Slashing Employee Hours to Dodge ACA Penalty May Violate ERISA.

Are You In Violation of ERISA?

Under ACA, employers with more than 50 full-time employees are required to pay minimum health care for them and their dependents. For the company, Dave & Buster’s, this would have meant incurring an extra 2 million dollars annually just on health care costs for their full-time employees. It is this turn of events that led them to reduce working hours of some of their employees.

Some of Dave & Buster’s employees who have taken the business to court claim that the national chain decided to cut their working hours to get below the 50-mark threshold. As a result, they claim that they lost their former full employee positions as well as their medical insurance. A lot to lose, by any standard.

In a recent turn of events on the legal front, the District Court of New York dismissed a motion to throw out the case. The motion had been filed by Dave & Buster’s. If that is any indication to go by, the aggrieved employees may yet get their recompense.

Under the ACA, employers are not expressly at fault for slashing employee hours just to dodge the healthcare payments. However, doing so colludes with the terms of the Employee Retirement Income Security Act. As per ERISA, it is illegal for an employer to undermine an employee’s right to benefits.

The ERISA penalty is the basis that the employees have used for their class-action suit. According to a city lawyer familiar with the case, the approach is clever and it gives the employees a good argument for their case. By cutting the employees’ hours, the employer directly interfered with their healthcare plans, and indirectly, with the ERISA provisions.

The lawyer goes on to say that trying to dodge the ACA payments in this way does not make any sense for large companies like Dave & Buster’s. This is because they have a large workforce. Bringing in part-time employees would mean widening the workforce even more and that would require a lot more management for the workers. Something the attorney explains is not an ideal situation.

The attorney goes on reveal that a lot of companies and employees are following the groundbreaking case with open eyes. Whatever the outcome, it will be a major precedent in the ACA realm. This case will most likely shape how employers deal with the same situation in future. However, the attorney is hopeful that Dave & Buster’s employees will get a settlement without the case having to drag in court. If a long-drawn court battle was to develop, she explains, it could be years before a judgement was declared.

As a recent publication on Law360 recently explained, employers need to mind how they release information to their employees. They need to ensure that they come up with a unified message that also addresses the benefits issues touching on employees.

On the Dave & Buster’s issue, however, the world is watching to see what the outcome will be. What the verdict will be is anyone’s guess. What is clear at this point, though, is that trying to dodge ACA provisions can get you into trouble with ERISA.

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