Proposed Settlement in Dave & Buster’s ERISA Class Action Lawsuit

A $7.4 million settlement has been preliminarily approved in a lawsuit alleging Dave & Buster’s violated ERISA by reducing employees’ hours with the intent to interfere with providing group medical plan coverage to avoid costs under the ACA.

A settlement has been preliminarily approved in the lawsuit filed against Dave & Buster’s (D & B) by current and former employees alleging the company’s nationwide reduction of employees’ work hours was motivated by an intent to reduce costs for the company by restricting employee eligibility for the company health plan.

D & B has reportedly agreed to pay more than $7.4 million to workers whose scheduled hours were cut. Background The Affordable Care Act (ACA) became law on March 23, 2010. The ACA’s employer mandate requires employers with more than 50 full time employees to offer health insurance to 95% of their full-time employees or pay penalties. The ACA defines “full time” as working 30 or more hours a week. Prior to the ACA, many employers offered health insurance to employees who worked at least 35 or 40 hours per week. Those employers were faced with the choice of expanding the eligibility criteria of their health plans, or risking penalties under the ACA. The Employee Retirement Income Security Act of 1974 (ERISA) places certain duties on private employers that sponsor certain employee benefit plans. One of the protections under ERISA prevents anyone, including an employer, from discriminating against a plan participant for the purpose of interfering with a right or the attainment of a right protected by ERISA.

Eligibility for health insurance is protected by ERISA. Marin v. Dave & Buster’s, Inc. According to the lawsuit filed in May of 2015, in response to the ACA employer mandate, D & B decided to manage its employee work schedules in order to restrict the number of hours employees could work per week. It was alleged that D & B reduced employees’ scheduled work hours specifically to limit employee eligibility for health insurance for the purpose of minimizing costs imposed by the ACA.

There were two outcomes of the schedule reductions that became the subject of the lawsuit:

• Some employees that were enrolled in D & B’s group health plan lost eligibility
• Some employees that were eligible to enroll for D & B’s group health plan lost eligibility

The lawsuit was significant because it alleged that D & B violated ERISA when it chose to reduce its employees’ scheduled hours to avoid the ACA penalties, on the theory that intending to eliminate or prevent eligibility for the health insurance plan was prohibited interference under ERISA §510. Initially, D & B denied all the claims made in the lawsuit and tried to have the case dismissed. The Court denied the motion to dismiss and the parties proceeded with the litigation while negotiating a settlement. Ultimately, a settlement was reached and preliminarily approved by the court on December 18, 2018. A final approval hearing is scheduled in May of 2019.

As with most settlements, there is unlikely to be any admission of wrongdoing on the part of D & B or any bright lines established by the court. However, the D & B litigation and preliminary settlement serve as an important reminder of the ERISA fiduciary rules and potential consequences when these rules aren’t followed. While the employer mandate forced many employers to evaluate their plan eligibility rules to understand potential penalty exposure and risks, as the D&B case illustrates, careful consideration of the ERISA fiduciary rules should also be a part of this evaluation.

This shows that often times many employers are simply unaware of their obligations under the law. If you are unsure you should always get the advice of legal counsel and your professional benefit adviser. If you have any question, please feel free to reach out to me at (215)355-2121. While Total Benefit Solutions Inc. cannot provide legal advice we may be able to assist with finding the right counsel to assist or answer a simple general benefit question.

This document is designed to highlight various employee benefit matters of general interest to our readers. It is not intended to interpret laws or regulations, or to address specific client situations. You should not act or rely on any information contained herein without seeking the advice of an attorney or tax professional.