Employee Eligible for COBRA Despite Termination for Abandoning Patient

A medical clinic employee was terminated after telling a patient to remain for 30 minutes following an injection to ensure no adverse reaction, and then—forgetting the patient was still there—departing for the day, leaving the patient alone in an empty clinic. The clinic did not provide the employee with a COBRA notice, although it paid for her health coverage for five months, after which she qualified for Medicaid. The employee filed suit, claiming, among other things, that the clinic had violated COBRA by failing to send her a COBRA election notice, and seeking statutory penalties for the failure. The clinic responded that the employee was fired for gross misconduct and, therefore, did not have a qualifying event requiring a COBRA notice.

The court rejected the clinic’s contention that the employee was ineligible for COBRA, concluding that one isolated incident of negligence did not rise to the level of gross misconduct. However, the court also determined that the employee had not provided evidence of actual damages. She had not paid any premiums, experienced a gap in coverage, or incurred any medical expenses that were not covered by Medicaid but would have been covered under the clinic’s plan. Furthermore, the clinic had continued her health coverage at no cost to her. The court declined to assess statutory penalties against the clinic, citing both the absence of harm to the employee and the lack of evidence of a pattern or practice of COBRA violations by the clinic.

EBIA Comment: If a covered employee is terminated for gross misconduct, the employee and any covered dependents lose the right to elect COBRA coverage, and the employer is not required to provide an election notice. But as this case illustrates, determining whether the gross misconduct exception applies is difficult, because the COBRA regulations do not define gross misconduct and courts have not agreed on the standard to apply. Because gross misconduct terminations tend to involve disputed facts, there is an increased risk of a costly court challenge. While the court in this case declined to assess penalties, an employer that is wrong about gross misconduct can face not only an award of retroactive COBRA coverage, but also an imposition of penalties of up to $110 per day for failure to provide the COBRA election notice that would otherwise be required. Given this uncertainty, we generally recommend that an employer avoid denying COBRA coverage due to gross misconduct except in situations involving the most flagrant conduct that clearly constitutes a substantial and willful disregard of the employer’s interests. Even then, legal counsel and any insurer should be involved in the decision. For more information, see EBIA’s COBRA manual at Sections VII.B.5 (“Qualifying Events: Gross Misconduct Exception”) and XXV (“Consequences of Failing to Comply With COBRA”). You may also be interested in our upcoming webinar “Learning the Ropes: An Introduction to COBRA Continuation Coverage” (live on 7/31/19).

Contributing Editors: EBIA Staff.