COBRA Notice Litigation Resulting in Big Dollar Claims
Can you imagine something as simple as a COBRA Notice missing a few technical requirements resulting in an employer needing to pay a 6 or 7-digit damages award? That is happening in Florida. Employers in and out of Florida should pay attention to this news, as what doesn’t start in California often starts in Florida.
There have been a flurry of cases in Florida over the past year. In these cases, a COBRA notice is provided to covered persons experiencing a qualifying event, albeit sometimes late. Yet the notice is alleged to be missing key details that are required by the COBRA regulations, such as the name and contact information of the Plan Administrator or the address for the remittance of payments. Much of the missing content is called for by the Department of Labor’s model notices. Yet, in our experience, these fields are often unknown or overlooked and therefore omitted.
Because of these deficiencies, the Plaintiffs allege they are entitled to the statutory penalty. There are few instances in the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that a plaintiff can receive cash damages. ERISA typically provides for a “make whole” recovery – providing the benefits that were due. However, the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), which amended and supplemented ERISA, included an avenue under ERISA Section 502(c)(1) for qualified beneficiaries to receive up to $110 per day per person for plan administrator’s failure to provide the required initial COBRA notice or the COBRA election notice. Plus, the court has the discretion to award legal fees under ERISA Section 502(g)(1).
So, although $110 per person per day does not sound terribly bad, imagine a class of qualified beneficiaries consisting of 100 people who lost their coverage as part of a reduction in force (RIF) 2 years ago and whose COBRA notices were arguably deficient. That math is $110 x 365 days x 2 years = $80,300. Now imagine several RIFs over the course of several years or simply adding a zero with a failure affecting 1000 or more people. This is how the numbers get so big. Plus, when you add in the prospect of receiving a legal fee award, you have a stimulus.
There are steps employers can take today to mitigate the risk of being the next target for this litigation. Simply using the Department of Labor’s model notices often is not enough if they are incomplete or not provided timely. We recommend employers ensure they understand what is required, including knowing what notices are needed and when, examine their notices and their administrative practices for conformity with the regulations, and know compliance soft spots so they can proactively protect themselves against a claim.