Wednesday, May 25, 2016

Can employers cut employees' hours to avoid Obamacare's employer mandate?

The Obamacare (aka Affordable Care Act) "employer mandate" generally requires large employers to provide full-time employees (30+ hours per week) with affordable health insurance. Can employers cut their employees' hours below that 30 threshold to avoid their obligations under Obamacare?

This sounds like an easy question. Employers have a right to set their employees' schedules and hours, and the employees have no vested, accrued, forward-looking right to health insurance. So, the answer must be "Yes!" of course the employer can cut their hours... right?

Not so fast. In Marin v. Dave & Buster's the Southern District of New York addressed this issue with a surprising (to me) outcome. The employee claimed that her hours were cut so that D&B could avoid the Obamacare employer mandate. She relied on ERISA Section 510, which provides:
Not official use.
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act. 29 U.S.C. § 1140.
The Court provided very little analysis, but concluded:
The critical element is intent of the employer -- proving that the employer specifically intended to interfere with benefits . . . see also Berube v. Great Atl. & Pac. Tea Co., 348 F. App'x 684, 687 (2d Cir. 2009) ("To succeed on a Section 510 claim, a plaintiff must demonstrate the employer specifically intended to interfere with benefits.") . . . .  "Discharging an employee for the purpose of depriving him of continued participation in a company-provided group health plan is a violation of section 510" . . . . Plaintiff has sufficiently and plausibly alleged this element of intent . . . . 
Accordingly, accepting as I must that these factual allegations will be proved, the complaint states a plausible and legally sufficient claim for relief, including, at this stage, Plaintiff's claim for lost wages and salary incidental to the reinstatement of benefits.
(internal citations omitted). Frankly, I'm still skeptical. This is only one district court opinion so this issue is far from resolved; but employers seeking to utilize this strategy should be aware of the risk.