Terminating the Employment Relationship

5. D ENIAL OF B ENEFITS B ASED ON G ROSS M ISCONDUCT

a. Defining Gross Misconduct An employee fired for "gross misconduct" is not entitled to COBRA benefits. 420 Keep in mind that if an employer denies COBRA coverage based on what it perceives as gross misconduct, and the ex-employee challenges the denial, the employer will have the burden to prove that the employee engaged in gross misconduct resulting in the employee’s termination. 421 There are no regulations defining “gross misconduct” under COBRA, and case law addressing the subject is sparse. In general, courts have found that mere “negligence or incompetence” does not rise to the level of gross misconduct. 422 Courts have also refused to find gross misconduct where the misconduct was inadvertent or sporadic. For example, a forgetful employee who occasionally neglects an employer's instructions has not likely engaged in gross misconduct. 423 Courts have found gross misconduct for more serious, intentional misconduct. Courts have found gross misconduct in the following cases: where a drunken employee crashed an employer provided car 424 ; where an employee called a co-worker a racial slur and threw an apple at her 425 ; where an employee battered a co-worker, placing her in the hospital 426 ; where an employee stole from her employer 427 ; and where an employee repeatedly and persistently refused to follow the instructions of his supervisor. 428 Based on the limited case law available, gross misconduct generally occurs when the conduct at issue is outrageous, extreme or unconscionable. 429 Some courts have also determined that the conduct must evince an “evil design” against the employer or, absent malice, “an intentional and substantial disregard of the employer's interests.” 430 b. Notification to the Employee In the event an employer denies COBRA based on gross misconduct, the employer must notify the ex-employee and potential COBRA beneficiaries of the determination (specifying denial based on gross misconduct). The general COBRA notice provisions require that, after a qualifying event occurs, the employee and any covered dependents eligible for COBRA coverage be notified of their option to elect continuation coverage. If that coverage is being denied, the employee and dependents must be notified of the decision and must also be given the right to appeal the determination by the plan administrator. The 2005 amendments to COBRA reference a “notice of unavailability of COBRA coverage” to be provided to plan participants in the event that COBRA coverage is not offered. That notice is sent instead of the election form. The participants then have the ability to appeal the determination that coverage is not available.

If an employer is considering denying an employee COBRA continuation coverage based on misconduct, we recommend the following:

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