FAILURE TO PROVIDE COBRA NOTICE FOR TERMINATED EMPLOYEES CAN BE COSTLY
A recent court decision from the U.S. District Court for the Northern District of Alabama, Evans v. Books-A-Million, serves as a compelling reminder for employers to ensure that individuals eligible for benefits under the Consolidated Omnibus Budget Reconciliation Act receive timely notice of their COBRA election rights.
In Evans, the plaintiff, Tondalaya Evans, had repeatedly requested that her former employer provide her proper notice of her right to elect dental insurance coverage under COBRA. Ms. Evans was only previously enrolled in her employer's dental plan, not its health plan. Despite her requests, Books-A-Million failed to provide notice. After approximately eight months in which Ms. Evans had no dental coverage, she obtained dental coverage from a new employer. Fortunately, she incurred no out-of-pocket dental expenses during this eight-month period.
Although she suffered no actual damages, the Court awarded Ms. Evans $83,063.45 as a result of Books-A-Million's failure to provide proper notice. In so doing, the Court determined, based on evidence at trial, that Books-A-Million's failure to provide notice was intentional. The Court then exercised its discretion and awarded a penalty of $75 per day for the entire 18-month period in which Ms. Evans could have received dental coverage had she elected COBRA coverage. The per-day penalty, by statute, could have been as high as $110.
Notably, the Court could have elected to end the per-day penalty period as of the date by which Ms. Evans received comparable dental coverage with her new employer. In choosing to permit the penalty period to run the full 18 months of COBRA eligibility, the Court opined that the failure to provide notice deprived Ms. Evans of a meaningful choice between accepting her new employer's dental plan coverage and continuing coverage under COBRA.
In addition to the $75 per day penalty, the Court awarded attorneys' fees and court costs of over $45,000.
Employers are well advised to ensure their COBRA notification procedures are properly implemented to avoid liability similar to that suffered by Books-A-Million.