Gini Dietrich

Business Leaders Kill Morale; Threaten Jobs Over ObamaCare

By: Gini Dietrich | November 19, 2012 | 

I’m having a hard time with some of my fellow business leaders right now.

On November 4, CEO Matt DeRose sent an email to his 600 employees stating that if Obama won a second term, he would layoff or position most of his team for part-time employment. He stated, “Increasing expenses brought on by recent regulations, taxes, and the stagnant economy” were driving his decision.

On November 12, Papa John’s Pizza CEO, John Schnatter said on a segment of The Ed Show on MSNBC, “ObamaCare is so costly, my employees will pay the price” stating most full-time employees would only be able to work 30 hours a week so the company could avoid paying benefits or a penalty.

He estimates ObamaCare will cost the company an additional $5-$8 million annually.

Schnatter said the additional healthcare costs could be passed to customers, at a price of $0.10 to $0.14 per pizza.

But an even bigger slap in the face is Papa John’s is giving away two million pizzas during the NFL season, which if you’re wondering, is the equivalent of $24-$32 million in retail price or likely half of that in cost. Regardless, giving away $12 million in pizzas is okay, but paying for your employee’s health insurance is not.

And now the CEO of Aetna has said the same: When ObamaCare takes effect, they will find a way to cut costs by laying off employees or taking away some of their hours.

How Much Does it Cost?

For organizations less than 50 employees, the health care reform doesn’t affect you.

But, for those with more than 50 employees, beginning in 2014, you must offer healthcare to all of your team members or pay a $2,000 fine per person (excluding the first 30) and offer it to no one. That means all of your employees are without health insurance (including you!) and must go to state health plan exchanges to buy insurance.

Take, for instance, you have 51 employees and you decided not to offer healthcare benefits. You exclude the first 30 and pay $2,000 per person. Your penalty is $42,000.

I did some quick math on the benefits we provide our employees. We pay approximately $6,000 per year, per employee for healthcare. Employees pay a portion of approximately $3,000 per year.

So, taking the same example as above, for 51 employees, we would pay $306,000 for healthcare benefits.

If we decided not to offer healthcare, we would save $264,000.

And, for our employees to get their own state-issued healthcare, unless they make more than $150,000 per year, they will pay less than they do now.

Morale Killer

But the bigger issue I’m having is how this behavior is likely affected morale.

First of all, ObamaCare doesn’t take affect until 2014. Yes, more than one year from now. The first open enrollment doesn’t begin until September of 2013.

All these business leaders are doing is scaring their employees about whether or not they’re going to have a job. They’re killing morale. They’re creating a hostile work environment.

It will be a full year of people wondering whether or not they have jobs. Not to mention what it could do to the economy and our unemployment rate.

ObamaCare is here to stay. No matter what your politics or who you voted for in this election, this is something we have to work into our business planning.

Rather than lead with fear and threats, why not encourage your employees to participate in the conversation about what they’d like for their healthcare future?

How motivated would you be to go to work if you knew you might have to cut your hours and go without benefits, or worse, lose your job entirely?

I wonder what Jim Collins, Jack Welch, or Ken Blanchard would say about that?

A version of this first appeared in my weekly Crain’s Chicago Business column.

About Gini Dietrich

Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, co-author of Marketing in the Round, and co-host of Inside PR. She also is the lead blogger at Spin Sucks and is the founder of Spin Sucks Pro. Join the Spin Sucks   community!

  • These dudes make me stabby. SMH.

    • @jasonkonopinski I really just don’t understand why you would tell people you’re going to let them go for something you can’t control. If it’s going to cost as much as you say, don’t freaking offer health insurance. You have a choice. Either way, your employees are covered. So you pay a penalty for not offering it. OK. It seems to be cheaper than what you pay for now. I don’t get it.

  • jtthom

    It’s incredible that in 2012 there are business leaders who still don’t understand the importance of social marketing, and the importance of having a positive role in society. It’s bad for all parties involved, and a product of a political system that polarises the interests of the employer from that of the employee.

