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Gross Misconduct and COBRA – When Can An Employer Try to Deny Coverage to Terminated Employee

Posted in Human Resources (HR) Compliance, Laws and Regulations

The Employee Benefits blog has a terrific post this week explaining the "Gross Misconduct" rule for COBRA Coverage.

For those unfamiliar with the lingo, The Consolidated Omnibus Budget Reconciliation Act (COBRA) (among other aspects) describes rights that employees have to continue their health insurance after their employment as been terminated (and for some other reasons too).    But there is an exception: When the employee is terminated for "gross misconduct", the benefits cease.  What does that mean? Well, the Act doesn’t define it.COBRA - Not cobra kai from Karate Kid

But the Employee Benefit blog shares some insight from one case about what it means. 

Three things are very important about this decision.  First, the court did not find that any “criminal” conduct was required to meet the “gross misconduct” definition.  Gross misconduct can be an intentional, deliberate, extreme and outrageous that “shocks the conscience.”  It can be “reckless or in deliberate indifference to an employer’s interests.”  …


Second, the employer has the burden of establishing the termination was for “gross misconduct.”  … It must be the primary reason, not one of many.


Finally, the employee and potential COBRA beneficiaries have to be notified of the determination that COBRA is not being offered because of the termination for gross misconduct.  

So what’s an employer to do? The blog suggests some thoughts, but I’ll share some general observations as well.

1. Document, document, document.  If an employer is going to claim "gross misconduct", there ought to be ample documentation supporting the decision.

2. Make sure the termination documents reflect the actual reason and the reason amounts to "gross misconduct".  Meeting this standard is difficult and courts will understandably look to any reason to deny it. Having a letter of termination that merely states the employee was let go for "performance" reasons, isn’t going to cut it. 

3. Follow policies and COBRA to the letter. The requirements, for example, about notification under COBRA are strict. Missing deadlines or not providing information may provide the escape hatch that might not be available otherwise.

And as always, seek some legal guidance on this. Denying COBRA nowadays is rare; if an employer does try to use that provision, it can be assured that a fight about coverage may not be too far behind.

  • http://www.hayberlawfirm.com Richard E. Hayber

    I wonder why an employer would make this claim, even if there might be grounds. Does it cost the employer anything to send the notice? Doesn’t the employee have to pay the entire premium? Further, wouldn’t making this claim set the employer up for a defamation claim if his claims of gross misconduct were proven to be untrue?