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Serving as a good reminder to employers about the importance of COBRA notices, a federal trial court in New Jersey recently awarded a former employee a statutory penalty for her former employer's failure to timely provide a COBRA election notice. (Fama v. Design Assistance Corp., D.N.J., No. 1:10-cv-02057, 4/20/12.)
Hopefully, the facts of this case will not sound familiar. The employee was terminated from employment with the company on November 30, 2008. Following her termination, she was erroneously left on the company's health and welfare plan until March 2009 when her coverage under the plan was retroactively terminated effective January 1, 2009. The employee did not receive a COBRA election notice until September 3, 2009, 293 days after the 44-day statutory notice period expired. The employee sought statutory damages, medical expenses, and attorneys' fees.
Employers are generally required to provide COBRA election notices to former employees and/or their qualified beneficiaries within 44 days of the qualifying event triggering COBRA coverage (termination of employment, a reduction in hours, death of a covered employee, divorce or legal separation from a covered employee, ceasing to be a dependent child under the terms of the plan, and a qualified beneficiary becoming entitled to Medicare). Failure to provide this notice can expose employees to a statutory penalty of up to $110 per day, as well as medical expenses incurred by the former employee/qualified beneficiary and attorneys' fees. However, courts rarely award the full daily statutory penalty of $110 per day.
In this case, the Court imposed a relatively small penalty of $10 per day for a total penalty of $2,930 and refused to award either medical expenses or attorney fees based on the specific facts of the dispute. In particular, the company reinstated the employee's health insurance after its initial revocation, and the employee could have submitted her outstanding medical expenses to the insurer following reinstatement. Yet, she failed to do so. In addition, the Court refused to award attorneys' fees because it saw the company's failure as limited in scope and without bad faith.
Thus, while damages in this case were relatively minor, the Court's decision serves as a good reminder that substantial damages can accrue for failures to comply with COBRA, and employers should regularly check their policies to ensure that COBRA notices are timely delivered.
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