Protect Your Business from ACA-Related Liability

Posted on Monday, February 25, 2019

The employer mandate under the Affordable Care Act is now a reality, after surviving a challenge in the Supreme Court in 2015, known as the case of King v. Burwell. That means businesses that qualify as "applicable large employers" must now provide health insurance to all U.S. employees that average 30 hours or more per week.

In 2015 the companies that are affected are those employing at least 100 full-time employees or the equivalent. In 2016, this also affects companies with at least 50 such employees. In an effort to minimize the financial impact this brings, changes are likely to take place. This article looks briefly at some of the possible effects on employment, and also describes a case where the ACA has landed an employer in court.

Jobs May Be Lost

As a result of the employer mandate, many companies may be considering a plan to restructure their workforces. The goal of the restructuring would be to minimize the number of employees that qualify for the health insurance mandate. Some have turned to automating tasks that were previously done by employees. That, of course, is coupled with workers being laid off.

Other employers have tried to migrate full-time employees to part-time positions, and hire more part-timers to pick up the slack. Some businesses are going with a skeleton crew of full-time, salaried managers, and hiring mostly part-time employees for rank-and-file positions.

If you're considering doing this, think it through before cutting back the hours your full-time employees now work. The reason lies not on the ACA, but in a much older law — the Employee Retirement Income Security Act of 1974. Section 510 of this law makes it illegal for businesses to restructure their labor forces simply to avoid having to pay benefits.

The relevant text is as follows: It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this title, section 3001 [29 USC §1201], or the Welfare and Pension Plans Disclosure Act, or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this title, or the Welfare and Pension Plans Disclosure Act.

Employees Go to Court

Business owners and human resource managers are closely following a lawsuit that's currently winding its way through the federal court system. According to Maria De Lourdes Parra Marin, an employee of the restaurant and arcade/entertainment chain Dave & Buster's, the company had substantially reduced her hours, along with the hours of scores of other workers at their Times Square location. The purpose of the cuts, employees allege, is simply to avoid paying the health insurance premiums that would otherwise be required.

According to court documents, Marin asserts that the company held an employee meeting in June of 2013, in which management informed the staff that the employee benefits would cost the company about $2 million. They therefore announced a plan to reduce full-time staff from 100 workers to 40. As a result, Marin's hours were slashed from full-time to 12 to 20 hours per week. Over the next 15 months, Marin never had a week with more than 30 work hours. Her income fell from $450-$600 per week to $150-$375 per week.

Court filings also point to some statements Dave & Busters executives made to the media, expressing an intent to "right-size" the full-time staffing levels. The company had also warned investors via official Securities and Exchange Commission filings that the ACA would affect company earnings if the ACA forced them to pay health insurance premiums for all their full-time employees.

Dave & Buster's is contesting the lawsuit, arguing that the law doesn't apply to benefits that the worker hasn't yet earned. Dave & Buster's also argues that workers don't have a "right" to employer-paid health insurance, since any employer always has a right to drop coverage and pay a fine if they so choose. Also, they point out, when the meeting happened and the hours were reduced, the employer mandate didn't exist. It was a future provision at that time, not a current one.

Outlook

It's too early to tell who will prevail in the lawsuit. But employers should document thoroughly any decisions to reduce hours or eliminate positions.

Officers, HR managers and boards of directors should also ensure the company is covered against the risk of being sued over employment practices such as the administration of benefits, including health insurance. Your general business liability insurance does a good job covering customers and vendors who slip on a freshly mopped floor. But it won't cover you against the risk of employee-initiated lawsuits arising from management practices and benefits administration.

If you're not sure your company is adequately covered, take actions soon. And consult with your professional advisers.

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Disclaimer: The information contained in Dulin, Ward & DeWald’s blog is provided for general educational purposes only and should not be construed as financial or legal advice on any subject matter. Before taking any action based on this information, we strongly encourage you to consult competent legal, accounting or other professional advice about your specific situation. Questions on blog posts may be submitted to your DWD representative.