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Can an employer cut hours only to remove healthcare benefits?

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  • Can an employer cut hours only to remove healthcare benefits?

    Hello,

    I have been working 30 hours a week for a company in California for over a year (since Jan 2010), and the company pays 100% of employee benefits for full time (considered 30 hrs and up) employees. My fiancée and I were married in late March 2011, and a week after I added him to my insurance, I was told the company is in dire fiscal straits and my hours were being reduced to 24 hours in order to save money on insurance costs; I was told they would no longer be able to offer me this luxury. I inquired if this was an issue of performance; my employer insisted it had nothing to do with my work performance, they are very happy with me, it is merely a business decision to remove my benefits to save money.
    I understand that I am an at-will employee and they have the right to cut my hours whenever they want, but I would like to know if it is legal to cut an employee's hours solely to remove insurance benefits. Also, it was made very clear that the justification is a strained budget, but in the very same week I was told this, another employee was hired, under the exact same title (development assistant), at 29.5 hours a week. I was told she was being hired, in part to make up for the 6 hours that I would no longer be there. It is no coincidence she was hired just a half an hour shy of 30 hours, allowing the company to avoid paying her insurance benefits. Can they lower one employees' hours under the justification of a fiscal crisis while simultaneously hiring another, under the same job title, strategically shifting both around to avoid paying insurance benefits? The company is lowering my hours only to remove my healthcare benefits, right after I got married and added my spouse to my coverage- is there anything I can do about this?
    Thanks for your help
    Last edited by Cfrei; 04-17-2011, 11:25 AM.

  • #2
    I would like to know if it is legal to cut an employee's hours solely to remove insurance benefits.

    It is legal.

    If you and your spouse were on the plan when they reduced your hours, they must offer you COBRA. Also, you may be able to get UI benefits for the reduction in hours.

    Reducing your hours in order to avoid offering you benefits is a giant red flag that the company is not doing well. They have told you that things are "strained." You would be best served spending your time away from work looking for a new job.

    sorry - edited to add: if your employer is large enough to qualify for COBRA, you have experienced a qualifying event (reduced hours).
    Last edited by J.J. Brown; 04-19-2011, 08:07 AM.

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    • #3
      Yes, it's legal. They can reduce hours and hire as many employees as they wish on part-time status and avoid having employees eligible for group health participation.

      What would be illegal is to keep you at 30+ hours/week and yank your health insurance if the insurance certificate states that all employees who regularly work 30 or more hours per week are eligible.

      I hope your new husband is eligible for health insurance where he works (assuming he is employed.) If so, he should contact HR about adding you to his plan right away. (He only has 30 days from the date your hours were reduced to add you to his employer's group health plan.)

      Comment


      • #4
        I rarely disagree with Beth or JJ but I have always understood that to cut someone's hours FOR THE SPECIFIC PURPOSE of making them ineligible for benefits was a violation of ERISA.

        If the hours were cut for business reasons, for example if the employer only had 25 hours worth of work for the employee and that cut had the effect of making the employee ineligible, that's too bad so sad.

        But to cut the hours for no other reason than to make the employee ineligible for benefits is something I've always thought was a no-no. ERISA is such a huge and bulky law, though, I can't put my hand on where it says so. If it does.

        It probably can't hurt for the employee to place a call to the US DOL, which is the regulatory agency for ERISA, and ask them. If I'm wrong, I'd like to know it.
        The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

        Comment


        • #5
          There are some ERISA protections for employees who exercise their rights to benefits under pension plans - generally on things like suspiciously-timed layoffs right before benefits are vested, reaching retirement age, etc. Burden of proof is on the plaintiff, and the employer can be in big trouble if found guilty. But that is only for retirement plans, as far as I am aware. I don't know of anything that would change my answer to this OP's situation.

          Comment


          • #6
            I rarely disagree with Beth or JJ but I have always understood that to cut someone's hours FOR THE SPECIFIC PURPOSE of making them ineligible for benefits was a violation of ERISA.

            Misclassifying an employee so as to make them ineligible for benefits is prohibited (classifying employees as IC's for example) but I can't think of anything in ERISA (not that I'm an expert) that would prohibit an employer from cutting someone's hours to 29.5 or hiring an employee at 29.5 hours so as to keep them under the allowable limit would be unlawful - as long as those are actually the hours that they work and they are truly part-time.

            Contacting the DOL to inquire about this certainly wouldn't hurt though.

            Comment


            • #7
              Agreed with the above. Past that:
              - If you have not already done so, get a copy of the Summary Plan Documents and read them. Find out exactly what the rules for your company is.
              - Agreed with talking to DOL. End of the day, they are the only people whose opinion matters.
              - Past that, there is a Very Large Retailer who shall not be mentioned who is currently in court. Employees have claimed that their jobs were deliberately structured to ensure that they would not be eligiible for health care coverage. This is not new, and not in response to recent business cycles, but rather the way that the Very Large Retailer was always structured. The same company has been reporting as routinely giving it's employees documentation to apply for governmental services as part of their new hire package. Since there are still open court cases (health care only as far as I know), that would seem to imply that there is at least some unresolved issue here.
              "Reality is that which, when you stop believing in it, doesn't go away".
              Philip K. **** (1928-1982)

              Comment


              • #8
                I checked with some colleagues who provided the following:

                ERISA §510 states that “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 . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan”. This provision provides protection to employees from adverse action by an employer in order to interfere with the attainment of rights under ERISA or in order to stop a participant from availing himself/herself of rights under ERISA.

                In order for an employee to prevail under a claim of an ERISA §510 violation, he/she must prove that the employer’s adverse employment action was taken with the specific intent to interfere with the employee’s rights or benefits under an ERISA plan. This means that the loss of benefits was the motivating factor behind the adverse employment action, not merely a consequence of the action. As with other employment discrimination causes of action, if the employee can make an initial showing of a prima facie case for intentional interference, then the employer must prove that there was a legitimate, non-discriminatory basis for their action.


                The colleague who provided it agreed with Beth to a point that she has mostly seen this used with regards to pension plans, but there is nothing in the quote that limits it to pension plans.

                I truly think the OP needs to run the situation by the DOL.
                The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

                Comment


                • #9
                  Intent?

                  Although it looks fishy, you would have to prove (or the DOL discover) intent. Unless there are company memos, emails, etc. providing this, it might be hard to prove.
                  However, you were
                  told the company is in dire fiscal straits and my hours were being reduced to 24 hours in order to save money on insurance costs;
                  Your testimony could be evidence.

                  You have to be realistic also, if you called the DOL, then they contacted the employer to investigate, you might want to look around for a job elsewhere. Because you may be fired for some reason, or no reason at all.

                  Comment

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