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National Restaurant Association - How costly is overregulation?

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How costly is overregulation?

Excessive regulation is slowing entrepreneurial growth and job creation in the restaurant industry, White Castle’s head of government affairs told the House and Senate’s Joint Economic Committee.

At a hearing July 12, Jamie Richardson, vice president of government, shareholder and community relations for the Columbus, Ohio-based chain, said the cumulative regulatory burden on restaurants – including the impact of the Affordable Care Act -- is making it hard for his and other restaurant companies to grow..

Richardson said that when he testified before Congress in 2012 about the impact of the health care law, White Castle 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,” he said.

More than one in five restaurant operators now say government is their No. 1 challenge, according to recent National Restaurant Association research.

Richardson told members of Congress that the health care law and the new overtime regulations are a “one-two punch for employers.”

  • The ACA’s employer mandate. The law requires larger companies to offer employees working 30 hours or more per week affordable health-care coverage or face potential penalties. Why it’s problematic:  The law’s definition of full-time employment as 30 hours per week is out of step with the traditional 40-hour standard, and is leading many employees to lose wages and hours.
  • Overtime regulations. The Department of Labor’s new rule, which goes into effect in December, guarantees time-and-half pay to any salaried employee earning under $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. Why it’s problematic: Richardson said the regulation is going to force many employers to convert “exempt” employees to “non-exempt” status – which will mean 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.”

Rep. Pat Tiberi (R-Ohio), the committee’s chairman, asked what it would take for White Castle to be able to hire more teenagers. Richardson noted the company’s tight margins – and the financial challenges imposed by the ACA and other regulations – make it tough to hire more employees.

Committee members also asked Richardson his thoughts on immigration. He told them White Castle “believes in comprehensive immigration reform.”

“All you need to succeed in the industry is a heart for hospitality.” He also told the members to look at the National Restaurant Association’s Faces of Diversity award winners to see how many immigrants have found success in the restaurant business.

Read Richardson’s testimony

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