Reducing Hours to Avoid ACA Obligations May Lead to Class Action Exposure

Employers Take note!

February 16, 2016

Compliance with the Affordable Care Act (ACA) has resulted in increased health benefit costs for employers. While programs to reduce the number of full-time employees may lower health care costs by reducing the number of employees qualifying for coverage, they also may lead to ERISA class action litigation. In Marin v. Dave and Buster’s, a federal district judge in the Southern District of New York denied a motion to dismiss a class action lawsuit claiming that the Dave and Buster’s amusement chain violated ERISA by cutting employee hours to avoid providing health care benefits to a class of employees.

The ACA’s employer shared responsibility requirements obligate large employers to offer minimum essential health coverage to substantially all of their full-time employees, or to pay significant penalties if just one such employee qualifies for a premium subsidy on a public health insurance exchange. There are also penalties if an employer offers coverage to its full-time employees but the coverage is not affordable for such employees or is not of minimum value. Specifically, the ACA defines a full-time employee as an employee who regularly works on average at least 30 hours per week. Employers are not exposed to penalties under the ACA for failure to offer coverage to part-time employees. As a result, some employers have considered moving employees to part-time status in order to avoid triggering penalties under the ACA for failure to offer health insurance coverage to such workers.

Section 510 of ERISA makes it unlawful for any person to discriminate against any participant or beneficiary for exercising a right under ERISA or an ERISA benefit plan. The plaintiffs alleged that by reducing employees’ hours to keep them below the 30-hour weekly average to qualify as a full-time employee, Dave & Buster’s interfered with the attainment of the affected employees’ right to be eligible for company health benefits

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