Lawsuit Alleges "Right-Sizing" Illegal Under ACA, ERISA

A new lawsuit may test the legality of “right-sizing” where the Affordable Care Act (ACA) and Employee Retirement Income Security Act (ERISA) intersect. The class-action lawsuit, Marin v. Dave and Buster’s Inc., involves around 10,000 employees of Dave and Buster’s who allege that their hours were reduced below the ACA 30-hour-per-week full-time threshold to ensure that Dave and Buster’s would not be responsible for employer shared responsibility penalties for not offering those employees affordable health insurance.

The employees allege that the practice of “right-sizing” violates the ERISA 510 regulation that bans employers from discrimination regarding employee benefits. Specifically, employers may not “discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled or may become entitled under an ERISA plan.” ERISA 502, the enforcement provision for ERISA 510 violations, allows plan participants and beneficiaries to recover benefits due under terms of the plan or other methods of relief. ERISA 502 also allows for civil actions taken in order for a participant “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” While ERISA 502 doesn’t allow for beneficiaries or participants to win punitive or compensatory damages, employees may be awarded back pay or reimbursement for legal costs.

The lawsuit, filed May 8 in the U.S. District Court for the Southern District of New York, should be watched closely by any employer. The case may determine whether strategies like reducing hours or moving employees from full-time to part-time status are illegal in the post-ACA health insurance landscape.

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