Lynn’s Paradise Cafe Is Still Closed, Still Unknown Exactly Why

A year ago this week, I was puzzling over why one of my favorite Louisville tourist traps, Lynn’s Paradise Cafe, had suddenly closed. I suggested it may have had something to do with the impending regulations that would be foisted upon businesses in 2014 by the Affordable Care Act (ObamaCare). I haven’t lived in Louisville for nearly nine years, so I’ll admit that I don’t understand all the dynamics that went into Lynn’s decision to shut down. I earned only one response I believe was ill-considered. Louisvillian Briana Morgan said that my suggestion was irresponsible. Here are her thoughts.

For starters, you are perpetuating an unreasonable misunderstanding of the healthcare act and its affect on small business. You’re also contributing to mindless Obama-bashing by ATTEMPTING to validate the ridiculous belief that he or the healthcare policy are responsible for the closure, even in the slightest. Tea party nonsense! Also, you’ve linked to an article that insists if you don’t like the way you’re being (mis)treated – go somewhere else. This is AMERICA, where we stand up and fight for eachother! In a nation struggling with unemployment, how dare one suggest that an abused or disenfranchised worker just go somewhere else if they don’t like it? Did you or the person who wrote that article know that mandated tip-outs are illegal in Kentucky, period? – so, their rights ARE being violated. Did you guys know that hosts, managers, and kitchen staff are not considered tipped employees? That it’s illegal to include them in the tip pools? Probably not. You probably also haven’t considered that the “bank” (as they call it in the biz) is not intended for tip-outs. It’s intended to provide change for your tables. It is not common practice (here) to require that anyone bring more than $40 worth of change, most require $20 banks. If it’s illegal to mandate tips, why would you think it isn’t illegal for them to mandate they bring money (admittedly) to force them to tip others?

A few other points that stem from yours and the linked articles – Do you actually think $20,000/yr is enough to live on? You sincerely believe that a person who makes under $35,000 has ANY chance of being able to supply $500 cash (FOR ILLEGALLY MANDATED TIP-OUTS) every week and wait two weeks until they’re paid to get it back? That’s nuts! I would also like to know the statistics of how many servers make more than $30,000/yr in this state. I’m guessing, from my experience and the folks I know, that that number is VERY LOW and certainly even fewer touch anywhere near the $50k mark. Every point that has been used to discredit the abusees – I mean employees – is lazy, irresponsible, TEA PARTY-esque propaganda.

My response:

My attempt was to offer one argument as to why someone who owns a profitable business would shut it down. My comments certainly weren’t the final word on the matter, which I indicated in the blog post. I don’t have enough information to know if it was the deciding factor, but I believe there is compelling evidence that the costs of the ACA may have played a significant role.

You, on the other hand, seem to reject out of hand the idea that a businessperson would choose to close rather than to face tens or hundreds of thousands of dollars in fines for failing to provide ACA-approved health insurance to employees. Your exact words: “You’re also contributing to mindless Obama-bashing by ATTEMPTING to validate the ridiculous belief that he or the healthcare policy are responsible for the closure, even in the slightest.”

To be clear, you’re refusing to admit even the mere possibility that a fine of up to $3000-per-employee could jeopardize the profitability of a business. If you find that bland suggestion “ridiculous,” we probably don’t have too much to discuss.

I know it’s probably satisfying on some level to blame an entrepreneur for job losses, but it doesn’t get us any closer to understanding why those job losses occurred. It doesn’t help us understand the policies that would make it easier or harder for entrepreneurs to employ people. But if you care about employment, you should care about what conditions contribute to sustainable private sector employment. In other words, what conditions make entrepreneurs *want* to hire people should be of great concern.

The “tip bank,” as far as I can tell, could have simply been an honest attempt to comply with the law and stay profitable. The notion that such a tip bank might be illegal doesn’t make Lynn a bad person, it just makes it harder for an entrepreneur to hire or keep workers and comply with the ACA. Again, I have to admit, I’m not totally clear on the precise mechanisms involved, and no one has sought to provide much information otherwise.

But a talented woman like Lynn, quite frankly, doesn’t have to put up with regulatory hurdles that makes her job harder. She can, as the saying goes, take her ball and go home.

If you have heard a more compelling argument for why Lynn shut her restaurant down in which the federally mandated provision of health insurance plays *no role whatsoever*, I’d love to hear it. If I agree with it, I’ll even post it on the blog. I’ll be honest, though. It doesn’t appear that you care much about the financial incentives involved here.

[Radio silence]

So how did my suggestion fare in the past year? To be honest, I don’t really know, but I’m at least a little more confident that Lynn just saw the writing on the wall for restaurants more broadly.

Restaurants that otherwise would have been subject to either providing ACA-approved health insurance or cutting employee hours got a reprieve when the President unilaterally decided to delay implementation. In the meantime, many restauranteurs are pushing for some sort of fix to the law that would allow them to hire more freely without big looming tax consequences or being forced to hike menu prices. The arguments from restauranteurs center on what they say is unnecessary complexity of the formula that calculates the number of “full time equivalent” (FTE) employees. Anything over 50 will trigger the insurance mandate.

For restaurants, the calculus is more complicated than for most businesses. Employees come and go. Restaurants need a large “bench” of employees who can come in to pick up shifts, but now they must be careful that a specific share of those employees don’t get too many hours or trigger fines. My tentative prediction is that restaurant employees who are valuable (but not that valuable) will end up splitting their work weeks among different employers. It allows employers to hire them for fewer hours, but the logistical burden of this form of compliance could be significant. Workers have to juggle schedules in order to be dependable to their various workplaces and employers suddenly find that they have a deeper bench of people who are relatively less available/dependable.