As these COBRA cases illustrate, COBRA compliance is a sticky issue! Here are three lessons from 2011 to keep you out of trouble in 2012!
COBRA Compliance Case #1: Notice the power of COBRA notifications.
Many COBRA disputes hinge on one critical factor: If and when the COBRA notice was sent, and if it can be proven. In fact, this was the deciding factor in the case of Brooks v. AAA Cooper Transportation*. In this case, the benefits specialist personally placed the employee’s COBRA election notice in the employer’s outgoing mail, and produced a signed and appropriately-dated copy of the COBRA notice. In another case, Hearst v. Progressive Foam Technologies, Inc.*, the post office helped prove that the former employee received timely COBRA election notice. In this instance, the employer’s COBRA TPA presented outgoing COBRA notices to a Post Office clerk, along with a manifest list naming each person receiving the COBRA notice. The clerk then verified and stamped the manifest to provide proof of mailing.
While these cases had positive outcomes for the employers involved, we tell all employers to go one step further by obtaining obtain a Certificate of Mailing from the U.S. Postal Service for all COBRA notices. This official record provides evidence that you sent the COBRA notice when you say you did.
COBRA Compliance Case #2: When is gross misconduct GROSS enough?
If an employee is terminated for gross misconduct, he or she may be ineligible for COBRA continuation benefits. But what exactly defines gross misconduct? It can be tough to prove! In the case of Shrimpton vs. Quest Diagnositics, Inc.*, an employee’s conviction as a Tier II sex offender (resulting in loss of employment) wasn’t “gross” enough for the court to approve denial of COBRA benefits because his conduct did not adversely impact the workplace. However, in the case of Berry vs. Frank’s Auto Body Carstar, Inc.* an employee’s profane and abusive language was deemed “gross” enough to deny COBRA benefits.
Here’s what the Department of Labor (DOL) says about the issue: The term "gross misconduct" is not specifically defined in COBRA or in regulations under COBRA. Therefore, whether a terminated employee has engaged in "gross misconduct" that will justify a plan in not offering COBRA to that former employee and his or her family members will depend on the specific facts and circumstances. Generally, it can be assumed that being fired for most ordinary reasons, such as excessive absences or generally poor performance, does not amount to "gross misconduct."
COBRA Compliance Case #3: When are 20 employees REALLY 20 employees?
As you’re aware, employers with 20 employees or more must comply with federal COBRA guidelines. But what if you have 19 employees during five months of the year, and 20 employees during the other seven? In the case of Franco-Santos v. Goldstar Transport, Inc.* the employer used payroll records to prove that at the time of the employee’s dismissal, the company had 19.4 employees who worked at least 50 percent of the time during the preceding year. Therefore, the employer qualified for the small employer exemption.
Here’s what the Department of Labor (DOL) has to say about the 20 employee COBRA compliance rule: “Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.”
Want to know more about COBRA compliance? Here are three ways to learn more:
- Subscribe to our free e-newsletter COBRATalk
- Register for COBRASchool classes
- Get our free report on COBRA outsourcing ROI
*Source: COBRA Connections #227, Wolters Kluwer CCH