    • @jtthom It’s bad leadership all around. I just cannot imagine working for an organization whose leader threatens to lay everyone off or put them all on part-time work because of something that will take effect more than a year from now. It’s bad leadership.

  • belllindsay

    Hmmmm, the math is interesting. Why all the hullaballoo!!??

    • @belllindsay I really thought I was missing something, which is why I did the math. And then, when it looked like it’ll cost us less to not offer health insurance and pay the penalty, I dug into how much state-issused insurance costs everyone. It’s still less than everyone is paying now. My thinking? Wait and see what happens during open enrollment next year (November) and weigh the benefits against the costs and then have a discussion about it during our staff meeting. I don’t understand why it’s such a big deal.

      • belllindsay

        @ginidietrich Well, don’t worry about me. THANK YOU CANADA!!!

  • I’ll be a bit of a naysayer here only because I don’t think the 2-million pizza giveaway should be included in this. It’s part of a major promotion that, if you looked at the numbers, actually makes the company money. I bet it’s not just some sort of loss leader.
    As for having to buy your own insurance through the state, I’ve already received notification of what that might look like, and it ain’t pretty. Pennsylvania’s state program that is supposed to run this is already bankrupt and had to be shut down. The numbers I would still have to pay for just my family are rather prohibitive.

    • @KenMueller It’s a perception issue, though. As a marketer, I realize it’s an investment and it does create more sales, but if you’re an employee and you’re told that you may lose your job but your employer is giving away two million pizzas, how does that make you feel?
      As a solopreneur, is it more expensive than what you pay already? Because the numbers I’ve seen break down like this (costs are per year):
      If your family makes less than $9500/year, you don’t pay anything.
      If you make $9,500 – $37,000 income, you pay $695
      If you make $50,000 income, you pay $1,000
      If you make $75,000 income, you pay $1,600
      If you make $100,000 income, you pay $2,250
      If you make $125,000 income, you pay $2,900
      If you make $150,000 income, you pay $3,500
      If you make $175,000 income, you pay $4,100
      If you make $200,000 income, you pay $4,700
      If you make more than $200,000, you buy a different level program
      As a business owner who pays a portion of our employee’s health insurance benefits, I’m struggling to see why this isn’t better – in some cases – all around.

      • @ginidietrich I understand the perception issue,a nd that’s an internal communications issue as well. As for the number you’ve seen, they are far different than what the state has sent me. Remember, the states have to run these programs, and have some leeway. And when the current program has been shut down due to lack of funds, it’s problematic. I’m definitely in a wait and see mode.

        • @KenMueller Well, for your situation, you have until 2016 so it’s not something I’d be wholly concerned with yet. The state will have time to figure it out before then. Illinois is the same way. They’ll figure it all out.

  • Thank you for saying something about this because it encourages me to dig deeper. It seems to me that people are afraid because there are points that have been left to “just wait and see” or have been left gray. As far as my chiropractors are concerned … they are very concerned. So much so that they have formed their own health insurance program that members can opt into early to help balance and offset the costs that are supposedly sky-rocketing once ObamaCare goes into full swing.
    I’m not for or against it right now because I need to research it further. I will say that the numbers I have been seeing within the healthcare industry (chiro-side) sound incredibly scary.

    • @kateupdates I think people just don’t know yet and they’re using what they’re hearing to scare people. Nothing takes effect until 2014 and we have until 2016 to make sure it’s all working the way it’s supposed to work. So it’ll be 2017 before, as individuals, we really need to worry about it. As a business owner, with a healthcare plan that’s been grandfathered in, my rates will probably increase during our open enrollment next November. It’s at that time I need to decide what we’ll do for employees. But it’s certainly not going to be to lay them off or make them part-time employees.

      • @ginidietrich Oh, and I completely agree that business owners shouldn’t use this to scare their employees. I think it just makes them looks like they don’t know what the heck is going on.

