On February 9, 2016, the U.S. District Court for the Southern District denied Dave & Busters, Inc.'s ("D&B") motion to dismiss a class action lawsuit brought by a former employee of the D&B store located in Times Square, New York. Maria De Lourdes Parra Marin v. Dave & Buster's, Inc. et al., 15-cv-3608 (S.D.N.Y. Feb. 9, 2016). In the underlying lawsuit, the former employee alleged that D&B violated her rights under Section 510 of ERISA when the company intentionally reduced her working hours to avoid having to offer and provide her and other employees with affordable health insurance coverage as required by the Affordable Care Act ("ACA"). Because D&B's motion to dismiss was denied, this case moves forward to the discovery and, possibly, to trial. This case should be monitored by any employer that reduced hours to avoid the ACA coverage mandate or is considering such an action in the future.
In accordance with the ACA's shared responsibility provisions, employers with at least 50 full-time employees (including full-time-equivalent employees) must either offer minimum essential coverage to their full-time employees (and dependents), or make an employer shared responsibility payment to the IRS. ERISA Section 510 provides, in pertinent part, that "it shall be unlawful for any person to discharge, fine, suspend, expel, discipline or discriminate against a participant . . . for 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."
In the D&B case, the plaintiff alleged that, from 2006 to 2013, she worked full-time for D&B and received health insurance under D&B's health plan. However, in June 2013 and in response to the ACA coverage requirements, D&B store managers allegedly told employees that the cost of complying with the ACA would be about $2 million and that the full-time employee count would be reduced from 100 full-time employees to 40 full-time employees for the specific purpose of avoiding the cost. After this announcement, the plaintiff's working hours were in fact reduced from 30 - 45 hours per week to 10 - 25 hours per week, which caused her to lose health insurance coverage in March 2014.
In denying D&B's motion to dismiss, the court found that the "critical element is the intent of the employer -- proving that 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."
Citing to the meetings held by managers in D&B's Times Square location about the ACA costing D&B "two million dollars," the resulting reduction of full-time headcount, and to similar meetings held at other D&B locations, the court held that D&B acted with an "unlawful purpose" in taking this adverse action against the plaintiff.
Because this case will now proceed to discovery and possibly to trial, the case provides a reminder to all executives, managers and supervisors about making statements about reducing employee working hours in any context that includes the ACA.