It may be illegal for Employer to cut employee hours because of Obamacare



We have all heard in the news that many businesses claim that Obamacare (Affordable Care Act ) has forced them to lay off workers or cut employee hours.  Moody’s Investors Service has noted that there is a there is statistical lack of participation from the young and healthy new insured to balance out the older and sicker, it could lead insurers to increase rates.  Read more:

The possible reason for this is that many businesses in the retail and service industries have reacted to Obamacare but cutting hours of full time employees below the 30 hour threshold. Businesses that openly claim that Obama Care has forced them to cut their employees’ hours may run afoul of the law.  Section 510 of ERISA makes it illegal for employers to make employment decisions to prevent an employee from obtaining or keeping benefits.

Brief Background on ERISA

ERISA Section 510, 29 U.S.C. § 1140, provides:

“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 title, section 3001 [29 U.S.C. § 1201], or the Welfare and Pension Plans Disclosure Act, or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this title, or the Welfare and Pension Plans Disclosure Act.”

Courts all over the country recognize lawsuits brought under ERISA and the anti-retaliation provision of the statute.  “We have recognized that Congress enacted § 510 primarily to prevent employers from discharging or harassing their employees in order to keep them from obtaining ERISA-protected benefits.” Kowalski v. L&F Prods., 82 F.3d 1283, 1287 (3d Cir. 1996).

How ERISA Applies

Section 3(7) of ERISA defines a “participant” as an employee or former employee “who is or may become eligible for a benefit of any type from an employee benefit plan.” 29 U.S.C. § 1002(7).  The health insurance benefits afforded by Obamacare qualifies as a benefit plan under ERISA.

Burden of Proof

To recover under ERISA Section 510, a plaintiff must establish  in his or her lawsuit the following: (1) prohibited employer conduct (2) taken for the purpose of interfering (3) with the attainment of any right to which the employee may become entitled.  Full time workers that  had their hours reduced to part time or laid off by an employer that was seeking to avoid the expenses of providing health care benefits may have a basis to sue.  Some attorneys may disagree and may argue that Section 510 protections do not cover employees who did not previously have coverage but there is authority to the opposite.  See Inter-Modal Rail Employees Ass’n v. Atchison, Topeka and Santa Fe Railway Co., 117 S.Ct. 1513, 1515 (1997) (The plaintiff need not seek to protect a vested right to benefits and may challenge defendant’s interference with a prospective right to benefits.)

Prediction About Future Trends

Many employers will may not be concern about individual ERISA claims because the damages are not that expensive, however, class-action lawsuits for ERISA violations related to Obamacare is a reality.

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