Human resource experts explain that you can now be sued for reducing an employee’s hours – plain and simple. Or is it?
If an employee can prove that the intent in reducing their hours was to deny the person access to some sort of benefit, then the employer can be sued. This is now true after a new ruling by the US District Court for the Southern District of New York.
The landmark lawsuit involved popular United States establishment Dave & Busters and employees who sued the restaurant claiming the company reduced their working hours to avoid having to offer them health insurance.
The employees were able to sue under ERISA Section 510, which was primarily written to apply to retirement plans. Section 510, however, can be applied to multiple other benefit plans as well including healthcare coverage, as it turns out.
Section 510 states:
“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, this subchapter, section 1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C.A. § 301 et seq.], 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 said that Dave & Buster’s health insurance plan is considered an employee welfare benefit plan under ERISA. HR experts explain that employees sued claiming the chain violated Section 510 by reducing hours to under 30 per week in order to avoid Obamacare’s employer mandate that says employers must provide full-time employees with health insurance.
Lawsuit paperwork claims that during a Dave & Buster’s single location meeting attended by the lead plaintiff, a general manager said this exact mandate would cost the company around $2 million. In order to avoid some of these costs, the company planned on cutting hours of full-time workers. This type of meeting, according to the suit, was eventually held company-wide. Ultimately, the case depended on whether or not ERISA could actually be applied to health plans. It was ruled, they could.
Of course Dave & Buster’s tried to get the lawsuit thrown out claiming there was not enough legally sufficient evidence. Unfortunately for them, the court said the employer’s “intent” is what really mattered. In order for the lawsuit to proceed to trial, according to the court, the plaintiffs needed to prove the employer specifically intended to interfere with their benefits. The court, obviously, felt they succeeded in doing so.
The lawsuit will now proceed to trial where Dave & Buster’s will be facing, at the very least, a very costly defense bill and/or massive settlement.
