Darden Restaurants, Inc. — owner of Red Lobster and Olive Garden — is battling back negative press attention in light of its October announcement that the company will use Obamacare as a reason to shift to part-time employees.
On Tuesday, the company released a statement revising down its prediction of profits, which led to a huge drop in stocks. Darden attributed the change to the negative attention around its stance on Obamacare, and promised to deal with the health care reform law “in ways that work for our employees”:
“In light of these upcoming changes, we are being cautious about our sales and earnings forecast for the full year,” [Darden’s Chairman and Chief Executive Officer Clarence Otis] continued. “Our outlook for the year also reflects the potential impact, though difficult to measure, of recent negative media coverage that focused on Darden within the full-service segment and how we might accommodate healthcare reform.” [..]
“We are also committed to accommodating healthcare reform in ways that work for our employees and guests. Darden is a strong business which continues to generate solid cash flows that will support appropriate reinvestment in our brands, effective debt management and consistent dividend growth.”
Under the Affordable Care Act, any business with 50 more full-time workers is required to offer a health care option to its employees by 2014. If a company chooses not to, and its workers instead seek subsidized care in the public exchanges, the company must pay a penalty.
Darden is one of several companies threatening to fire employees, switch workers to part time, or freeze hiring because of the health care law. One Applebee’s franchise owner, the CEO of Papa John’s Pizza, and a Denny’s franchise CEO have made similar threats.
In addition to potentially earning those companies bad press, their complaints about the health reform law are off-base. In reality, Obamacare will, over time, decrease health care costs. It will also likely lead to more satisfied workers, competitive hiring, and higher rate of employee retention.
Update:
AP is reporting that, in an effort to stem the negative attention, Darden will announce Thursday that they will not be moving any workers to a part-time schedule because of Obamacare. The company is, however, keeping the option open of relying more heavily on part-time employees in the future. Ultimately, reports a Darden spokesman, they tested a shift to part-time staff and found a decline in satisfaction all around:
After Darden’s tests were reported in October, the company received a flood of feedback from customers through its website, on Facebook and in restaurants, said Bob McAdam, who heads government affairs and community relations for Darden. Additionally, he said that internal surveys showed both employee and customer satisfaction declined at restaurants where the tests were in place.
“What that taught us is that our restaurants perform better when we have full-time hourly employees involved,” he said… McAdam declined to give specifics on the internal surveys but said the decline was “enough to make a decision.”