Employer Mandate

Under Internal Revenue Code section 4980H, an Applicable Large Employer may be subject to a penalty if it does not offer its full-time employees, and their dependents, minimum essential coverage that is affordable and provides minimum value.

Who are Full-Time Employees?

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An employer’s obligations under the Employer Mandate apply only to full-time, common law employees but not to independent contractors or employees leased from an agency.

Common Law Employee or Independent Contractor?

Status as a common law employee or independent contractor depends on several factors, such as the right to control and direct the individual’s work.  In general, a common law employee is one performing services for an employer who has the right to control what will be done and how it will be done.  If an employer has the right to control or direct only the result of the work but not how it is done, the general rule is the person is an independent contractor.

Full-Time Employee Defined

A full-time employee is one who averages at least 30 hours of service per week (or 130 hours of service per calendar month).  An hour of service includes:

  1. Each hour an employee is paid, or entitled to payment, for the performance of duties; and
  2. Each hour an employee is paid, or entitled to payment, for time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

An hour of service does not include hours worked as a bona fide volunteer for a government agency or tax-exempt organization, and whose only compensation is expense reimbursement or reasonable benefits and nominal fees.  Also, hours worked as part of a Federal Work-Study Program, or a substantially similar State program, are excluded from an hour of service.

For more information on the factors considered when determining common law employee status or the methods available for calculating an employee’s hours of service, see our June 2014 Briefings, which you can find below.


Additional Information
Health Care Reform: IRC §4980H Common Law Employees and Independent Contractors
This Briefing describes the factors employers should consider when determining whether an individual is a common law employee or independent contractor.
Health Care Reform: IRC §4980H Calculating Hours of Service
This Briefing outlines the methods available for calculating hours of service to determine the full-time status of employees for purposes of Internal Revenue Code section 4980H.
Health Care Reform: New Guidance on Crediting Hours of Service
The Internal Revenue Service issued guidance addressing when employers must credit hours of service for employees who are receiving disability payments or workers’ compensation benefits.
Methods for Determining Full-time Status