If you wish to avoid providing health insurance to employees, can you just reduce their work schedules so they don’t meet the 30-hour weekly threshold under the Affordable Care Act (ACA)?
A recent ruling from a federal judge in New York has raised serious and troubling questions about the legality of this practice.
Is an Employee “Entitled” to Coverage?
The ACA requires employers with 50 or more full-time employees (or full-time equivalents) to offer affordable minimum health coverage to their employees averaging 30 hours or more per week. A common strategy for avoiding this mandate has been to manage workforce scheduling so that employees work less than 30 hours and therefore are not eligible for coverage.
Maria De Lourdes Parra Marin, an employee of the Dave & Buster’s restaurant in Times Square, claimed that she had been regularly working 30 or more hours per week but that the company cut her hours causing her to lose her eligibility for coverage under the company’s group health insurance plan. She sued the company on behalf of herself and a large class of current and former employees who experienced similar reductions in hours, claiming that the company illegally took her benefits away..
Specifically, the lawsuit alleges that the reductions in hours violated §510 of the Employee Retirement Income Security Act (ERISA) which prohibits interference with an employee’s ability to obtain benefits to which they are entitled. As evidence of the company’s unlawful motivation, Ms. De Lourdes Parra Marin pointed to numerous statements from company officials about how the prospect of the ACA was forcing them to reduce the employees’ hours so that they did not have to pay for insurance.
You Can’t Lose What You Never Had
Dave & Buster’s filed a motion to dismiss the case, arguing that in order for such a claim to proceed, an employee has to demonstrate more than merely a “lost opportunity to accrue additional benefits.” They contended that you can not violate the law by merely acting to prevent an employee from becoming eligible for a future benefit. Instead, there must be an obstruction to the employee’s receipt of a benefit to which they are unquestionably entitled at the time.
The judge issued a decision siding with Ms. De Lourdes Parra Marin and denying the employer’s motion to dismiss the case. The judge ruled that the critical element of §510 is proof that the intent of the employer’s action was to interfere with an employee’s attainment of benefits. In this instance, the judge concluded that there was enough evidence of such a motive to permit the lawsuit to move forward.
Bottom Line
Remember that this was not the final ruling on the law – it was actually just the first of what will likely be a long series of legal skirmishes in this case. Still, this could be an inkling of something very significant down the road. A great many employers base their staffing patterns on the potential cost of providing employee benefits, and the prospect of complying with the ACA mandates for health insurance coverage has led many employers to reconfigure their workforce.
This may just be a case where the employer was so overt about their intentions that a judge felt obligated to let the issue play out just a little bit longer. It is difficult to believe that the courts will actually start handcuffing employers’ ability to determine where to spend their labor dollars. Nevertheless, at least one judge thinks that there my be merit in second-guessing these sorts of decisions so this is definitely a development worth tracking.