Class Action Suit Alleges Dave & Buster’s Cut Employee Work Hours to Skirt ACA Obligation to Offer Health Coverage
In the first lawsuit of its kind, a purported class of approximately 10,000 workers at Dave & Buster’s, the restaurant chain, filed a lawsuit in the Southern District of New York (Marin v. Dave & Buster’s, Inc., S.D.N.Y., No. 1:15-cv-03608) alleging that their employer reduced the workers’ hours to keep them from attaining full-time status for the purpose of avoiding the requirement to offer them health coverage under the Affordable Care Act’s (ACA’s) employer mandate. The ACA’s employer mandate generally requires large employers to offer affordable and minimum value health coverage to their full-time employees (employees who regularly work an average at least 30 hours per week). Employers are not generally required to offer coverage to employees working less than 30 hours per week on average. After the employer mandate took effect, many employers have been moving employees to part-time status to avoid triggering penalties under the employer mandate.
The theory in this case is that ERISA Section 510, which prohibits employers and plan sponsors from interfering with an employee’s attainment of benefits, effectively prohibits employers from reducing work hours for the purpose of avoiding the requirement to offer health coverage under the ACA. For several years, commentators have been predicting that plaintiffs would eventually file lawsuits like this one, and that ERISA Section 510 would be the basis for those lawsuits. This case is significant because many other employers have implemented similar strategies striving to limit work hours for certain groups of employees for the purpose of avoiding penalties under the ACA. Although we would argue that this type of strategy, if structured properly, does not interfere with employees’ attainment of benefits under ERISA Section 510, at least one court may now weigh in on the issue. Employers should therefore watch this case closely, as it will impact the now-common practice of structuring employee work hours so as to manage financial exposure under the ACA.