Flashback: Coffee Giant Teaches Employees Economic Lesson When Forced To Increase Wages
Editor’s Note: Our readers responded strongly to this story when it originally ran; we’re re-posting it here in case you missed it.
A basic fact of economics for businesses of all sizes is that when certain costs go up, like employee wages, other costs must be reduced in order for the businesses to retain a similar profit margin as was maintained before the changes.
Thus, we see that in response to a mandatory hike of the minimum wage in the Canadian province of Ontario, a franchisee of the popular Tim Hortons coffee chain has chosen to reduce certain employee benefits in response to higher labor costs rather than lay off any of their workers, according to a Jan. 4 report in The Washington Times.
The franchise owners, Jeri Horton-Joyce and Ron Joyce Jr. — daughter and son-in-law of founder Tim Horton — let their employees know in a letter that some of their benefits had been cut in response to the minimum wage rising by $2.40, an unfortunate but necessary unintended consequence of the mandatory pay raise.
According to the CBC, employees at the Cobourg, Ontario, franchise were not particularly pleased when they were asked to sign a document noting that they would be losing their paid breaks and had to begin contributing toward certain health benefits because of the minimum wage hike, with one anonymous employee stating, “I feel that we are getting the raw end of the stick.”
The tough news came in a letter distributed to employees by Ron Joyce Jr. Enterprises, which stated, “These changes are due to the increase of wages to $14.00 minimum wage on January 1, 2018, then $15.00 per hour on January 1, 2019, as well as the lack of assistance and financial help from our Head Office and from the Government.”
It is worth noting that Canada’s Employment Standards Act doesn’t require employers to give employees any sort of break outside of one for a meal during their shift, much less mandate that the break be paid, so this cut benefit is within the law, even if employees don’t like it.
Aside from the loss of paid breaks, employees who have been with the franchise longer than five years will have to begin contributing 50 percent of their health care benefits, while those employed between six months and five years will have to contribute 75 percent. That benefit used to be covered 100 percent by the company.
“That was a big benefit for the people who work at Tim Hortons, because it’s not a great-paying job,” stated one employee, who was making $13 per hour before the minimum wage hike. “The benefits are what kept me there. Now you are going to make me pay that.”
“I don’t understand why you can take it away. Sounds like you are penalizing your staff because the government is trying to help your staff,” the employee added.
Another unnamed employee complained that their paycheck would actually be smaller after the wage hike, and stated, “I’ve worked for the company for a very long time, and I was very upset. I wasn’t marching down the street asking for this pay raise. Now I’m worse off.”
The Toronto Star noted that the letter to employees apologized for the benefit changes and added, “Once the costs of the future are better known we may bring back some or all of the benefits we have had to remove.”
The corporate headquarters of Tim Hortons declined to comment specifically on the letter from the Cobourg franchise, but noted that individual franchisees are responsible for complying with all applicable laws and regulations pertaining to their own employment matters, such as wages and benefits.
As for the corporation, “Our focus continues to be on supporting our restaurant owners by growing sales and profitability through a balanced and multi-faceted strategy while ensuring we provide our guests with great experiences.”
According to the Great White North Franchisee Association, half of whose members include Tim Hortons franchisees, the mandatory cost increases such as the minimum wage hikes and paid vacation days have put small businesses in “a difficult situation” economically, and that without assistance from the parent corporation and in order to keep from shedding any jobs, the franchisees have been forced to cut costs elsewhere.
“While other competitors have received concessions from their franchisors, unfortunately our chain has not,” the GWNFA stated. “Many of our store owners are left no alternative but to implement cost-saving measures in order to survive.”
The employees of the Tim Hortons franchisees who have seen their benefits cut may be upset, but they should be upset at their government for foisting this mandatory cost increase upon their employer instead of allowing the free market to determine what wages should be.
They should also count themselves lucky that though they may have lost some benefits, at least they still have a job.
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