Limiting Employee Hours to Avoid the Affordable Care Act May Violate ERISA

affordable care act, employment lawUnder the Affordable Care Act (ACA), employers with 50 full-time equivalent employees (those working 30+ hours per week) must offer at least minimal healthcare to employees and their dependents.  Employers, including many franchised businesses, may attempt to avoid this requirement by reducing employee hours and relying more on part-time employees.  While that decision may make economic sense in the short-term, it could lead to an ERISA class action suit.

ERISA prohibits employers from discriminating against employees for exercising their rights under a benefit plan or for the purpose of preventing employees from acquiring those rights.  In a recent New York case, a district court judge refused to dismiss an ERISA class action suit brought by employees whose hours were seemingly cut to avoid healthcare liability under the ACA.

The law in this area is new and is still developing, but franchisees should be careful when making staffing and scheduling changes because courts might look unfavorably on employer staffing decisions made primarily to avoid the ACA.  No matter what changes you’re planning, consider having any discussions regarding staffing decisions with your attorney to make sure you’re protected.

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