The Affordable Care Act (“ACA”) requires larger employers (50 or more full-time equivalents) to offer “affordable” “minimum-value” health care to employees working 30 or more hours per week or face the possibility of significant penalties. In response, some employers cut employee hours to avoid offering health insurance. The recent class action settlement proposed by Dave & Buster’s (Marin v. Dave & Buster’s, Inc.) should serve as a cautionary reminder to employers who have cut or who are considering cutting employee hours to avoid the ACA employer mandate.
ERISA Section 510 makes it unlawful to retaliate or discriminate against a participant for exercising any right to which he or she is entitled under the provisions of an employee benefit plan or for the purpose of interfering with the attainment of any right to which the participant may become entitled under the plan. The employees claimed that they were covered under the restaurant’s health insurance plan prior to the enactment of the ACA and that managers told them their hours would be cut to avoid the ACA. The ACA employer mandate would have represented an added cost to the company in excess of $2 million. Avoiding this expense proved to be a false economy.
On December 7, the court gave preliminary approval to Dave & Buster’s for a $7.4 million settlement. A hearing is scheduled for May 9, 2019 to determine if the settlement will be formally approved.
Although the future of the ACA is in question, it is in effect, and employers should assume that it will be enforced. Employers should review and document any changes to employee work schedules, be sure that reductions in employee hours are for legitimate business purposes, and avoid making comments that suggest staffing and scheduling decisions are made on the basis of health care costs or avoiding the ACA employer mandate. Employers who have already made such changes should consult with legal counsel to consider any steps that should be taken to avoid liability.