As if the penalties from the IRS and Department of Labor aren’t enough to worry about, we can’t rule out the potential for private civil action in either state or federal court. There have been numerous cases in which a participant was entitled to monetary damages due to errors in the compliance process. Here are a couple of examples:
In Amin vs. Flagstone Hospitality Management: An employee sued its former employer for multiple grounds based on his termination. The employee claimed that the employer omitted a single word from the mailing address on his COBRA notification.
In this case, the employee was entitled to relief, because the courts ruled that the employer did not have a completely accurate mailing address because the word “North” on the street name was missing (yes, that’s all that was missing). In addition, the mailing book that the employer kept to track COBRA mailings did not include a zip code.
This case resulted in over $130,000 in damages to the employee.
In Misna vs. Unitel, an employee resigned, and several days afterward, the employer terminated employment during the notice period claiming gross misconduct. The employer did not provide COBRA documentation to the former employee, and the spouse of this former employee incurred some significant medical expenses in this timeframe.
The courts determined the following:
- The termination was voluntary as the letter of resignation was turned in prior to the last day worked, and that this was not a gross misconduct situation
- The qualifying event occurred on the last day worked, and the ex-employee and family were eligible for COBRA
- The award for this case was over $130,000 and included over 6 years of daily fines for COBRA notification violation, totaling over $45,000.