  • HowieG

    Being fairly expert on this crap going on, the more companies that jetison giving healthcare (de-coupling) the better for the US in the long run. Healthcare never should of been a perk of employment because mostly big businesses offer it. And if everyone had to shop for healthcare and pay out of pocket there would be true competition and maybe less obesity. Secondly who says Papa Johns or another business won’t still be paying. They will have to pay more in wages to compensate for employees paying for it on their own and they lose a Government tax break.
    As for Papa John’s? The guy is responsible for selling crap to American’s made up of GMO processed fake food for cheap causing an increase in obesity causing our healthcare costs to explode. Oh and he is an Evangelical Christian. There you go another f-n hypocrite. BTW it isn’t pizza he makes. Papa Johns makes Domino’s and Pizza Hut seem gourmet.

    • @HowieG But that’s not really the point. The point is these business leaders are threatening their employees because of something that won’t take effect for more than a year. They’re using scare tactics to run their businesses. It’s bad, bad leadership.

      • @ginidietrich  @HowieG I agree, the scare tactics are uncalled for and really leave a sour taste in my mouth as a consumer. Given the choice, I am not going to buy pizza from them if they treat their employees that way. As for Obamacare, I am personally very worried about it. The chiropractors and doctors that I know are very fearful of what it is going to look like when it rolls out. Yes, stage one looks appealing enough….that’s kind of the point. I think we’ll find, however, that it is going to cost us a lot in the long run, and not just in dollars.

        • @TaraGeissinger @HowieG Let’s ask the Canadian to weigh in on this. @belllindsay … how does this affect you Canadians? Is it expensive for you individually?

        • belllindsay

          @ginidietrich  @TaraGeissinger  @HowieG What do I know? I just hand over 3/4 of my pay to the government every year and they take care of me. 😉  Our taxes are insane, but it’s been that way for so long now that it just feels normal.

        • belllindsay

          @ginidietrich  @TaraGeissinger  @HowieG However, if we’re talking about dental and prescription, etc., then yes, to go private (i.e. Blue Cross or whatever) is ridiculous – and god forbid if you’ve had any major illnesses, in fact forget about it altogether if you have anything chronic like diabetes or asthma! I’m pretty sure no private insurance company would even take me on. 😉 #sicko

    • @HowieG What is the correlation between paying for your own healthcare and obesity?

  • HowieG

    Sorry the Reply button isn’t working for me Livefyre seems glitchy. Anyway yes I rubber stamp/agree your premise i just had to add the 4th dimension as is what I do. 8) Also ironic most of the complaintees tend to be big GOP supporters even before Obama was elected.

    • @HowieG Yes…and I was accused of writing liberal trash when I wrote this. But it’s not about Republican or Democrat. It’s about leadership. I like Papa John’s pizza more than Domino’s or Pizza Hut. But I sure wouldn’t want to work there.

  • thefarmerslife

    Several of the new regulations in the healthcare law go into effect in January 2013.  That’s why we are seeing so much about this after the election into the end of the year.

  • When I hear CEO’s talk like that, I can only think one thing– They wanted to make the layoffs anyway, but now they have an excuse.  A business that gives a darn about its employees, even in the face of cuts, works with them instead of making statements to the press.
    With things the way they are, I can only see a future of people who are self-employed  working with others in collaboration.
    The comments below are amazing. Recently, I had a reality check from a friend that works for a hospital in their billing department. She says that when Obamacare takes effect they will fix costs, which will be way below what it actually costs the hospital for the services they provide. For example, something like an MRI.  It really puts them in danger of not being able to cover their operating costs.
    I still support the changes, but there is a loooooooot to work out.

    • @susansilver I agree there is a lot to work out. And, as fiscally conservative as I am, some of it scares me too. But I would never put that on my team. If it’s something that affects all of us, I will have a conversation with them and be honest and transparent about the changes. But mouthing off to national media that we’ll have to fire half of them? Totally ridiculous.

  • magriebler

    Amen, sister. It’s the responsibility of business owners to figure out how to work rising costs into their business model, whether it’s the price of postage, paper, utilities, rent or health care. These guys know it. What they’re doing is deliberately political or, to be more blunt, apolitical, since I’m not sure they’re happy with the whole democracy thing.
    Jim Collins would not deign to call a single one of these men a leader.
    And I won’t be eating Papa John’s pizza any time soon.

