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More employers can expect litigation comparable to the lawsuit filed by a former restaurant worker, whose lawsuit, where she claimed her employer cut her hours to part-time to avoid Affordable Care Act costs, has successfully survived a motion to dismiss.
To protect themselves against potential lawsuits, employers should carefully monitor any communications to workers on workforce reductions to avoid any suggestion they are being made to save money under the ACA, legal experts suggest.
Last month, a U.S. District judge refused to dismiss a putative class action lawsuit filed in May 2015 by Maria De Lourdes Parra Marin in Maria De Lourdes Parra Marin v. Dave & Buster's Inc. et al.
Ms. Marin had charged that, in response to the ACA's enactment, managers at a New York restaurant operated by Dallas-based Dave & Buster's told workers that to avoid costs totaling as much as $2 million it would reduce its full-time workers to 40 from more than 100, according to the Feb. 9 ruling by the U. S. District Court for the Southern District of New York.
She said she was then reduced from full- to part-time status, causing a reduction in pay to a range of $150 to $375 per week from $450 to $600 per week, along with a loss of eligibility for medical and vision benefits, according to the ruling.
Ms. Marin then filed suit, charging discrimination under the Employee Retirement Income Security Act. U.S. District Judge Alvin K. Hellerstein denied Dave & Buster's motion to dismiss the case in his ruling.
“Plaintiff has put forward factual allegations supporting her claim that the employer had the specific intent to interfere with her right to health insurance,” the ruling said. “The reduction in plaintiff's hours affected her employment, her pay, and the benefits she had and to which she would be entitled.”
Experts say while they believe this may be the first such ruling in litigation filed over the issue of cutting back hours because of the ACA, more can be expected.
They also point out the case itself is still in its very early stages. “This was just a motion to dismiss. The court didn't get into a determination of whether there was evidence” the employer had violated the ACA by intentionally manipulating hours and employees to avoid coverage, said Marc D. Katz, a partner with Andrews Kurth L.L.P. in Dallas. All the ruling said was that if, theoretically, the worker could prove what she claimed, there was a violation, he said.
“There's definitely the potential for more” litigation on this issue, said David L. Barron, a member of law firm Cozen O'Connor in Houston.
Even though the law has been around since 2010, it is only now “we're getting into the full swing” of its implementation, said Stephen J. Evans, an associate with Armstrong Teasdale L.L.P. in St. Louis. There has not been a lot of litigation in this area of ERISA, “and the ability to get attorney's fees and form a class action might make it an attractive area for a lawsuit,” he said.
The New York ruling “certainly makes these types of lawsuits more attractive to plaintiffs' attorneys,” said Daniel T. Sulton, a shareholder with Ogletree, Deakins Smoak & Stewart P.C. in Greenville, South Carolina.
“It's discouraging news to employers, who have always had legitimate reasons for business restructuring,” he said.
Experts advise employers to be cautious about what they tell their workers. “The big picture is, before you make changes, or react to the ACA or any other law, that you would consult with your legal counsel and your consultant and make sure to manage any communications that are put out to employees,” so that you are not conveying the message that any changes are based on the cost of benefits, Mr. Evans said.
If there is a cutback in hours, “It's probably not wise to have supervisors openly blaming it on (the ACA), or saying anything like that,” Mr. Barron said.
However, “This should not prevent an employer from moving someone from a benefit-eligible position to a non-benefit eligible position, so long as the rationale behind it is not on a discriminatory basis, or there's an intent to interfere with someone's benefits,” Mr. Sulton said.
Employers, though, should have “clear documentation” as to their legitimate business rationale for the job restructuring, Mr. Sulton said.
Oral arguments will lead the U.S. Supreme Court to resolve nonprofit religious organizations' challenge of the health care reform law's contraceptive mandate.