Detroit Business Law » Employee Benefits

COBRA Coverage and Termination Due to Gross Misconduct

Editor — Tue, 13 Apr 2010 18:51:25 +0000

Under The Consolidated Omnibus Budget Reconciliation Act (“COBRA”), employees and their families are not entitled to COBRA coverage under the employer’s group health plan when an employee is terminated for “gross misconduct.” There will be no qualifying event under COBRA unless the voluntary or involuntary termination of employment is for reasons other than gross misconduct.

However, the term “gross misconduct” is not specifically defined in COBRA or in regulations under COBRA. Therefore, employers should be very cautious about withholding COBRA benefits when an employee is terminated for misconduct. Whether a terminated employee has engaged in “gross misconduct” is a determination for the Courts and will depend on the specific facts and circumstances of the situation. Employers should be aware that there can be serious consequences for failing to comply with COBRA if an employee’s misconduct is not deemed “gross misconduct”.

There are certain offenses that clearly constitute gross misconduct, and have been deemed so by Courts. Generally, it can be assumed that being fired for most ordinary reasons, such as excessive absences or generally poor performance, does not amount to “gross misconduct.”

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm.

What Happens With Employer-Provided Housing When An Employee Is Fired Or Quits?

Kevin Demorest, Legal Assistant — Fri, 19 Jun 2009 10:19:44 +0000

It is not uncommon for employers to provide housing to employees as part of their compensation package. This frequently occurs in the hospitality, multi-family housing, and construction industries. Employers must be wary when an employee is terminated or resigns, because complications can arise when the employer attempts to oust the former employee from company housing. The employer cannot simply change the locks or physically remove the employee from the premises without a Court Order. The employer must follow the same standard eviction procedures used for other landlord-tenant cases.

If the employer does not follow standard eviction procedures, he or she could be liable for violating Michigan’s Anti-Lock Out Statute, which states that the wrongly evicted employee “shall be entitled to recover the amount of his actual damages or $200.00, whichever is greater, for each occurrence and, where possession has been lost, to recover possession.” In other words, the employer would be responsible for paying damages and giving the property back (at least until the correct eviction procedure has been followed).

To avoid this liability, the employer should provide the discharged or resigned employee with a notice to quit. If the former employee does not leave after the notice to quit is provided, then the next step is to file a complaint for possession of the premises in the local District Court.

The Ins & Outs of the Temporary COBRA Subsidy

detroitlaw — Wed, 13 May 2009 15:30:51 +0000

On February 17, 2009, in an effort to ease the financial burden on so many Americans who have been recently laid off, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”).

Under ARRA, employees “Involuntarily Terminated” from their employment (and other qualified beneficiaries) anytime from September 1, 2008 through December 31, 2009, and who are eligible for and elect COBRA, may receive a federal government subsidy to help pay for their COBRA premiums. They will be able to receive this federal government subsidy for up to 9 months. Employees and other qualified beneficiaries will only have to pay 35% of their regular COBRA premium, with the other 65% being paid by the federal government.

“Involuntary Termination” includes layoffs, failure to renew employment contracts, termination for good cause by employer action, or forced retirement packages, if after the offer period a certain number of remaining employees in employee’s particular group will be terminated. “Involuntary Termination” does not include voluntary resignation, divorce, dependent child ceasing to be dependent, death, or termination due to gross misconduct.

Employers are required to mail all eligible former employees (and other qualified beneficiaries) one of four different notices to notify them of the premium reduction and other rights provided to them under ARRA, including a second opportunity to sign up for COBRA. Each of the four types of notices is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions.

COBRA-eligible employees who lost their jobs between September 1, 2008 & February 16, 2009 (and other qualified beneficiaries) who either didn’t elect COBRA when offered, or elected COBRA but discontinued COBRA coverage have another chance to sign up for COBRA and get the reduced premium. Employers were given a deadline of April 18, 2009 to send all former employees in this particular group a letter informing them of their second chance to elect coverage.

To summarize, employers must do the following to comply with ARRA: (1) Identify the eligible individuals; (2) Calculate and report the subsidy to employees and the federal government; and (3) Provide the proper notice to all eligible individuals.

Employers should take note that if a qualified beneficiary becomes eligible for other health care coverage, the COBRA subsidy ceases. It is not necessary for the qualified beneficiary to actually obtain other health care coverage to lose the subsidy. All that is necessary is that the qualified beneficiary be eligible to receive the other health care coverage.

It is important that employers be careful to fully comply with the requirements of ARRA, as failure to apply the subsidy can mean tax penalties. Likewise, employees should take care not to miss an opportunity to receive the subsidy.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.