While many employers are still trying to figure out all of the new IRS Form 1094 and 1095 reporting requirements of the Affordable Care Act (ACA), lawsuits on ACA matters have popped up on the radar. In the first case of its kind, a federal court in New York City has recently given employers a glimpse on how it views the interplay between the Employee Retirement Income Security Act (ERISA) and the ACA.

The Decision to Continue the Lawsuit

In this decision, the court denied the employer’s request to dismiss a proposed class action lawsuit.  The plaintiff employees asserted that the employer intentionally reduced its workforce hours to prevent these employees from being eligible for health benefits. The legal cause of action is based on an ERISA section 510 claim of interference with health benefits of the employees. The employer countered that it could not violate this ERISA provision because a claim pursuant to that section 510 of ERISA requires that an employee show more than a lost opportunity to accrue benefits and ERISA does not entitle an employee to future benefits. 

The court rejected the employer’s arguments, contending the lawsuit contains the minimum essentials by alleging the company’s actions affected both current benefits and the ability to attain future benefits and by containing sufficient factual allegations regarding the company’s intent to interfere with the workers’ right to health insurance.

Reasoning Behind This Decision

In this case, the employee who filed the lawsuit had worked at the company as a full-time employee until 2013. The employee’s hours were reduced in 2013 and the employee then asserted in the lawsuit that the company reduced the employee’s hours and those of other employees solely to make them part-time workers ineligible for company provided health-care benefits since they then averaged under 30 hours of work per week.  The employees asserted that the company actions were motivated by the ACA’s employer mandate rule that requires employers to provide affordable health insurance that meets minimum-value standards or face potential penalties to all employees that average 30 or more hours per week during a measurement period.  

 What This Means for Employers

It is important to clarify that this recent decision did not rule in favor of the employees.  Rather here the point is that the lawsuit was simply allowed to proceed. As the case develops, it will likely provide future guidance on the interplay of ERISA and the ACA. The takeaway for employers is that litigation has begun involving those employers who have reduced the hours of their employees who reduced the hours of those employees regardless as to whether these actions were intentional or not.  Employers should proceed carefully and have a well thought out plan of attack in the event hours of employees ever need to be reduced.  Should you have questions or concerns regarding any reduction in hours for your work staff, please consult with your HNI representative.