Suspension without pay may be a COBRA qualifying event

Suspension may be a qualifying event under COBRA
Suspension may be a qualifying event under COBRA

Most HR people know that if an employee experiences a “qualifying event” under COBRA they must be sent the paperwork for continuation of insurance coverage.  According to the USDOL the qualifying events for employees are:

  • Voluntary or involuntary termination of employment for reasons other than gross misconduct
  • Reduction in the number of hours of employment

Unfortunately one employer did not equate suspension with a reduction in hours.

The case

According to attorney Maria Danaher of Ogletree Deakins a school board failed to provide notification to two teachers who had been suspended without pay, but not immediately terminated. Because they had not been terminated the school system did not think a “qualifying event” had occurred. According to Danaher, in Employees suspended without pay may be entitled to COBRA notice
, health care benefit coverage had continued for both Green and Richards, but the System had stopped paying any share of the premiums, without letting the suspended employees know. Both employees received bills after a period of time of over $4000 for unpaid coverage. As you can imagine they were unhappy and filled suit.
In court, according to Danaher, the school system claimed “that a ‘reduction in hours alone is not a qualifying event triggering the notice requirement,’ and further argued that such reduction in hours must be accompanied by a ‘loss in coverage’ to trigger COBRA notice. The plaintiffs argued that their reduction in hours actually triggered a loss in coverage (when they became responsible for all premiums) and, therefore, was a qualifying event.”
You might guess this, but the court agreed with the two teachers and the judge ruled that the suspension without pay was indeed a qualifying event. The judge set aside the bills and invoices sent to the two ex-teachers.
The lesson
When dealing with COBRA don’t assume that termination is the necessary qualifying event. If you reduce hours or suspend without pay you may also be exercising a qualifying event and COBRA notification notices must be sent. At least check with an attorney if you are not sure how to handle notification.

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