Health Care Reform: Beware of Litigation Risks

by Parker Poe Adams & Bernstein LLP
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As almost all employers know, one of the many requirements of health care reform is the so-called employer mandate. The employer mandate generally provides that large employers who fail to offer their full-time employees affordable health coverage that provides minimum value may potentially face significant penalties. For purposes of health care reform, a full-time employee generally is an employee who is employed on average at least 30 hours per week. As the costs associated with providing health coverage to employees continue to rise, many employers have questioned whether to re-align their workforce and/or limit an employee’s hours to ensure certain employees are not considered full-time. A Federal judge in the Southern District of Ohio recently issued an opinion that sheds light on the potential litigation that may arise from such a decision.
 
In Sanders v. Amerimed, a part-time pharmacist alleged that he was not promoted to a full-time position in order to avoid having to provide him with benefits under the company’s group health plan. Among other causes of action, the employee sued the company for discrimination under Section 510 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  ERISA Section 510 provides, in relevant part, “[i]t 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 provisions of any employee benefit plan.” The company argued that the employee was not permitted to sue under ERISA Section 510 because the employee was not a participant or beneficiary in the group health plan.
 
ERISA defines “participant” as “any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan.”  (emphasis added). The Supreme Court has stated that the language “may become eligible” means “a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or (2) eligibility requirements will be fulfilled in the future.” Relying on this language, the district court found that the employee was a participant for purposes of ERISA Section 510. Notably, the court based its decision on the following facts alleged by the employee:

• The employee applied for several different full-time positions with the company while he was a part-time employee.
• The company accepted the employee’s applications for the positions and interviewed him for at least one of the positions.
• The company recommended that the employee obtain an additional certification to help him secure a full-time position (and the employee did).
• As an existing employee, the employee’s work was already known to the company, and the company had given him good performance reviews.
• The company had specifically told the employee about the full-time position and explicitly stated that the employee would be considered for the job.

Note that it remains unclear at this stage whether the employee will ultimately prevail – this court decision simply means that the employee had standing to proceed with the litigation. Other courts may be less inclined to extend ERISA Section 510 claims to such employees, depending on the facts. Nonetheless, this case may be indicative of one type of claim employees may begin to make as the employer mandate becomes effective in 2015 and employers attempt to (or may be perceived as attempting to) re-align their workforce and/or limit an employee’s hours.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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