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Employees allege employer cut hours to avoid ACA liability

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in Compensation and Benefits,Human Resources

Can you zero out the Affordable Care Act’s (ACA) mandate to provide 95% of full-time employees—those who work at least 30 hours a week—with group health benefits by cutting their work hours, so that they’re no longer considered full-time employees? One employer that allegedly did so is now defending itself against a class action lawsuit. (Marin v. Dave & Busters, Inc., No. 1:15-cv-3608, S.D. N.Y., 2015)

Right size, wrong consequence? These em­­ploy­­ees allege that in 2013 their employer implemented a “right sizing plan” under which their work hours were cut to fewer than 30 hours a week, specifically to allow it to avoid ACA liability. As a result, they lost their health benefits and wages. And they seem to have incontrovertible proof.

  • They allege that the general manager and an assistant general manager announced at an employee meeting that complying with the ACA would cost as much as $2 million and that to avoid that cost the company planned to reduce the number of full-time employees.
  • Filings with the Securities and Exchange Com­­mis­­sion noted the increased cost of compliance and, for the period after employees were reclas­­si­­fied as part time, a decrease in payroll and benefits costs.

The employees want their full-time status reinstated, along with their ability to participate in an ACA-compliant health plan. They also want their lost wages and interest from the date their hours were reduced.

E IS FOR ERISA: The basis of these employees’ argument is that the employer’s actions interfered with their rights under Section 510 of ERISA to participate in the plan. Under Section 510, it’s unlawful for any person to discriminate against plan participants for exercising any right to which they are entitled under the provisions of an employee benefit plan.

The company has filed a motion to dismiss the lawsuit.

Bulletproof proof or shot full of bullet holes? Although it seems as if employees have an airtight case, Section 510 discrimination cases are difficult to prove because they require specific intent to discriminate. At this stage, it’s not clear if the employees have met that burden.

For example, employers traditionally retain flexibility to rejigger their workforces, depending on their business needs, without running into a Section 510 buzz saw. COBRA takes this into account by allowing employees whose work hours are reduced to qualify for COBRA benefits.

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