Can a Failure to Hire Violate ERISA?
A recent decision of the federal district court for the southern district of Ohio raises interesting questions under Employee Retirement Income Security Act of 1974 (ERISA) that might also affect employer liability under the Affordable Care Act (ACA). The case involved a challenge by a former employee who was originally hired as a part-time pharmacist. As a part-time employee, the employee was not entitled to participate in the employer’s group health plan. The employee claimed that he sought a full-time position because he wanted to participate in the group health plan and to receive other benefits. He was never hired on a full-time basis and eventually resigned from his part-time position. He sued the employer, claiming that he was denied a full-time position because of his age and a medical condition that affected his nervous system, which would have led to significant claims under the health plan, if he had obtained coverage. He claimed that the employer had violated the Americans with Disabilities Act, the Age Discrimination in Employment Act, and ERISA. He also claimed that he was constructively discharged.
The case was before the court on a motion to dismiss the ERISA claim. When deciding such a motion, the court must accept as true all of the factual allegations in the lawsuit.
The former employee said that the employer had violated ERISA by refusing to hire him for a full-time position because of its concern about the substantial medical expenses that would have to be paid by the group health plan. The former employee alleged that he had had good reviews and had been encouraged to apply for a full-time position that had become available. He also claimed that the employer had recommended that he obtain additional certification in order to help secure a full-time position, and that he did so. Not surprisingly, the employer said that the employee had no ERISA claim because the employee was never a participant in an ERISA benefit plan, and thus could not have an ERISA claim. The court said that construing the facts favorably to the former employee, the former employee reasonably expected to become employed full-time. Because that was his reasonable expectation, he met the definition of participant, which under ERISA includes employees who “may become eligible to receive a benefit of any type from an employee benefit plan.”
This case pre-dates the ACA and the changes employers are making to comply with those requirements. The standard for full-time employment under the ACA is an average of at least 30 hours per week, and some employers are moving their employees up or down in hours to make certain they are on one side or the other of the 30 hour a week line. Those employees who have their hours cut and even, under this case, those employees who are hired for positions that are less than 30 hours a week and not considered for full-time employment, may be able to bring suit challenging the employer’s actions. Commentators discussing the ACA have been warning employers about the risks of restructuring job requirements, and particularly, of changing employee hours, if the effect is to eliminate coverage under an ERISA plan. Based on this decision, employers may wish to heed that warning.
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