Employers know that the Consolidated Omnibus Budget Reconciliation Act (COBRA) requires them to send qualifying employees notice of their ability to continue group medical, dental and vision plan coverage at their own expense after separation from employment. Employers may not understand the possible penalties for failure to send COBRA notices. Earlier this month, the Eleventh Circuit Court of Appeals reminded employers that such failure can result in costly penalties.
Evans v. Books-A-Million involved a terminated employee who was on the company’s group dental plan, but failed to receive timely COBRA notice. She sued, and the district court determined that the company had intentionally failed to send the notice. It applied a $75 per day penalty contained in the COBRA statute, resulting in a cumulative fine of $37,950, plus attorneys’ fees and costs adding another $45,000 to the verdict.
The Eleventh Circuit upheld the penalty and costs, finding no abuse of discretion on the part of the judge in applying the penalty. The district court concluded that the employer had decided not to send the COBRA notice after the employee refused reassignment after returning to work from maternity leave.
Providing COBRA notice and allowing the employee to continue dental coverage under the group plan would have cost the employer little to nothing. Whether the failure to send COBRA notice is intentional or an oversight , the possibility of daily fines and attorneys’ fee awards should prompt employers to make sure systems are in place to avoid such failures.