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Benefits

Court Compels Arbitration of COBRA Claim

EBIA  

EBIA  

Staugaeno v. Flatrock, Inc., 2021 WL 4133742 (E.D. Mich. 2021)

Available at https://www.govinfo.gov/content/pkg/USCOURTS-mied-2_20-cv-13329/pdf/USCOURTS-mied-2_20-cv-13329-0.pdf

As part of a lawsuit for wrongful termination, a former employee alleged that her employer failed to provide a COBRA election notice after her termination. Asserting that the employee’s claim was subject to arbitration pursuant to the terms of her employment application, the employer asked the court to dismiss the claim and compel the employee to arbitrate. The employee argued that the language in her employment application requiring arbitration for “a dispute [that] arises concerning [her] employment with and/or termination from the Company” was too narrow to cover her COBRA claim because her COBRA claim was not “a dispute concerning her employment or her termination.”

The court rejected the employee’s argument, noting that most courts have held that disputes arising under ERISA, including COBRA claims, are subject to arbitration under the Federal Arbitration Act. Explaining that “but for Plaintiff’s employment and termination, she would not have a right to COBRA benefits,” the court concluded that the COBRA claim was subject to the arbitration agreement and dismissed the case.

EBIA Comment: While courts generally enforce arbitration agreements with respect to former employees’ COBRA claims, they are less consistent when enforcing such agreements as to covered spouses and family members. For example, one court recently held that an employer could not compel a spouse to arbitrate claims that were premised on his own statutory COBRA rights (see our Checkpoint article), but other courts have held that COBRA claims of an employee’s spouse are “derivative” of the employee’s claims and are likewise subject to any arbitration agreement. For more information, see EBIA’s COBRA manual at Section XXV.H (“Procedural Issues in COBRA Lawsuits Under ERISA”) and EBIA’s ERISA Compliance manual at Section XXXIV.J.2 (“Mandatory Arbitration May Not Be Binding or Require Cost-Sharing”). You may also be interested in our upcoming webinar “Claims and Appeals Rules for Group Health and Disability Plans: Translating Rules into Best Practices” (live on 10/7/2021).

Contributing Editors: EBIA Staff.

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