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ISSUE SUMMARY:

Under the ACA, employers with 50 or more full time equivalent employees must provide employees who work an average of 30 hours or more a week with health coverage or face a financial penalty. This significantly impacts employees who may have previously worked 40 hours and will have their hours reduced. According to one study conducted by the UC Berkeley Labor Center, at least 2.3 million workers are at risk of reduced hours as a result of the health reform law. Employers will also face significant compliance burdens in administering the newly defined 30-hour workweek. We encourage Congress to pass legislation that would restore the traditional 40-hour workweek.

ACTIVE LEGISLATION:

  • S. 1510 | Sens. Todd Young (R-IN) and Joe Manchin (D-WV)
  • H.R. 2782 | Reps. Jackie Walorski (R-IN) and Dan Lipinski (D-IL)

ACTION NEEDED:

Congress should pass legislation to restore the 40-hour workweek by changing the definition of a full time employee from 30 hours to 40 hours (or 174 hours a month for full-time equivalents) under the ACA.


BACKGROUND:

Traditionally, the Fair Labor Standards Act (FLSA) has been used as the standard of defining full-time employment as 40 hours per week. The FLSA 40-hour work week threshold was enacted in 1938 to require employers to pay time and a half to employees working over 40 hours per week. In 2010, the ACA enacted a full-time threshold for the purposes of requiring employers to offer employees health coverage at 30 hours per week. This threshold was based on the delineation of an individual’s eligibility for Medicaid expansion and eligibility for employer-sponsored coverage, not on workforce policy or the FLSA.

This 30-hour threshold fundamentally changed workforce policy and business operations. Prior to the enactment of the 30-hour threshold, many industries did not designate employees as full-time or part-time but rather would use a salaried or hourly designation and allow employees to pick-up and trade shifts with their colleagues. Since the implementation of the 30-hour threshold, variable-hour and part-time employees have lost the flexibility to add or trade shifts to earn extra money.

As the law currently stands, employers with 50 or more full time equivalent employees must provide employees who work an average of 30 hours or more a week with health coverage or face an eventual financial penalty. Employers large and small are finding it difficult to comply with this change to the traditional definition of a full-time employee and the extensive tracking of employee hours it requires. As a result, many employers who have not traditionally provided coverage to workers averaging less than 40 hours a week, including smaller business owners, school systems and nonprofit organizations are slashing their employee’s hours in order to comply with ACA. This not only denies many working Americans access to health insurance benefits but also puts less money in their pockets, making it even harder for people to afford health coverage, let alone put food on the table and pay for other expenses. The nation’s economy has been slowly recovering from the devastating economic crash of 2008.

According to one study conducted by the UC Berkeley Labor Center, at least 2.3 million workers are at risk of reduced hours as a result of the health reform law. The 30 hour requirement as it stands now not only makes it harder for employers to run their businesses, but it also hurts the personal financial outlook of many average Americans and ultimately stalls the economic growth of the country.

Those who do not have access to employer coverage, including those workers with reduced hours, will have the option of buying individual coverage, including, if income eligible, subsidized coverage through the new state marketplaces. However, with working hours being cut, workers from these companies will have less money in their pockets overall, making health insurance even more difficult to afford, especially if they are not eligible for a federal tax credit.


TALKING POINTS:

  • This legislation will effectively change the federal tax code to define full-time employees from 30 hours to 40 hours (or 174 hours a month for full-time equivalents) as defined by the ACA employer shared responsibility provisions.
  • This bill encourages businesses to continue offering health insurance to employees who are truly full time. Thirty hours of service per week does not reflect most employers’ full-time workforce needs nor employees’ desire for flexible hours. Changing the definition of a full-time employee from 30 hours to the traditional 40 hours will help discourage business owners from reducing employee hours and provides the greatest flexibility for employers with variable workforce needs.
  • Under current law, employers with 50 or more full-time equivalent employees must provide all employees who work an average of 30 hours or more a week with health coverage or face a financial penalty. Health and Human Services (HHS) regulations have also applied the 30 hour as the full-time definition to the SHOP exchange. Both small and large businesses are finding it difficult to comply with this change to the traditional definition of a full-time employee.
  • This legislation will not only help employers run their businesses, but it ultimately encourages the economic growth this country so desperately needs.

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