."

"Our franchisees will comply fully with the law and take every measure possible to continue doing right by their employees -- the lifeblood of their businesses," Archer said. He pointed out that Tankel opened a new restaurant just last week that created about 200 jobs and will be opening another one next month.

Tankel is far from the only employer concerned about the health care rule. Papa John's founder John Schnatter has been one of the most outspoken business owners with concerns about the impact of the health care law, similarly warning last week that employees' hours may be cut to prevent their stores from reaching the 50-employee threshold. The Wall Street Journal earlier this month reported on several other businesses in the retail and service industries that may replace full-time workers with part-time workers or make other moves to avoid the new health care requirement.

The Obama administration has insisted the rule doesn't amount to a "mandate" on employers and refers to it as "a matter of fairness."

The Health and Human Services Department (HHS) says that as few as 10,000 U.S. businesses out of six million (less than 0.2 percent) will be hit with the requirement. The vast majority of businesses -- 96 percent -- have fewer than 50 employees and thus will be exempt, according to the department. Furthermore, of those firms with more than 50 employees, more than 96 percent already offer health insurance to their workers.

Another aspect of the health care law aims to make it cheaper for small businesses to provide insurance for their employees: Starting in 2014, firms with up to 100 employees will have access to state-based Small Business Health Options Program (SHOP) Exchanges, which are intended to increase competitive pressure on insurers and bring down costs.

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