    • @magriebler It really pains me. By no means am I the best leader in the world (I’m way too impatient), but I just don’t understand how you can run a business this way. Talk about beating morale into the ground.

  • Reading through the comments, it appears you’ve started a heated debate on healthcare systems. So I will avoid that entirely and focus on the more relevant topic: internal communications and the fallout thereof.
    I can’t image what the voting booth experience was like for someone who’s boss told them if Obama wins, they will likely lose their job. As an internal memo, it has to be frightening enough, but to take those claims public as so many business leaders did is…icky, at best.
    Whenever companies announce a political position, they are taking a calculated risk. I know people that will never eat Chik-Fil-A ever again…and I know people that go out of their way to support them…based on the recent equal marriage fiasco. Already, I know many people that will take their pizza business elsewhere in a crowded market based on the Papa’s Politics.
    What shocked me about his statement is how disconnected it seemed from the chain’s tagline: Better Ingredients, Better Pizza. Their brand was built on a sense of quality and family. And while the company has every right to compensate their employees as they see fit within the law, this seemed out of character. 
    Also, it could have been a major win for them, if they had announced a small price hike that would go to ensure their employees received the best healthcare possible. Who wants a sick person sneezing on their pizza?

    • @MikeSchaffer The internal communications and lack of leadership is what kills me. I just cannot imagine saying to my team: Alright, when our open enrollment comes around in November, we’re going to fire half of you. But don’t worry. You might be in the lucky half so keep working hard and we’ll see where it ends. Riiiiiiight.

  • I really wonder about some of these “leaders” and whether they have taken time to think things through. Even if you dislike Obamacare you have to wonder why they would put this kind of thing out there.

    • @Joshua Wilner/A Writer Writes That’s EXACTLY my point. It makes me nuts.

  • ginidietrich

    @denas It’s really awful. Why anyone would threaten to fire people because they don’t agree with policy is beyond me

  • ginidietrich

    @denas I agree. It makes me sad

  • ginidietrich

    @denas OMG! LOL!! Yes, we did!

  • kmskala

    First, let’s clear up a little bit of confusion here. Papa John’s is a franchise-based business. So Papa John’s isn’t paying anything, it’s local business owners, like you, that are paying this expense. An employer in Iowa, for example, has indicated Obamacare is going to cost him an extra $500,000 a year. How many small businesses have an extra $500,000 laying around?
    Second, the 2 million free pizzas is not a good comparison. This is likely covered by the franchisee’s local/regional ad fund, which most franchise-based businesses have. Each location pays a certain percentage into this fund to cover marketing campaigns. These free pizzas equate to about 660 free pizzas per location. They’ll likely get reimbursed by corporate. Regardless, 660 free pizzas is not on the same level as an extra $500,000 in healthcare expenses.
    Third, I think it’s good that businesses are speaking up. Regardless of your political affiliation (I am conservative and strongly oppose Obamacare), your employees need to know what impact this has on their jobs. Would you rather work for a company that says “we’re likely going to lay some people off or drastically reduce hours” or have executives hush-hush and then spring this on them? We complain when executives don’t communicate enough and then we complain when they come out and are honest with us.

    • @kmskala I totally disagree. I think it’s really bad leadership to threaten to fire people if the election doesn’t go your way. The Papa John’s CEO came out and said ObamaCare will cost the corporate offices $5-$8MM more…that doesn’t compare to it affecting franchisees. And, if the costs are handed down to the franchisees, most don’t have 51 or more employees so it doesn’t affect them at all. The only franchisees who will be affected at the ones, like Peyton Manning, who own multiple locations.
      The right leadership message is to say, “We don’t know how this is going to affect us and we’re gathering as much information as we can right now in order to bring you the best recommendation. When we have everything we need to make an educated decision, we’ll let you know how this will affect your benefits.”
      But to say they’re going to be fired or moved to part-time status is demoralizing and just plain wrong.

