Claim that hours were cut to dodge ACA mandate plausible under ERISA

A former Dave & Buster’s employee may proceed with a putative class action alleging that her work hours were cut so that the restaurant chain could avoid paying the looming increase in health insurance costs brought on by Obamacare, a federal district court in New York held. Denying the employer’s motion to dismiss her claim for lost wages and salary incidental to the reinstatement of benefits, the district court found the employee stated a plausible claim under ERISA, Section 510, and rejected the notion that her theory of liability failed as a matter of law.

Dropped to part-time. For seven years, the employee worked full-time (30-45 hours per week) at Dave & Buster’s Times Square restaurant, and was covered under its health insurance plan. However, when the Affordable Care Act was enacted in 2010, managers told employees that it would cost $2 million dollars to comply once the statute’s coverage mandates took effect in 2015. To avoid those costs, they told employees, the restaurant planned to reduce its full-time (insurance-covered) workforce at that location from its current complement of 100 employees down to 40. Sure enough, after June 1, 2013, her schedule was reduced to 10-25 hours per week (or 17.43 hours, on average) and, in March 2014, she received a letter from Dave & Buster’s giving formal notice that she was now on part-time status, and her insurance coverage would terminate at the end of the month. Having her hours slashed meant not only that she lost her medical and vision benefits; it also reduced her pay from $450-$600 to $150-$375 per week.

Viable ERISA claim. The employee’s complaint asserted that Dave & Buster’s slashed her hours “for the purpose of interfering with the attainment” of a right to which she “may become entitled” under the company’s employee benefit plan, and she put forth factual allegations that it did so pursuant to a “nationwide” plan to trim its ranks and intentionally interfere with employee healthcare coverage. As evidence that the company was motivated by concerns about future healthcare costs, she pointed to:

 Her own manager’s meeting informing employees of the restaurant’s plan;
 The fact that similar meetings were held at other restaurant locations;
 A post on the company Facebook page by an employee from another location that “[t]hey called store meetings and told everyone they were losing hours (pay) and health insurance due to Obamacare”;
 A senior HR official’s statement in a newspaper article, in response to a query about employee layoffs, that the company “is in the process of adapting to upcoming changes associated with health care reform”;
 An SEC filing which included the assertion: “Providing health insurance benefits to employees that are more extensive than the health insurance benefits we currently provide and to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, will increase our expenses.”

Taken as true, these facts were sufficient to state a plausible ERISA claim, the court found.

Intent, not effect. Dave & Buster’s argued that an employee has no entitlement to benefits not yet accrued and that, to state a Section 510 claim, an employee has to establish “more than lost opportunity to accrue additional benefits.” Yet the employee alleged that her current benefits had been affected, in addition to her ability to attain the right to future benefits. Moreover, the “critical element” is intent, the court noted. The ERISA claim arose from the employer’s unlawful motivation in interfering with employees’ accrual of benefits, and the employee asserted that Dave & Buster’s specifically intended to interfere with employees’ benefits and that it acted with an “unlawful purpose.” Intent was plausibly alleged here, sufficient to avoid dismissal of her ERISA claim.

SOURCE: Marin v. Dave & Buster’s, Inc., (SD NY), No. 15 Civ. 3608 (AKH), February 9, 2016.

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