Risk of Reducing Employees Below 30 Hours in Response to Affordable Care Act Mandate
Category : Employment Law
As the looming mandate for health insurance approaches and covered employers with 50 or more full-time equivalent employees weight their options, consider the risks when contemplating reducing employees below 30 hours. Section 510 of ERISA makes it unlawful for an employer to take adverse action against a participant for exercising a right to which the participant is entitled or for the purpose of interfering with the attainment of any right to which the participant may become entitled under an employee benefit plan.
The concern raised by Section 510 is that reducing an employee who was averaging over 30 hours per week to less than 30 hours per week could be considered a violation of ERISA. The employee must prove that the employer was motivated by the specific intent to avoid providing the benefit. Because employees can recover attorney fees as well as damages under the statute, it is likely that plaintiffs’ lawyers will challenge employers who reduce employee hours in response to the ACA mandate. It is unclear how this issue will be resolved by the courts and the federal government has indicated that it will not provide guidance to employers on this issue. So the issue likely will not be resolved until after the mandate takes effect and employees challenge the employer’s reduction of hours through an ERISA lawsuit.