      • @ginidietrich  @kmskala Gini:  You hit upon an excellent point about leadership communication.  A leader can’t be the “boy who cried wolf” if he/she wants the team to trust him/her.  A healthcare cost crisis isn’t upon the company yet, so it makes sense to wait a bit before declaring there are no options but layoffs.  Compare that to the situation at Hostess, where the CEO said flat out everyone would be out of a job unless striking bakers came back to work.  That was no idle threat, and we saw what happened. That’s hardly the case at Papa John’s.

        • @wgmccoll  @kmskala Exactly! That’s my biggest problem with it. I don’t care if you do or don’t offer health insurance. It’s none of my business. But don’t threaten your employees for something they can’t control.

        • debdobson62

          @ginidietrich  @wgmccoll  @kmskala I so agree.  Leadership is not about threatening your employees about a vote or something they can’t control.  Leadership is about figuring out how to manage and lead the company.

        • @debdobson62  @wgmccoll  @kmskala Even when things don’t go your way.

      • kmskala

        @ginidietrich  “We don’t know how this is going to affect us and we’re gathering as much information as we can right now in order to bring you the best recommendation. When we have everything we need to make an educated decision, we’ll let you know how this will affect your benefits.”
        But they do know how it’s going to affect them. And that’s what they are informing people. This type of action happens every day for a number of reasons — decreased sales, increased cost of goods, etc. The only reason this is different is because of the politics behind it.
        We’ll have to agree to disagree on this.

        • @kmskala But why say we’re going to lay you off or put you to part-time hours? All that does is incite panic. And the part-time hours is only to beat not having to pay the penalty for not offering health care. So you’re inciting panic and you’re showing your team you are going to game the system. It’s bad leadership, no matter how you dice it.

  • This is yet another way to show how pissed off people are by the election. I too am completely grossed out by the manners of these business leaders and they clearly are taking advantage of their position to prove a point.
    I was traveling last week and one of the people I was with mentioned that nobody should ever speak the president’s name in front of him and he was completely distraught over the whole thing. Im wondering aloud if the perception is different if it were called something other than ‘Obama’Care ? Im not too sure how this will affect me yet but we clearly dont have a choice in the matter. But… if it’s going to be around longer than the next 4 years, clearly we can come up with a better name right? But that’s an entirely different topic.

    • @C_Pappas There actually is a name for it – it’s the Affordability Act. But people keep calling it ObamaCare to get “the other side” riled up.

  • rdopping

    You know, in good ole Canada corporate taxes are fairly robust. Rightly so. Canada also has robust healthcare for its people of which we pay dearly each year. It depends on what your company offers as extended health but it can be upwards of  $2,000 per annum. Not much considering our higher taxes (personally at approx 38% of my income) partially offset the healthcare system we so generously enjoy.
    I don’t know what I would do if I was in the US.
    Taxing corporations for the benefit of its employees seems like a good thing to me. It’s about time that corporate America starts to see its workforce as something other than chattel. Strong opinion. Yes. But it surely seems that way when the current administration has to force the issue with penalties if you don’ get health insurance.
    I don’t know all the issues but it seems like having healthcare is a no brainer to me especially when you look at how much it costs to replace an employee vs keeping one happy and healthy.

    • @rdopping But it’s not even about the healthcare, Ralph. It’s about how leaders are reacting to something they don’t want to pay for. And, in some cases, they’re going to end up saving money. We off healthcare to our employees. The math is up there in the blog post. I just don’t understand why/how you would threaten to let your employees go so you can game the system and not pay your share.

      • rdopping

        @ginidietrich You’re right and I recognize the issues with gaming the system.
        I would have fully expected that because as I mentioned the $$$ always seem to over-ride the “right thing to do”. Not many firms are like yours who actually care about people and not only making as much money as possible.
        I am sure you agree that healthcare is an extremely important issue and it costs. People don’t want to pay for it because it’s not in inherent in the culture like it is in Canada or the UK where it is part of doing business. We have to find other ways to make profit.

