Can Employee Hours Be Reduced to Avoid Providing Health Insurance?

In Healthcare Reform by Coolidge Wall

Once the Affordable Care Act was passed, employers began reviewing their options about providing health insurance coverage to employees. One option continually referenced in the news was how employers were considering reducing employee hours to avoid providing health insurance coverage. One employer is now the subject of a class action law suit that claims the employer violated ERISA when it reduced employee hours to avoid providing health insurance coverage. Marin v. Dave & Buster’s, Inc., S.D.N.Y. No. 1:15-cv-036081.

Marin alleges on behalf of the affected employees that Dave & Buster’s reduced their hours as part of a company-wide plan to avoid the cost of providing health insurance to employees that worked 30 hours or more per week. The complaint states that store-wide meetings were held at the Times Square Store where management explained that compliance with the Affordable Care Act would cost the company as much as $2 million and that to avoid the cost the number of full-time employees was going to be reduced. Additional information indicated that the similar meetings were held at all company stores.

After the meeting, Marin’s hours were reduced below 30 hours per week and later reduced again below 20 hours per week. After the reduction of hours, she received a letter officially notifying her that she no longer qualified for health insurance coverage.

ERISA Section 510 states that employers cannot discriminate against a participant for exercising any right under the plan or interfere with any right under the plan. Marin alleges that Dave & Busters violated Section 510 by interfering with her rights (and the rights of other affected employees) under the health insurance plan. As damages, Marin is requesting for herself, and the class, restitution for the lost health insurance and lost wages.

Dave & Buster’s tried to have the complaint dismissed. However, the court denied the motion to dismiss. The court stated that the complaint states “a plausible and legally sufficient claim for relief, including, at this stage [Marin’s] claim for lost wages and salary incidental to the reinstatement of benefits”.

We will continue to watch this case and provide updates on any future decisions. If you have questions about employee benefit issues, please contact Edie Crump (937-449-5530).

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