Saturday, January 10, 2009

Heinemann's not a victim of paid sick leave law

Last week Heinemann's abruptly closed its last three restaurants due to declining sales, increased competition and the deepening recession. With no advanced warning 115 people lost their jobs.

Co-owner Peggy Burns also blamed Milwaukee's new paid sick day ordinance.

But wait a minute.

Milwaukee's new ordinance doesn't go into effect until February 10, 2009.

And two of the three shuttered stores and their employees would not have been covered by the law since they were located outside the city in Fox Point and Brookfield.

Earlier, the company closed stores in Greendale, Whitefish Bay, Grafton and Wauwatosa. None of these stores were effected by the sick pay ordinance either.

So what gives?

Apparently opponents of providing employees with paid time off when they or a family member are ill are so angry about the law that they feel justified in lying about its impact.

Next we'll be told that Milwaukee's high poverty and black unemployment rates are caused by the sick leave ordinance. Or that Tower Automotive shut down because of the onerous regulation.

As layoffs and business closings increase in the coming months, we will continue to hear opponents of paid sick days blame it for all of Milwaukee's economic woes. Don't believe the hype.

3 comments:

Nick said...

While it is obvious that the business was suffering from multiple issues besides the sick pay one, it is not correct to say that the restaurants outside of Milwaukee would not have been effected.

It would have been very difficult for the chain to offer benefits to some of its employees (the ones in Milwaukee), while at the same time denying those same benefits to the ones who happened to work in other cities.

That would have led to higher employee disatisfaction, as well as calls for transfers to different restaurants making it harder to do business.

The reality is, they would have likely been forced to offer benefits in all their restaurants, whether within the city limits or not.

Michael Rosen said...

Nick,

You have a point which I will discuss in a moment.

But the demise of Heinemann's had nothing to do with the law despite the Burns statement.

The poor economy, declining sales and the chain's inability to reposition and redefine itself in a highly competitive market doomed it.

You raise an interesting point that it would have created administrative difficulties to provide benefits in Milwaukee and not in suburban locations. But chains often have different pay scales and prices in different markets. So it can be done. And if the firm was viable, which it was not, it may have even found that treating employees humanely creates loyality, increased productivity and service and decreased replacment and training costs.

But in any case, to blame a law that isn't even operational for Heinemann's demise defies reality.

Johnny said...

The actual quote from the Fox 6 News clip is as follows: "With the economic problems we’ve been having and this incredible overbuilt industry there was no way that we could take that on too.”

Let's use our logic. Peggy Burns makes reference, in fact, only to a future situation - that of the ordinance coming into play in future operations. Rather obviously, she could not under any circumstances have been referring to the ordinance as a current cause of the demise - everyone knows the ordinance is not yet in effect. The company was already in financial trouble, and the added burden of the paid sick days would have had a significant enough effect upon future operations to impact the present decision-making process.

Now, to details - the company-wide versus single store impact of the ordinance. In a small company like a restaurant chain with several stores, employees are often very loyal and will spend many years with the same job. They might stick with the company through a move or a change in the availability of transportation. Either of these, and these are only two examples, could open the possibility of switching locations and staying with the company. Further, in small businesses (especially service businesses), employees might train in various stores, management might rotate through stores for extended periods to receive full-company exposure, and stores might share staff in tight situations. In this type of business, it is likely not possible to vary your policy by store and at the same time avoid staff shift, localized employee dissatisfaction, hiring difficulties specific to location, and so on. The ordinance would have effected the entire company, in each of its locations.

The above is not anything novel or insightful. It’s just logic. Without context, we could make an argument out of anything.