Illinois
In a recent COBRA case, an Illinois employer went above and
beyond to mend its ways. It did not matter. The court imposed a
penalty anyway.
The case of Fama v. Design Assistance Corporation is an
instructive lesson for all who are involved with COBRA
administration. Mistakes are easy to make but often are hard to
forgive. The employer strayed from the COBRA path in at least three
ways:
1) Notice failure. When the employee allegedly
abandoned her job, the employer failed to send a COBRA election
notice. The election notice was sent about 11 months after the
qualifying event.
2) Incorrect reason for failing to offer COBRA.
When the ex-employee's attorney pointed out the notice failure, the
employer's initial response was that she was terminated for cause.
Wrong answer. The only permissible excuse in this case would have
been gross misconduct, and job abandonment does not qualify.
3) Taking on the DOL. The employer initially
ruled that her COBRA coverage was not eligible for the ARRA
subsidy, even though the employer initiated the termination. The
DOL intervened, and the ARRA subsidy was applied.
Eventually, the employer reinstated coverage retroactively at no
cost to the former employee. This step was more than COBRA
requires. The district court concluded that the employer did not
act in bad faith or with malicious intent. However, it awarded a
$10 daily penalty for the notice failure, leaving open the
possibility of awarding attorney's fees and court costs. (It could
have been worse: The maximum daily penalty is $110). Of course, the
employer has already had to spend some 18 months defending a case
that could have easily been avoided.
