Under the Affordable Care Act (ACA), Applicable Large Employers are required to provide health insurance to all full-time employees. However, what is considered a full-time employee can be confusing. Generally, employees are considered “full-time” if they work an average of 30 hours per week or an average of 130 hours per month. However, the law only requires employers to count “hours of service” when determining full-time status.

The law defines an “hour of service” in two distinct ways:

- Hours worked: the most straightforward hour of service. Any time for which an employee is paid (or promised payment) for performing duties for the employer is considered an hour of service.

- Hours of paid non-work time: Any time for which an employee is paid (or promised payment) for nonperformance of duties (due to vacation, holiday, illness, layoff, jury duty, military duty, or leave of absence) is considered an hour of service.

Unpaid leave is generally not considered “hours of service” for ACA purposes. However, there are some special circumstances in which unpaid leave can count as hours of service. In these circumstances, an employer must negate the impact of this time on the employee’s measurement period (either by removing the time from the measurement or by imputing income for that time period):

- Unpaid leave under the Family and Medical Leave Act (FMLA)

- Unpaid Leave under the Uniformed Services Employment and Reemployment Act (USERRA)

- Unpaid leave under state jury duty laws

Employers should ensure that they are in compliance with the ACA hour rules by setting up a system to track applicable hours. There should be a separate bank for hours worked/paid leave and special unpaid leave.