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A federal court in Atlanta recently ruled that a national retail chain owed a former employee approximately $80,000 for failing to send her a COBRA notice.  The ruling was issued on August 8, 2014 in the case of Tondalaya Evans vs. Books-A-Million.

In the case, the U.S. Court of Appeals for the Eleventh Circuit affirmed the prior judgement of a trial court in Alabama that Books-A-Million intentionally failed to send Ms. Evans a COBRA notice related to her dental insurance coverage.

Accordingly, the trial court assessed a statutory penalty of $75 per day against Books-A-Million for the sixteen months during which the retailer had failed to send the required COBRA notice.  In addition, the trial court awarded Ms. Evans over $45,000 for her attorneys’ fees and litigation costs.  The Court of Appeals upheld each of these amounts and in fact ordered the trial court to reconsider awarding Ms. Evans additional litigation expenses.

Several aspects of this case should be noted by all COBRA covered employers and their professional advisers.

  • This case arose from Books-A-Million’s termination of Ms. Evans’ employment when she refused to accept a role reassignment within the company.  After she was fired, in addition to her COBRA related claim, Ms. Evans alleged that Books-A-Million had violated her rights under FMLA, the Equal Pay Act and Title VII of the Civil Rights Act.  The trial court threw out all of Ms. Evans’ non-COBRA claims (although the Court of Appeals ordered the trial court to reconsider her FMLA claim in its August ruling).  If not for the COBRA violation, Books-A-Million might have avoided all liability with regards to Ms. Evans’ termination.  Instead, because the company failed to send her a simple notice, they now owe her over $80,000.
  • The $80,000 judgement was based on a COBRA failure tied exclusively to Ms. Evans’ dental insurance coverage.  Many employers diligently follow COBRA’s requirements with regards to group health insurance but are neglectful with regards to ancillary coverages such as dental, vision, Health FSAs and HRAs. This case highlights the risks such employers face.
  • The trial court’s $75 per day statutory penalty amounted to less than half of the total judgment awarded against Books-A-Million.  Employers weighing the potential consequences of COBRA non-compliance must also factor in the additional potential liabilities resulting from attorneys fees, litigation costs and even uninsured health expenses that a trial court might assess.

Overall, this case reinforces every employer’s need for a complete COBRA compliance strategy.  For more information about evaluating your organization’s current COBRA processes contact Admin America via e-mail or toll free at 1-800-366-2961.

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