Can Staples manage employee hours to avoid offering ACA required health coverage?
The spotlight has been on Staples in recent weeks due to accusations that the company is purposefully reducing employee hours to avoid offering health coverage per the Affordable Care Act (ACA). The ACA requires employers with 100 or more full-time employees to offer health coverage to full-time employees, defined as those working 30 or more hours per week.
Staples employees have voiced frustration against a long-standing company policy that states part-time employees cannot work more than 25 hours per week. Employees allege that strict enforcement of this policy clashes with the ACA’s employer mandate. Surely the intent of the ACA is not to drive employers to reduce employee’s hours, however, there may be temptation to do so. Are policies which enable an employer to skirt the law – whether intentionally or not – legal?
Employers that purposefully manage employees to work under 30 hours per week in order to avoid offering health coverage may be in violation of ERISA Section 510 which states, “it shall be unlawful for any person to…discriminate against a participant or beneficiary…for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.”
Staples has denied that they are reducing employee hours to avoid offering health coverage per the employer mandate. However, an employee’s claim of violation under Section 510 depends on what that employee is told.
- Scenario 1: Let’s assume that a manager tells an employee that they can no longer work more than 25 hours “because of Obamacare.” The employee has a viable case against the employer for violation of ERISA Section 510 since the manager, acting on behalf of the employer, has informed the employee that the company is taking direct action to interfere with an employee’s entitlement to an employee benefit plan.
- Scenario 2: Now let’s assume that the manager informs the employee that he or she cannot work more than 25 hours due to “a long-standing company policy on part-time work.” The employee can still argue that the strict enforcement of this policy is in reaction to new ACA regulations, but the case against the employer for violation of ERISA Section 510 is significantly weakened.
Only the courts can decide what practice is in violation of ERISA. In the meantime, employers should take steps to protect themselves against claims of ERISA violations. Employers should have current plan documents in place that clearly outline the company policies on part-time work, scheduled hours and benefit eligibility. WGA recommends that employers also maintain a current “wrap document” that meets ERISA standards. Should the employer make any policy changes, the “wrap document” should be updated accordingly and a plan amendments should be distributed timely to employees.
More than ever, employers will need to be very conscious about the messages they send and policies they enforce as it pertains to work schedules and benefit eligibility.
About the Author
Kate O’Sullivan is a Client Service Manager at WGA in the Employee Benefits Group. She is responsible for servicing a number of small, mid-size and large accounts, and works on the WGA Health Care Reform Committee.