Reducing Employee Hours to Avoid ACA Coverage Mandate May Be an ERISA Violation

February 19, 2016

A federal court in New York is allowing a class action lawsuit to proceed, claiming an employer violated the Employee Retirement Income Security Act (ERISA) by intentionally reducing employee hours to avoid providing health care benefits to certain employees.  Specifically, the employees allege the employer violated Section 510 of ERISA by intentionally interfering with employees' eligibility for benefits under the company's health plan.  They also claimed damages for lost wages and demanded the restoration of their health coverage, as well as reimbursement of their out-of-pocket medical costs.  The court noted the complaint referenced e-mails and other communications the employees allegedly received when their work schedules were reduced, as well as public statements by senior executives and disclosures in the company's securities filings, which specifically explained staffing changes were implemented, in part, to reduce the impact of the ACA on the company.