In preparing for the obligation to comply with health care reform, some employers have hit upon the idea that they will never be considered "large employers" (meaning having more than 50 full-time employees) if they have no full-time employees on their payroll, or at least fewer than 50 who work more than 30 hours per week.  While it is true that PPACA does not require employers to offer health insurance to part-time employees, the simple act of making all your employees part-time does not necessarily insulate you as the employer from being subject to potential obligations as a large employer.  This is because the act counts part-time employees as a fractional employee for making the determination.

Under PPACA sections 1513 and 10106, you have to count part-time employees as a fractional "equivalent full-time" employee.  To determine your status as a large employer, you first take all employees who work 30 or more hours per week in the measurement period and count them as a full time employee.  Then, you add up all of the hours worked by part-time employees in a month and divide that number by 120, which gives you the full-time employee equivalent of your part-timers.  So an employer that has 20 part-time employees all working 24 hours a week has the equivalent of 16 full-time employees ((20 x 24 x 4)/120).  So if the employer has 35 full time employees and thinks he is not a large employer, he is wrong.  Because under this calculation, he actually has the equivalent of 51 full-time employees.

We expect more guidance to be issued on this calculation methodology as time goes on, but employers should be keenly aware that there is a difference between avoiding the penalty by offering coverage to full-time employees only, and avoiding the penalty by not being a large employer.  Again, the law does not require an employer to offer coverage to part-time employees but a large employer that does not offer coverage to full-time employees is potentially subject to the penalty.  Having nothing but part-time employees is not the solution to avoiding penalties.  Knowing the law and complying with it is the only way to avoid penalties.  Make sure you plan accordingly.