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Jan 26, 2015

By Ilyse Wolens Schuman

During the first employment-related hearing conducted Friday by the new Senate Committee on Health, Education, Labor and Pensions (HELP), Senators and panelists debated whether the Affordable Care Act‘s definition of “full-time” employment should be amended.

Under the health care law’s employer responsibility requirements, employers with at least 100 full-time or full-time equivalent employees are now required to provide health insurance meeting certain ACA standards to their full-time employees or pay a penalty.

For employers with 50 to 100 full-time employees, this pay-or-play employer mandate becomes effective in 2016. The ACA considers a worker “full time” if he or she works 30 hours or more per week, instead of the customary 40 per week.

“Doesn’t reflect … reality in the American workplace”

At the hearing, Chairman Lamar Alexander (R-TN) echoed what many in the business community have been claiming, which is that the 30-hour threshold “doesn’t reflect any reality in the American workplace.” To that end, lawmakers in both the House and Senate have re-introduced legislation to amend this definition under the ACA.

On Jan. 28, the House of Representatives passed the Save American Workers Act of 2015 (H.R. 30) by a vote of 252-172. The bill attempts to re-define the full-time employee benchmark to 40 hours under the health care law. In the Senate, Sen. Susan Collins (R-ME), a member of the HELP Committee, and Sen. Joe Donnelly (D-IN) introduced similar legislation — the Forty Hours is Full Time Act of 2015 (S. 30) — earlier this month by.

Sen. Alexander started the hearing by citing a Hoover Institution study, which found that the 30-hour standard puts 2.6 million working-age Americans at risk of losing jobs and work hours. Alexander claimed many of these employees work in the hospitality, retail, and restaurant industries, and are disproportionately women. Dr. Doug Holtz-Eakin, President of the American Action Forum, testified that this number of workers at risk of having their hours reduced on account of the 30-hour definition was as high as 9.8 million.

Disincentives to hire full-time employees

Andrew F. Puzder, CEO of CKE Restaurants, explained:

The ACA’s math is simple: Three employees working 40 hours a week will produce 120 hours. Five employees working 24 hours per week will also produce 120 hours. Under the ACA, employers must offer the three full-time employees health insurance or pay a penalty. They have no such obligations to the five part-time employees, making part-time employment less costly. In this way, the ACA unintentionally encourages our general managers to reduce their employees’ hours to under 30 a week.”

Dr. Holtz-Eakin described this disincentive to hire more full-time employees as “essentially a tax on the growth of small businesses.” He noted also that “30 [hours a week] is simply at odds with the data on labor markets in the U.S.” According to Holtz-Eakin, 72 percent of workers work over 40 hours per week, and 50.2 percent work exactly 40 hours per week.

In contrast, Sen. Patty Murray (D-WA), Ranking Member of the Committee, claimed “by allowing businesses to get out of offering health insurance to any employee working less than 40 hours, this bill will actually create the problems it claims to solve.”

Increasing people on government health programs?

Both Senators Murray and Elizabeth Warren (D-MA) cited the recent Congressional Budget Office report finding that the 40-hour bill would increase the number of people on government health programs by at least half a million, and reduce by one (1) million the number of employees who receive employment-based health insurance.

Sen. Alexander concluded the hearing by noting the next HELP hearing on employment issues will be next Thursday, Jan. 29, 2015, and will address employee wellness plans.

A full list of panelists and links to their testimony, as well as an archived webcast of the hearing, can be found here.

This was originally published on Littler Mendelson’s Workplace Policy Update blog© 2015 Littler Mendelson. All Rights Reserved. Littler®, Employment & Labor Law Solutions Worldwide® and ASAP® are registered trademarks of Littler Mendelson, P.C.