Under the Affordable Care Act’s (ACA) employer shared responsibility rules, large employers are required to offer medical coverage to substantially all full-time employees – those who work an average of 30 or more hours per week. This expansion of the class of full-time eligible employees undoubtedly poses a challenge to many employers who must balance the need to comply with ACA rules with budgetary constraints.
One solution employers implement is to decrease the pool of full-time eligible employees by cutting employees’ work hours to fewer than 30 per week. This concept allows the employer to comply with the ACA by offering coverage to all eligible employees while minimizing the number of employees to whom coverage must be offered. However, in an attempt to strike such a balance, these employers may find themselves up against a different (and arguably larger) problem: an ERISA Section 510 “interference with benefits” lawsuit. Several experts, including Filice Insurance, predicted this very response, and the first evidence of this is now materializing.
A class of approximately 10,000 Dave & Buster’s workers filed a lawsuit in the Southern District of New York. The class alleges that Dave & Buster’s reduced employees’ work hours to prevent them from attaining benefits-eligible status, which the class asserts is a violation of ERISA Section 510. Section 510 prohibits employers and plan sponsors from interfering with an employee’s attainment of benefits.
Though the case of Marin v. Dave & Buster’s Inc. is the first of its kind in the ACA context, it does serve as an important reminder for employers. ACA compliance implicates a broader range of legal issues than the employer mandate alone, and employers must carefully craft policies with this in mind. Employers who currently structure employee work hours so as to limit the benefits eligibility of workers should pay close attention to this case, as it has the potential to significantly impact future ACA compliance strategy.
