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June 18, 2024
Classify Part-Time, Full-Time Employment to Determine Benefits

by Margaret Lohmann

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Many employers offer benefits to their full-time employees that they don’t offer their part-time employees. But when employees work part-time some weeks and full-time other weeks, determining their status for benefits purposes can be tricky. Fortunately, we have some helpful advice.

Define Your Terms

Determining whether a variable-hour employee qualifies for benefits depends on how you classify part-time versus full-time employment and how state and federal law defines such work. You should internally define part-time and full-time employment and consistently apply such definitions, as well as follow state and federal laws related to employee benefits.

For example, federal law requires “applicable large employers” (employers with at least an average of 50 full-time employees) to offer full-time employees medical benefits. The Internal Revenue Service (IRS) and the Affordable Care Act (ACA) define a full-time employee as an individual working at least 30 average hours per week or 130 hours per month.

This determination is generally made based on a monthly measurement method (MMM). However, employers that have variable-hour employees can use a lookback measurement method (LBMM) instead.

LBMM vs. MMM

When using the LBMM, you would look back at a defined measurement period of at least three, but no more than 12, consecutive calendar months to see whether an employee averaged at least 30 hours of work per week. If you determine the employee worked full-time during the measurement period, the employee should be treated as full-time during a subsequent “stability period” that lasts at least six consecutive calendar months and is no shorter than the measurement period.

If the employee remains employed—even if their hours drop below 30 a week—they must receive full-time benefits during the stability period for you to avoid a potential penalty.

The MMM is a straightforward month-to-month approach whereby an employee who works at least 130 hours per month in any given calendar month is considered full-time. This approach isn’t best for employees whose work regularly fluctuates above and below 130 hours a month.

The MMM has no measurement period like the LBMM, but its rules provide a onetime “limited nonassessment period” for three full calendar months, starting with the first full calendar month in which the employee is otherwise eligible for medical coverage.

For example, an employee could work 120 hours in January, 140 hours a month from February to May, 125 hours a month from June to September, and 135 hours a month from October to December. Full-time work in February triggers benefits eligibility, and the employer must offer medical coverage by May 1 to avoid potential penalties for February-to-May work. If the employee doesn’t work full-time from June to September, the employee can be dropped from active coverage.

Coverage must be offered again for October to December. However, no limited nonassessment period will be available because it's only available once per employment period. This highlights how the MMM can be a poor measurement tool for variable-hour employees.

Be Consistent About Consistency

If you internally define part-time and full-time status and accompanying benefits, you should establish what it means for an employee to be “consistently working.” You must also determine whether employees who surpass part-time hours work frequently enough to be considered full-time workers. Consider questions such as whether there’s an anticipated end date to an employee’s extended hours, whether extended hours are seasonal, and whether their period of extra hours worked can be clearly defined.

For example, if a part-time employee works substantially more hours one week to complete a project but doesn’t consistently exceed part-time hours, that employee likely can’t be classified as a full-time employee entitled to benefits.

Bottom Line

You must frequently evaluate whether part-time employees are consistently working hours that satisfy full-time employment. Determinations should be uniformly applied, whether based on internal or state and federal guidance.

Margaret Lohmann is an associate at Steptoe & Johnson PLLC in Bridgeport, West Virginia. A former Steptoe & Johnson summer associate, Maggie currently focuses her practice on employment litigation. She can be reached at 304-933-8344 or maggie.lohmann@steptoe-johnson.com.

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