By now, every employer should know whether it is a “large employer” that is subject to the ACA’s employer shared responsibility mandate, but might not know how to count hours of service to determine its employees’ full- or part-time status. Understanding how to identify hours of service is critical to complying with the ACA because large employers must offer coverage to all full-time employees, and full-time status is dependent upon each employee’s hours of service.
First, the obvious – an “hour of service” includes every hour for which an employee is paid for the performance of duties. Put another way, if you pay an employee for eight hours of work, then the employee incurred eight hours of service. For salaried and other non-hour employees, employers may calculate hours of service using the same method or, since most employers do not track non-hourly employees’ hours, either (1) credit the employee with eight hours of service for each day that the employee worked or (2) credit the employee with forty hours of service for each week that the employee worked.
Significantly, an “hour of service” also includes each hour for which an employee is paid for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity, layoff, jury duty, military duty or leave of absence. So, even if an employee is out sick for a day and uses available sick leave, that sick leave qualifies as an hour of service – but only if the sick leave is paid. By contrast, unpaid sick leave (and vacation time, layoff, etc.) does not constitute an hour of service.
All told, the simplest method of determining hours of service may be to simply look at each employee’s paycheck to determine the number of hours for which the employee received payment (regardless of what the employee did or did not do to earn that payment), and credit that number towards an employee’s hours of service calculation.
Questions? Suggestion for a future Obamacare FAQ of the Month? Please contact WS Attorney Peter E. Hansen at (262) 560-9696, or email firstname.lastname@example.org.