Federal Court Denies Motion to Dismiss ERISA Proposed Class Action
Author: Marta Moakley, XpertHR Legal Editor
March 4, 2016
A federal court has denied an employer's motion to dismiss a proposed class action lawsuit, Marin v. Dave & Buster's, Inc. The lawsuit, which was filed in the United States District Court for the Southern District of New York, alleges that the employer violated the Employee Retirement Income Security Act (ERISA) by reducing workers' hours - and thereby rendering the workers ineligible for health benefits - in anticipation of higher costs under the Affordable Care Act (ACA).
The ACA's employer shared responsibility provisions (also known as the employer mandate) apply only to applicable large employers. In order to avoid a penalty, an employer must offer coverage that provides minimum value and is affordable to full-time employees. Full-time employees are generally defined as those who work at least 30 hours per week.
The employee-plaintiff in the case alleged that the employer held two meetings in 2013 in which the employer's representatives told employees that compliance with the employer mandate would result in over $2 million in costs. Therefore, the workforce would be reduced from over 100 full-time employees to approximately 40.
ERISA § 510 protects an employee from discrimination "for the purpose of interfering with the attainment" of a right to which he or she may become entitled under the benefit plan in which he or she is a participant. The employee alleged that the employer's decision to reduce her hours in anticipation of higher costs under the ACA violates § 510.
The employer countered that the employee had no entitlement to the benefits, and that she cannot make a claim on future benefits that had not accrued.
However, the court rejected the employer's arguments and ruled that the employee had adequately stated a claim under § 510. Citing other cases, the court determined that the employee had sufficiently alleged that the employer had specifically determined to interfere with benefits. The court took into consideration that, due to the employer's actions, the employee had not only lost future benefits, but also current benefits as a plan participant.
Because a number of large employers reassessed staffing needs once the ACA's employer shared responsibility provisions came into effect, subsequent developments in the case (including whether or not a class is certified) should continue to be of interest.