Dave & Busters and the Affordable Care Act
First let me tell you that the information in this publication is provided for informational purposes only and is not to be construed as legal advice or to suggest the suitability of action in any particular circumstance. Now onto beer, cheeseburgers, and Guitar Hero.
Dave & Busters, Inc. (D&B) is advertised as a family-friendly restaurant chain offering a sports-bar style setting for American food and arcade games. Like many large employers, over the course of the last several years D&B has taken to strict controls of employee hours worked to help avoid penalties under the Affordable Care Act (ACA)’s employer shared responsibility mandate.
The ACA, among other things, requires large employers to make a compliant offer of health care coverage to any employee who works an average of at least 30 hours per week. There is also a provision of the Employee Retirement and Income Security Act of 1974 (ERISA), which states in section 501 that an employer cannot take an action that effectively is limiting or “…interfering with the attainment of any right to which such a participant may become entitled to under the plan.” These two laws seem like two rams butting heads in the spring.
And now there’s a first-of-its-kind lawsuit by a group of D&B employees in federal district court alleging D&B violated ERISA section 510. At the core of the compliant is the allegation that D&B reduced employee hours in order to prevent employees from attaining the ACA average of hours, thus avoiding employee benefits costs. The employees lost not only income due to the reductions, but also health coverage. Sound similar to any business decisions that you may have made lately?
As of the date of this post, the case has survived a motion to dismiss, but is still in the early stages. Taking into account the recent history of the judiciary’s construction of ERISA section 510 in relation to staff scheduling, it seems unlikely that the employees will prevail on these claims. But more lawsuits of this kind will inevitably follow in the future.
What are some steps a large employer can consider in light of this, and what could D&B have done better? D&B over-communicated to affected employees that the direct cause of the hours reductions were the restrictions of the ACA. Perhaps they should’ve stuck to “business reasons.” Generally, it’s a best practice to make sure all employees are aware that there are many options for health care coverage to individuals, including the Marketplace Exchanges in each state. In many circumstances, employees can realize subsidies and premium cost reductions for purchasing such coverage at a reduced premium price.
eBenefits has the best solutions for your ACA reporting needs and deadlines. Learn more on how we can help your organization stay compliant.