Will Dave & Buster's ACA Employer-Mandate Plan Design Land It in Hot Water with ERISA?

On May 8, 2015, the named plaintiff, Maria de Loudes Parra Marrin (Plaintiff), in a class action lawsuit, filed a Complaint in the United States District Court of the Southern District of New York. She primarily alleged that her former employer, Dave & Buster's, discriminated against her and other employees in violation of Section 510 of the Employee Retirement Income Securities Act of 1974, as amended (ERISA), by cutting employee hours to “save money” under the ACA. Plaintiff alleges that this cutting of hours and altering employee positions from full-time to part-time intentionally interfered with the Plaintiff's and other similarly situated employees' attainment of health insurance benefits, as prohibited under Section 510 of ERISA.

In her Complaint, the Plaintiff alleged the following facts:

• In June 2013, Dave & Buster's scheduled two meetings for the (New York) Times Square Store, where Plaintiff worked. At the meeting that Plaintiff attended, the store general manager, along with the store assistant general manager, stated that “compliance with the ACA would cost Dave & Buster's as much as 'two million dollars,' and that, to avoid that cost, Dave & Buster's planned to reduce the number of the full-time employees at the Times Square Store to approximately 40 [from over 100].” Complaint at 6.
• Similar meetings were being held at other stores. Id.
• On June 9, 2013, a former employee from another location posted to the Dave & Buster's Facebook page that “in a preemptive strike against Obamacare, Dave and Buster's cut the vast majority of their employees down to part-time last week ' . They called store meetings and told everyone they were losing hours (pay) and health insurance due to Obamacare ' ” Id.
• In August 2013, a senior vice president of human resources for Dave & Buster's was interviewed on The Dallas Morning News about the reduction in full-time employees at the company. The senior vice president stated, “We take all decisions that affect our team members' hours seriously. Like many companies, D&B is in the process of adapting to upcoming changes associated with health care reform.” Id. at 7.
• From August 2013 through February 2014, Plaintiff's hours were reduced from approximately 30-40 per week, with 30 hours per week qualifying as a full-time employee under the ACA, to 10-25 per week, with a corresponding drop in pay from $450-600 per week to $150-375 per week. Id.
• By letter of March 10, 2014, Dave & Buster's notified the Plaintiff that she no longer qualified for employer-provided health insurance, as her hours dropped below 28 hours per week, and the company plan document required at least 28 hours per week for eligibility for coverage for both the health and vision plans. Id.
• In a letter to Plaintiff's attorney dated June 23, 2014, the senior vice president, general counsel, and secretary of Dave & Buster's stated that the reduction in hours was part of a nationwide “program in 2013 intended to right-size the number of full-time and part-time employees in [its] stores.” Id. at 8.
• In a filing with the Securities and Exchange Commision (SEC) in September, 2014, Dave & Buster's noted that “[p]roviding health insurance benefits to employees that are more extensive than the health insurance benefits we currently provide and to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, will increase our expenses ' .” Id.
• Plaintiff further alleges that the class consists of approximately 100,000 employees across Dave & Buster's footprint of 72 stores nationwide. This estimate, as Plaintiff states in the Complaint, is based upon the number of hourly employees employed by Dave & Buster's.

The Complaint States a Claim for Relief Under ERISA

As stated above, Plaintiff filed a Complaint in the United States District Court of the Southern District of New York primarily alleging that her former employer, Dave & Buster's, discriminated against her and other employees in violation of Section 510 of ERISA by cutting employee hours to “save money” under the ACA. Plaintiff alleges that this cutting of hours and altering employee positions from full-time to part-time intentionally interfered with the Plaintiff's and other similarly situated employees' attainment of health insurance benefits, as prohibited under Section 510 of ERISA. Defendants in this case moved to dismiss the Complain,t arguing that Plaintiff's theory failed as a matter of law under ERISA's Section 510.

Section 510 of ERISA, as applicable, states as follows:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter, section 1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C. 301 et seq.], or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act.

29 U.S.C. ' 1140.

Thus, the issue presented to the district court for determination is whether “Plaintiff has alleged a legally sufficient claim for relief that Defendants' curtailment of her hours discriminated against her 'for the purpose of interfering with the attainment' of a right to which Plaintiff 'may become entitled' under the employee benefit plan of which she was a participant.” Marin v. Dave & Buster's, Inc., 2016 U.S. LEXIS 18086, U.S. Dist. Ct. SDNY, Feb. 9, 2016, at *3.

Defendants argue that employees have no legal entitlement to benefits that are not yet accrued, such as health benefits. Further, Defendants argue that to be entitled to a claim under Section 510, Plaintiffs “must show more than 'lost opportunity to accrue additional benefits.'” Id. at *5 (internal cites omitted). However, the district court stated that Plaintiff alleges that Defendants' behavior affected not only her future ability to attain benefits, but also her current right to attain benefits. Further, the district court found that the Defendants acted with an “unlawful purpose” by taking such adverse actions against Plaintiff. Id. at 5-6.

The district court noted that the critical element in a Section 510 case is intent. For example, terminating an employee's employment with the company to deprive him or her of continuing to participate in the health plan is a violation of ERISA's Section 510. Based upon the Complaint and the facts set forth therein, the district court found that “Plaintiff has sufficiently and plausibly alleged this element of intent.” Id. The district court denied Defendant's motion to dismiss, holding that “the complaint states a plausible and legally sufficient claim for relief, including, at this stage, Plaintiff's claim for lost wages and salary incidental to the reinstatement of benefits.” Id. at 6-7.

So What Now?

This is a case of first impression, so no previous guidance is available. If this case does not settle out, it will take some time to work its way through the court system before we get more guidance. However, it is critical to remember that the ACA is not the only federal statute that governs employer-sponsored health plans. When making design changes to health plans, employers must look to ERISA, the Internal Revenue Code (IRC), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA), among many others to make sure that any changes are not causing issues with other federal acts and thus inviting audits and/or litigation. Myopic changes to enhance, or save, the bottom line may cause more fiscal damage in the long run that an employer did not anticipate.

Jennifer S. Kiesewetter is the founder of Kiesewetter Law firm, PLLC in Memphis, TN. Her practice encompasses a wide range of regulatory compliance issues, and focuses on employee benefits law, qualified and non-qualified employee benefit plans; employee benefit plan regulatory compliance, and negotiations with the DOL and IRS. She can be reached at [email protected].