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Caution: The Danger of Reducing Work Hours to Avoid the Obligation to Offer Health Coverage under Ob

10,000 employees of Dave and Buster’s filed a class action suit alleging, in part, that the company reduced their work hours in order to avoid the requirement to offer full-time employees the health coverage under the Affordable Care Act.

The ACA’s employer mandate generally requires large employers (of at least 50 employees) to offer affordable and compliant health coverage to their full-time employees, i.e. those who work an average of at least 30 hours per week. The effective date of the mandate depends upon the employer’s size but will become effective for all large employers in 2016. As the employer mandate becomes inevitable, many employers are trying to avoid penalties against them for failing to provide health insurance by moving employees to part-time status.

The legal theory in the above case is that the Employee Retirement Income Security Act (ERISA) prohibits employers from interfering with an employee’s attainment of benefits. This provision effectively prohibits employers from reducing work hours for the purpose of avoiding the requirement to offer health coverage under the ACA.

While changing an employee’s hours to part-time seems like an easy solution, this recent case discourages a purposeful reduction in hours. Contact PMP for more information on this and other important HR matters.

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