Some 80 million private sector employees will be required to get a Covid vaccine or weekly Covid test under the federal rules announced by President Joe Biden last week. But don’t assume that the workers you come in contact with every day will be covered by the mandate, which only applies to businesses with 100 or more employees.
In addition to those 80 million workers, there are another 43 million employees who work at companies that employ fewer than 100 people — and who are not covered by that federal mandate.
For example, most fast food restaurants are independently-owned franchises, not company-owned locations. Roughly 95% of McDonald’s (MCD) nearly 14,000 US locations are owned by a franchise operator, not the company itself.
McDonald’s says very few of its nearly 2,000 US franchisees own a single store. And the average store has about 60 employees. But franchisees can set up separate companies for every location they own to limit the headcount they have to report for each.
So there’s still a chance the employee serving you a Big Mac or Quarter Pounder isn’t required to get a vaccine or take a Covid test in order to go to work.
These companies could require their franchise operators to have their employees comply with the same rules that apply to larger companies, but that’s unlikely, said Brian Kropp, chief of research at consulting firm Gartner’s HR practice.
‘The war for talent’
With a record number of job openings and not enough job seekers to fill them, “the war for talent is intense right now,” Kropp said. “If McDonald’s does [require vaccinations] and Wendy’s doesn’t, those employees who don’t want to get vaccinated are going to walk out the door to go over to Wendy’s.”
Many other large companies hire independent contractors, rather than employees, to interact with the public, including Uber (UBER), Lyft (LYFT) and other major delivery services such as DoorDash and Instacart.
In addition to their need to hang on to workers, those companies have a bigger issue at play — imposing a vaccine mandate on drivers could complicate future legal battles over whether they should be considered employees rather than independent contractors, Kropp said.
“If the mandate were to apply to them, it makes it more likely in future legal cases for drivers to say, ‘We’re treated the same way as employees,’” said Kropp.
Most of the companies engaging with franchisees or independent contractors didn’t respond to questions about their plans when contacted for this story. DoorDash, however, said that it won’t ask its delivery drivers to comply with the vaccination rules because of their status as independent contractors.
“We are encouraging all members of the broader DoorDash community to get vaccinated,” the company said, adding that it does require its delivery drivers to wear masks when interacting with the public.
Can vaccines be good for business?
Many larger business are happy to see the new vaccine and testing mandates because they believe a widely vaccinated workforce could lead to a more level playing field.
“They’ve done the math and figured out that vaccines mean lower absenteeism, lower health care costs,” Kropp said.
Delta Air Lines (DAL) said last month that each employee hospitalized with Covid costs the company about $50,000.
For major employers that compete for talent with other large companies, the new rules are a big advantage, Kropp said.
“Walmart now doesn’t have to worry about losing the workers to Target (TGT),” he said.
Small employers, however, haven’t been able to embrace mandates on their employees because they often compete for workers with similarly-sized companies.
A survey of 533 small businesses conducted by the National Federation of Independent Business, a trade group that primarily represents companies with fewer than 100 employees, found that only 3% had any kind of vaccine mandate, and that 14% were “considering” one. The survey was conducted over the first six days of September, just before the federal rule was announced.
“Their ability to retain and recruit workers is a major factor in whether they impose a vaccine mandate,” said Holly Wade, executive director of the NFIB Research Center.
At the same time, small businesses have to worry about absenteeism if Covid cases start spreading through their workforce in addition to the health care expenses for the roughly one third of small employers who offer health coverage.
Although a major airline like Delta might be able to afford a $50,000 hospital bill when an employee is hospitalized, small businesses are hard-pressed to cover those costs.
“Any huge medical event for one of their employees can increase their premiums astronomically,” Wade said. “We hear about that from small business owners all the time.”
Clarification: This story has been updated with additional information about McDonald’s franchise ownership.
