Dave & Buster's Can't Shake Claims It Illegally Cut Hours

Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...

By Jo-el J. Meyer

Feb. 11 — Dave & Buster's Inc. lost its attempt to have a federal court dismiss a proposed class action that alleges the company intentionally reduced its workforce's hours to prevent employees from being eligible for health benefits.

The case is the first Employee Retirement Income Security Act lawsuit that alleges an employer, in response to the employer mandate of the Affordable Care Act, intentionally interfered with workers' benefits by cutting their hours to make them part time.

In an order issued Feb. 9, Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York denied Dave & Buster's motion to dismiss. He said there was enough evidence early in the case to support workers' claims that the company acted with an “unlawful purpose” when it reduced the hours of hundreds of employees, thereby making them ineligible for health benefits.

The proposed class action was brought by Dave & Buster's employee Maria De Lourdes Parra Marin, who worked at the company's Times Square store as a full-time employee until 2013. Marin alleged that the company reduced her hours—and the hours of hundreds of other employees—to make them part-time workers ineligible for company-provided health-care benefits. Marin alleged that the decision to do so was driven by one factor: the ACA's employer mandate.

The mandate requires larger employers to provide employees with affordable health insurance that meet minimum-value standards or potentially face penalties.

The lawsuit alleges that by reducing workers' hours to make them ineligible for health-care benefits, Dave & Buster's violated ERISA Section 510. That provision prohibits employers from interfering with employees' receipt of ERISA-governed benefits such as health insurance.

In its motion to dismiss, Dave & Buster's argued that to establish a Section 510 claim, an employee must show more than a lost opportunity to accrue benefits. Dave & Buster's argued that under ERISA, an employee has no entitlement to future benefits and that it couldn't violate Section 510 by making its workers ineligible for future benefits.

The court rejected this argument, saying Marin had alleged that Dave & Buster's actions affected both current benefits and the ability to attain future benefits. “Plaintiff has sufficiently pled that the employer acted with an ‘unlawful purpose' when taking an adverse action against her,” the court said.

Marin was represented by Abbey Spanier, Conover Law Offices and Frumkin & Hunter. Dave & Buster's was represented by Paul, Weiss, Rifkind, Wharton & Garrison.

To contact the reporter on this story: Jo-el J. Meyer in Washington at jmeyer@bna.com

To contact the editor responsible for this story: Phil Kushin at pkushin@bna.com