On May 8, 2015, a class action was filed asserting that  Dave & Buster’s interfered with employee rights under ERISA by reducing their work hours to below 30 in order to avoid the Affordable Care Act insurance mandate. Marin v. Dave & Buster’s, Inc. (S.D.N.Y.). This case involves potentially 10,000 employees whose weekly hours were reduced in 2013 when they were shifted to part-time status.

ERISA Section 510 states that “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 such participant may be entitled under the plan.” Although the original intent behind ERISA and Section 510 relates to retirement plans, Section 510 has been used to assert claims regarding employer medical plans. In support of its claim that Dave & Buster’s reduced hours to keep employees from becoming eligible for medical plan benefits, the plaintiffs’ attorneys referred to Dave & Buster’s Security and Exchange Commission filings, where the company raised concerns about the cost of ACA compliance.

We have been concerned all along that what is permissible under the ACA (reducing hours) may conflict with either ERISA Section 510 or, depending upon the demographics of the affected workforce, may raise potential discrimination issues or create FLSA problems if supervisors encourage or turn a blind eye to employees’ working off the clock. With a substantial increase in healthcare costs projected during the next few years, employers who may consider reducing the number of individuals eligible for insurance should also  consider how they will control for these unintended consequences.