New worry for Charlotte restaurants: Rehiring staff who get ‘more money by not working’ 

As North Carolina prepares to start reopening this month amid the coronavirus crisis, some Charlotte restaurant owners say they have a new problem: workers are getting paid more by unemployment than if they came back to the job.

“Many staff members do not want to come back to work because they can make more money by not working,” said Doug Bell, managing partner of RoCo Holdings. “This problem will accelerate once we are allowed to open for some dine-in business.”

RoCo Holdings, which includes The Roasting Company at Montford Park, Plaza Midwood and Rock Hill, Eddie’s Place and Providence Road Sundries, closed dining rooms on March 17 under Gov. Roy Cooper’s stay-at-home order.

Pre-COVID-19, the restaurants had about 125 employees. Operating as take-out only, there are about 30 workers.

Bell said his full-time staff earn $15 an hour, and up to $18 with tips.

“However, they can make the equivalent of $23.75 hour on unemployment,” Bell said. “We are having a difficult time getting staff to come back to work.”

RoCo Holdings isn’t alone.

Mital Naik, owner of Brazz Carvey & Brazilian Steakhouse in uptown Charlotte, wants to reopen his dining room as soon as it’s allowed. According to Cooper’s plan which allows businesses to reopen in phases, dining in at restaurants could resume as soon as the last week of May.

But Naik said it won’t be easy. Some of his part-time workers, who can earn up to $18 an hour with tips working about 25 hours a week, are earning more on unemployment.

That’s because there’s an additional $600 a week added to unemployment benefits under the Federal Pandemic Unemployment Compensation as part of the CARES Act, on top of what the state pays. North Carolina’s maximum unemployment payment is $350.

So a full-time restaurant worker earning $720 a week from an $18 per hour job could see up to $950 a week from the unemployment changes, Bell said.

“A couple (employees) have said they don’t want to come back because they’re making more collecting unemployment,” Naik said. “The CARES Act caters to the service industry but is not beneficial to us.”

Unintended consequences

Under the federal stimulus package, the CARES Act boosts pay for the unemployed, while the separate Personal Paycheck Protection program increases financial aid to small businesses.

The problem is the two programs aren’t working together.

With the increase in unemployment compensation, over half the people getting unemployment are receiving more than what they would have earned working, said Wells Fargo senior economist Mark Vitner.

“This is the result of a program that has very good intentions and having some unintended consequences,” Vitner said.

He said about 36% of the 30 million U.S. job losses in the last six weeks have been at restaurants.

The additional employment compensation ends July 31.

The PPP loan is only forgiven if all employees are kept on the payroll for eight weeks, and at least 75% of the loan goes to payroll. A company must be back to full payroll by June 30.

“This could obviously be a problem if restrictions are still in place for restaurants in particular, but many small businesses as well,” Bell said. “Most restaurants are in limbo on this issue.”

The two programs also are run by different groups. The PPP is through the U.S. Small Business Administration and the other program runs through state unemployment insurance offices.

“Those two plans could have been coordinated,” said UNC Charlotte professor and economist John Connaughton. “It was not well thought out.”

Bell said the unemployment payments are making it difficult to get staff back. But, he said, it’s also hard to decide how to use the PPP loan not knowing how many workers to bring back or if restaurants will be operating at full capacity by the end of June.

Naik, who also received a PPP loan, said because he’s unable to bring back all of his workers, he’s going to use the loan as a low-interest tool to help rev up business. Neither Naik nor Bell disclosed the amount of their loan.

‘Fear factor’

Another Charlotte restaurant is experiencing a staff shortage for a different reason.

Great Wall of China South in Charlotte has cut back hours and is now open four days a week. Manager Amy Zhang said even though her employees have said they’ve yet to receive unemployment money, they won’t return to work out of fear of contracting COVID-19 and spreading it to family.

“Losing their lives is not worth it,” she said.

Zhang said the restaurant is operating contactless for takeout now, but she has trepidation about reopening the dining room too soon.

“I don’t think things are under control,” she said.

North Carolina reported 10,746 coronavirus cases as of Friday morning, and 405 people have died, according to health officials the Observer reported.

The U.S. Centers for Disease Control and Prevention reports Friday morning that more than 1 million cases in the U.S. and at least more than 60,000 Americans have died from COVID-19, the disease caused by the new coronavirus.

Connaughton understands Zhang’s concerns. Even if workers come back, he agreed that there’s a “fear factor” both from businesses for liability reasons and from consumers’ confidence.

“The idea that this is going to be a quick recovery is not going to happen,” he said. Even with continued economic growth by the fall through the end of next year, “we still won’t be quite back to where we were in the fourth quarter of 2019.”

Vitner said it’s a bit “unnerving” going out now with people wearing face masks and grocery store shelves not full. But economic growth will start again in June or July with restaurants and doctor’s offices opening, he said.

Bell get why employees won’t return. But it’s frustrating.

“I believe we had a great staff at all the restaurants. Most were long-time employees, and we pride ourselves in having much lower turnover than typical in this industry,” he said. “Most in this business are struggling for their very existence.”

This story was originally published May 1, 2020 at 3:11 PM with the headline "New worry for Charlotte restaurants: Rehiring staff who get ‘more money by not working’ ."