Former Employee’s Recollection of “Christmas Card List” Was Insufficient to Defeat COBRA’s Small Employer Exception

As part of an employment discrimination lawsuit, a former employee claimed that her employer improperly discontinued her medical benefits in violation of COBRA. The employer asked the court to dismiss the claim, arguing that it did not have enough employees to be covered by COBRA. The employer provided tax documents, payroll registers, and deposition testimony as evidence that it employed no more than 19 employees at any given time. In contrast, the employee estimated that—based on Christmas card lists, office telephone lists, and personal knowledge—the employer had 25 or more employees, but she presented no supporting documentation. The court granted the employer’s motion to dismiss the claim, concluding that the employee’s recollection, based on documents she could not produce, was insufficient to create a genuine dispute of material fact in the face of the employer’s strong evidence to the contrary.

EBIA Comment: A group health plan is not subject to COBRA for any calendar year if the employer maintaining the plan employed fewer than 20 employees on at least 50% of its typical business days during the preceding calendar year. For purposes of this small employer exception, all employees must be counted—not just those covered by the group health plan—and the employees of related employers under common control must be included. Self-employed individuals, independent contractors, or members of a corporate employer’s board of directors are not counted (unless these individuals are also employees), and a special fractional rule applies for counting part-time employees. Employers claiming the small employer exception should be able to substantiate their employee counts with items such as tax documents, timesheets, payroll and personnel records, and workers’ compensation reporting forms. For more information, see EBIA’s COBRA manual at Section IV.C (“Small Employer Exception”).

Contributing Editors: EBIA Staff.