Hearing Ponders Whether Regulation Stifles Restaurant Industry

More than one in five restaurant operators say government is their No. 1 challenge, according to the National Restaurant Association. That charge was reiterated recently by the head of government affairs for a quick-service chain, who told Congress that excessive regulation is slowing entrepreneurial growth and job creation in the restaurant industry.

At a July 12 hearing before the House and Senate’s Joint Economic Committee, Jamie Richardson, v.p.-government, shareholder and community relations for White Castle, said the cumulative regulatory burden on restaurants is making it hard for his and other restaurant companies to grow. Richardson cited the impact of the Affordable Care Act, pointing out that when he testified before Congress in 2012 about the impact of the healthcare law, the Columbus, Ohio, chain had 408 restaurants in operation. Today the store count is at 390.

“While other factors have taken a toll, it is the mounting uncertainty and collective effect of a regulatory and legislative regime hostile to job creation that is bringing us to a standstill,” Richardson said. He called the health care law and new overtime regulations a “one-two punch for employers.”

The ACA’s employer mandate requires larger companies to offer employees working 30 hours or more per week affordable healthcare coverage or face potential penalties. Some operators consider it problematic because it defines full-time employment as 30 hours per week rather than the traditional 40-hour standard.

The Labor Department’s new rule on overtime regulations, which goes into effect in December, guarantees time-and-half pay to any salaried employee earning less than $47,476 a year and who works more than 40 hours in a week. That’s double the current salary threshold of $23,660 a year. Richardson said the regulation is going to force many employers to convert “exempt” employees to “non-exempt” status, meaning less workplace autonomy for these employees, along with fewer opportunities for flexible work arrangements, career training and advancement.

Richardson said the industry isn’t against increasing the overtime salary threshold or against regulations in general. “We understand individual regulations sometimes have a beneficial impact, however, they should make sense and encourage entrepreneurship, not just grow bureaucracy.”