In Rochelle v. City of Atlanta, the U.S. Court of Appeals for the Eleventh Circuit upheld a lower court’s decision that a terminated employee was not eligible to receive penalties for a COBRA notice violation because the employee suffered no harm due to this violation.
Law. Group health plan administrators must generally provide COBRA election notices to former employees and other qualified beneficiaries within 44 days of a qualifying event. COBRA qualifying events include loss of coverage due to: (i) termination of employment for reasons other than “gross misconduct”; (ii) reduction in hours; (iii) death of the employee; (iv) divorce or separation from the employee; (v) the employee’s becoming covered by Medicare; and (vi) ceasing to be a dependent child under the plan’s terms. Failure to provide the COBRA election notice within this time period can subject administrators to a penalty (currently $110 per day), at the discretion of the court, as well as the cost of medical expenses incurred by the qualified beneficiary.
Facts. An employee covered under her employer’s group health plan was terminated for a variety of reasons that apparently did not amount to gross misconduct. In return, the employee sued the employer for, among other things, failure to provide the required COBRA election notice.
The lower court found no basis for imposing penalties, noting that the employee had admitted that, under her group health plan, the employer “maintained her coverage, with no COBRA premiums, leaving her ‘better off than she would have been had it offered her COBRA coverage in a timely notice.’” The court found that imposing a penalty “would not serve the purposes of COBRA.” The employee appealed.
Appeals Court. The Eleventh Circuit ruled that, in exercising its discretion, a court should consider whether the failure to send the COBRA notice harmed the employee. However, the penalty “is meant to be in the nature of punitive damages, designed more for the purpose of punishing the violator than compensating the participant or beneficiary.” Here, the district court did not abuse its discretion in declining to impose penalties. The record supports the court’s findings that there was no evidence of bad faith and that the employee was not harmed by the lack of proper COBRA notification. The Eleventh Circuit therefore ruled that the district court properly considered the absence of harm as a factor in its decision.