In the brave new benefits world defined by Obamacare, a new creature has sprung forth: the ERISA challenge.
The Employee Retirement Income Security Act protects employees’ pension and benefit rights. The Affordable Care Act (ACA) requires most employers to offer health coverage to all full-time employees, which the ACA defines as those who work at least 30 hours a week. If they don’t, they must pay a $2,000 per employee penalty.
Some employers have tried a third approach to avoid the ACA’s employer mandate: reducing employees’ hours so they no longer qualify as full-time employees under the law.
It’s a risky strategy, as the Dave & Buster’s restaurant chain has learned. An employee whose hours were reduced is suing, claiming that the employer violated ERISA Section 510, which states:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of anplan, this title, section 3001 [29 USC §1201], or the Welfare and Pension Plans Disclosure Act, or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this title, or the Welfare and Pension Plans Disclosure Act.
The employee alleges that cutting her hours below 30 per week interfered with her attainment of a right—her right to health coverage. To win, she will have to show that Dave & Buster’s intended to interfere with her rights.
Traditionally, employers have won Section 510 cases by showing they had legitimate, nondiscriminatory reasons for taking action.
This case, however, is the first to allege that reducing hours to avoid either offering coverage or paying the ACA’s prescribed penalty violates Section 510. Employers should keep an eye on the case to see if the courts agree.
Advice: Two key Supreme Court decisions notwithstanding, the ACA has not been extensively litigated. That means it’s a crap-shoot when an ACA-related case reaches court. Talk to your attorney before changing staffing levels or adjusting hours to stay under the ACA’s compliance thresholds.