        • @rdopping I guess that’s where it rubs me wrong. If you don’t care about your employees, you have turnover. When you have turnover, your margins decrease. When you decrease, you have to find new ways to make money. So why not just be good to your employees?

        • @ginidietrich  Bingo. That’s all. 😉

  • AmyVernon

    @MikePayne_SRQ @mmangen That has nothing to do with the point @ginidietrich is making in her piece. I’ve seen many people unsatisfied

  • AmyVernon

    @MikePayne_SRQ @mmangen @ginidietrich (2/2) in part because benefits (primarily healthcare) were so horrid and they were treated so poorly.

    • ginidietrich

      @AmyVernon xoxo

      • AmyVernon

        @ginidietrich 🙂

  • mmangen

    @mikepayne_srq and with that the uber-expense we pay as self-employed 🙁

  • samfiorella

    @bschorr Entrepreneurship is alive and well! Love it! 🙂 @ginidietrich

  • ginidietrich

    @bschorr Seriously.

  • golfnovels

    It doesn’t have anything to do about caring about employees. It has everything to do about who is going to pay for it and being forced to do it by the government. The new “employee” will become an independent contractor for a year. The employer / employee relationship will become a dinosaur. I hate to say it but the “haves” are not going to sit around and have the “have-nots” dictate to them what to do.

    • @golfnovels That is a narrow provincial view that comes across as being petulant. The “haves” are not a single minded bloc nor are they all the modern incarnation of robber barons.
      Smart businesses grow because they attract top talent and part of that is done by providing benefits that people want and need.
      The marketplace won’t always remain as it is now with a surplus of workers making it easier to pick and choose. Things will swing and then those who find ways to buck the system to save a buck will likely find themselves feeling pennywise and pound foolish.

      • golfnovels

        @Joshua Wilner/A Writer Writes  @golfnovels Then I’ll pose a scenario. There is one entity that spends $100 when there is only $20 in the bank. That entity does it over and over and over again, year after year with no budget (now) and no controls. It has no fiscal responsibility. It is known as the federal government and to some degree, many state governments.
        Corporate businessmen do understand the bottom line and I don’t think that too many of them will continue to operate when expenses excessively exceed revenues. They will trim fat. They will get lean. They will act with fiscal responsibility. If you own your own business you will understand that principle. If you work for someone then it might be harder for you to grasp. It takes a lot of effort to sell a product or service. It just doesn’t appear — like some in government obviously think.
        I think the scenario that you describe more adequately describes a bigger government that makes people dependent upon them, thus increasing their power base.

  • dbvickery

    It sucks, and I agree with Gini’s post…but it will be cost-prohibitive for some businesses | @dvyo @ginidietrich

  • jenzings

    I agree that this is not the method or the tone that is appropriate for presumed adults and business owners. The Denny’s manager that suggested a surcharge is backing down:

    An important point from the article that every business owner needs to understand is this:
    “Unfortunately for Mouannes, many consumers don’t understand the complex relationship between franchisees and their parent corporations, or that owners of individual outlets within Denny’s, Ace Hardware, Applebee’s, Papa John’s and Jimmy John’s may not represent the whole company when speaking against Obamacare.”
    Individual franchise owners are damaging their brands, as is the owner of Papa John’s. I really don’t care what these business owners think of the law–it’s the law, and they need to figure out how to comply. The unfortunate fact of the economy is that hourly workers are seen as expendable by large swaths of the business community.
    On the voting business–I had always thought it was against the law to attempt to coerce someone to vote one way or the other. Perhaps that is something handled at the state level. If it isn’t against the law, it should be. And threatening to fire employees if the vote goes counter to what they want is definitely an attempt to coerce voting behavior.
    Having tantrums solves nothing. Ask any toddler.

    • @jenzings That’s the thing that bothers me about all of this. I feel like a) they’re demoralizing their teams and b) they’re trying to game the system. I guess these are the same people who get huge tax breaks for their vacation homes and planes.

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