It is pretty clear that COBRA is not available for employees that are terminated for gross misconduct. In my May 13, 2008 post, I looked at what constitutes "gross misconduct." So what kind of notice do we give to an employee and dependents if he termination is for gross misconduct? Do we have to give them any notice at all?
That was the issue in Berry v. Frank's Auto Body Carstar, Inc., recently decided in the Southern District of Ohio. The employee in this case was terminated after a fight with another employee. The facts pretty clearly supported a finding that the termination was justified. But the employee still brought an ERISA Section 510 claiming that the employer terminated him in retaliation for his son’s large health insurance claims. The employee also sued for failure to provide COBRA notices and election forms to him and his family members.
First, the court decided there was no Section 510 violation because the violent altercation was a legitimate and nondiscriminatory reason to discharge the employee. There was no evidence that it was a pretext for retaliation based on his son’s significant medical claims. After that, the Court looked at the "gross misconduct" component and clarified that this type of termination is not a "qualifying event" for the purposes of COBRA notice and election. The Court went on to clarify that when an employee is terminated for gross misconduct, the plan is not required to provide the terminated employee and his family a COBRA election. In effect, because there was no qualifying event, there is no requirement to provide a notice or election form.
Unfortunately, the Court did not get into what type of notification does have to be issued. Even though there is no qualifying event, there is still some obligation by the plan to provide notice that there would be no COBRA coverage. Ultimately, the determination that a qualifying event did not occur creates an issue that can be appealed, so the employee and his dependents had to at least be given some measure of notice that they have appeal rights. According to the DOL, the Notice of Unavailability of COBRA Coverage" comes into play when group health plans deny a request for continuation coverage or for an extension of continuation coverage, or when the plan determines the requester is not entitled to receive it. When a group health plan makes the decision to deny a request for continuation coverage from an individual, the plan must give the individual a notice of unavailability of continuation coverage. The notice must be provided within 14 days after the request is received, and the notice must explain the reason for denying the request.
So if you are planning to deny coverage because of gross misconduct, you still have to provide a notice. It should probably be provided within 14 days of the termination or at least 14 days from the date the employee asks for COBRA continuation information. And it has to provide for an appeal right. You may still be right about denying continuation coverage, but make sure you don't do so in a way that potentially creates some other cause of action (like failure to provide notice).