Contributed by
the attorneys who write Alabama Employment Law Letter
Lehr, Middlebrooks, Price & Proctor, P.C.
Wouldn''t it be
nice if someone else could just take care of all those COBRA notices for you?
Maybe you''ve heard there are some companies out there that will mail out the
required notice forms when, for example, an employee is terminated. Couldn''t
you just let those companies worry about those details (for a fee, of course)
and not have to worry about COBRA anymore?
"No" is
the resounding answer an Alabama federal appellate court gave recently, as it
upheld a penalty of $10,800 imposed on an employer for failure to provide a
required COBRA notice to an ex-employee.
Run-of-the-mill
facts
Ivory
Scott worked as a salesman for Suncoast Beverage Sales. He had several
disciplinary notices and was ultimately terminated. At his termination meeting,
the company had him initial a form that said COBRA health insurance information
had been discussed with him. According to Scott, a Suncoast employee told him
that COBRA information would be mailed to him, but it never was.
The wrinkle
Suncoast
had entered into a contract with a company called First Health. The contract
stated that First Health would send out all the COBRA notices for Suncoast. So
if First Health failed to send out the required notice, that wasn''t the
employer''s problem, was it? Turns out that it was.
The law
As you
know, COBRA generally requires group health plans to provide continuation of
health coverage and provide specific notices of employee and beneficiary rights
and obligations when coverage is going to end because of "qualifying
events," such as an employee''s termination. There''s also some law out
there that says if an employer sends out a required notice in "good
faith" and in a way that should reach the ex-employee, then it has done
what COBRA requires.
So Suncoast argued
that by telling First Health that Scott was terminated and expecting First
Health to do what it normally did in that situation - send out the required
notice - it had done all it needed to do to comply with COBRA.
Our appellate
court specifically rejected that argument and said you can''t avoid COBRA
liability by contracting away your responsibilities under the Act. The
responsibility to comply with COBRA stays with the employer.
The cost
Scott
was awarded $10,800 for Suncoast''s failure to send out the COBRA notice. This
figure represented $20 per day for the 540 days he didn''t receive his COBRA
notice. The company was actually kind of lucky; the Act authorizes a penalty of
up to $110 a day.
Suncoast argued
that Scott shouldn''t get any money because the evidence revealed he would have
been unable to afford the COBRA premiums even if he had received the notice.
The court said it
wasn''t necessary for Scott to show that he actually lost out on an opportunity
he would have used; he didn''t have to prove he would have used the COBRA
insurance to get the penalty money. The penalty, the court said, was more for
punishing Suncoast than it was for compensating Scott. Scott v. Suncoast
Beverage Sales, Ltd. (11th Cir. 2002).
The lesson
Suncoast
could have saved $10,800 (plus all the money it took to litigate the case) by
making sure a COBRA notice was sent to Scott. It''s that simple. In fact, it
could have saved that money by having a record that it took the necessary steps
to send the notice to Scott, even if he never actually received the notice.
Some things to
remember about COBRA:
Copyright 2002
M. Lee Smith Publishers LLC. This article is an excerpt from ALABAMA EMPLOYMENT
LAW LETTER. The Alabama State Bar requires the following disclosure: "No
representation is made that the quality of the legal services to be performed
is greater than the quality of legal services performed by other lawyers."