Restaurant Workers Claim Hours Cut to Avoid Insurance

A proposed class of about 10,000 workers claimed a restaurant chain cut their hours to avoid providing them with health insurance under the Affordable Care Act.

The lawsuit, which appears to be the first of its kind dealing with the issue, was filed under Section 510 of the Employee Retirement Income Security Act. The section prohibits employers from interfering with employees' receipt of ERISA-governed benefits like health insurance.

Benefits experts have predicted that companies may respond to the ACA's employer mandate by moving their full-time workforces to part-time status, which could in turn expose them to class action lawsuits under ERISA Section 510. The requirement penalizes large employers that do not provide health benefits to employees working at least 30 hours a week.

The worker leading the litigation effort claimed that the company slashed her weekly hours from more than 30 to about 17 to avoid the ACA's employer mandate. According to the worker, Dave & Buster's then dropped her from its health plan, because she failed to work a sufficient number of hours. Because of this reduction in hours, she also saw her weekly wages cut nearly in half, she said.

In the complaint, the workers quoted from the restaurant's recent filings with the Securities and Exchange Commission, pointing in particular to passages in which the company voiced concerns that ACA compliance would increase corporate expenses.

Citing these SEC filings, the complaint also claimed that the company's operating payroll and benefits costs decreased slightly as a percentage of total revenue during the period in which these changes were implemented. According to the complaint, the SEC filing attributed this decrease in costs to “decreased hourly and management labor costs offset by increased incentive compensation expense and unfavorable health insurance claims experience.”

Dave & Buster's did not immediately respond to Bloomberg BNA's request for comments.

For more information, see Compensation and Benefits Library's “Tax Aspects of Health Plans Under the Affordable Care Act” chapter.