Loose Lips Sink Ships: New Liabilities Under The Affordable Care Act

The Affordable Care Act (“ACA”) requires larger employers (50 or more full time equivalents) to offer “affordable” “minimum value” health care to employees working thirty (30) or more hours per week or face the possibility of significant penalties in some cases.  Thus the cost of staffing with part time employees may be far less than paying for health insurance for workers working 30 or more hours.

At the same time, ERISA Section 510 (29 USC Section 1140) prohibits discrimination against an employee “for exercising any rights to which he is entitled under the provisions of any 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…”

In a June 15, 2015 article published in Pension & Benefits Daily, we indicated that Marin v. Dave & Buster’s, Inc. et. al.  (S.D.N.Y.) will likely be the first of what may be many such cases under the ACA.   In this case, an employee who had been full time and working over thirty hours per week  had her hours reduced to below thirty the effect of which was that she would not qualify for health insurance. As a result, she brought a putative class action lawsuit alleging a violation of ERISA Section 510.  On February 9, 2010 Judge Hellerstein denied the Employer’s motion to dismiss, holding that allegations of intent to deprive plaintiff of health insurance would go to trial. Also of significance was his ruling that ERISA would allow an order requiring the employer to repay the employees if plaintiffs prevailed.

Marin had alleged that

• Company officials told employees that complying with the ACA would cost the Employer over two million dollars and that they were reducing the number of full timers to avoid the liability;
• That at restaurant meetings employees were told they were losing hours and health insurance;
• That a Company official had told a newspaper that the employer was in the process of “adapting to upcoming changes associated with Healthcare reform;” and
• The company reported in SEC filings that “Providing health insurance benefits to employees that are more extensive than the health insurance benefits we currently provide and to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, will increase our expenses.”

While defendants will properly argue that they have a right to make entrepreneurial decisions as to the necessary staffing and scheduling to provide the most economic labor cost (see Inter-Modal Rail Employees Assn. v. Atchison, Topeka and Santa Fe. Rlwy, 117 S.Ct. 1513 (1997)), employers should be wary of statements that suggest they are making staffing and scheduling decisions solely or principally on the basis of health care costs. Because of the potential for liability, some potential staffing patterns should be considered with an employer’s attorneys rather than non-attorney advisors. In addition, it may be that the Courts will recognize a difference between lowering hours of existing employees and setting new hire staffing patterns.

It is now clear that these and related issues will be developed over the next few years as more suits are brought and wend their way through the trial and appellate courts. In the meantime employers should be wary of what they say about healthcare issues, the ACA and benefit costs.