Free health insurance for former employee relieved employer of liability for COBRA violation

Despite the fact that a software company failed to notify an employee of his COBRA benefits immediately following his termination, it was not liable for statutory penalties because he suffered no prejudice as a result of the COBRA violation, a U.S. District Court for the Southern District of Florida has ruled. After the employee was terminated, the company provided him and his family with free health insurance for a 10-month period. The court agreed with the employer that its provision of the free insurance placed the employee in a better position than he would have been in if there had been no COBRA violation.
Moreover, as part of his claim arising out of the COBRA violation, the employee argued that he was entitled to be compensated for the “significant distress and emotional distress” that he suffered as a result of his employer’s failure to provide him with proper notice. However, that contention was meritless because, as pointed out in Gonzalez-Villanueva v. Warner Lambert, 339 F.Supp. 2d 351, 360 (DC P.R. 2004), courts have specifically held that COBRA does not provide for emotional damages claims.

Background.

The employee worked for the company as a technical consultant for over 12 years before he was terminated for, among other things, tardiness and failure to attend scheduled work sessions and meet deadlines. At the time of his termination, he was suffering from clinical depression and gout, and his wife was ill with cancer. After the employer’s free health insurance coverage ended, the wife moved to Finland to obtain further medical treatment. Following one month there, during which she was covered by travel insurance, the wife had free health coverage in Finland.
The employee alleged that he incurred more than $4,000 in uncovered medical costs since his termination date. However, he produced no documentary evidence to substantiate his purported expenditures.

Claim for statutory damages.

Pursuant to COBRA, employees are permitted to continue their health insurance coverage at the group rate after their employment is terminated, and plan participants must be given notice of their coverage rights upon the occurrence of a “qualifying event.” When the notice requirement is violated, courts have the discretion to hold the plan administrator personally liable for up to $110 per day from the date of that failure. However, in making damages determinations, courts are to consider both the nature of the administrator’s conduct and the prejudice to the employee.
The court herein concluded that imposing a penalty against the employer would not serve the purposes of COBRA. If the employee had elected COBRA continuation coverage in the same plan that he had as an active employee following his termination, he would have had to pay over $20,000 in premiums for the period during which he was given free coverage by the employer. As a result, the court concluded that the free insurance placed him in a better position than he would have been in with COBRA coverage.
COBRA’s civil enforcement provisions are intended to put employees in the same position that they would have been in absent the violation. Consequently, the $4,000 in medical expenses that the employee claimed he incurred after being terminated was outweighed by not having to pay $20,000 in health insurance premiums. Moreover, the employer’s extension of the free health insurance benefit mitigated against a determination that it had acted in bad faith. Finding that the employee was not prejudiced by the COBRA violation, the district court granted the employer’s motion for summary judgment.

Family and Medical Leave Act (FMLA) interference.

The employee’s claim that he was improperly terminated shortly after requesting FMLA leave was rejected as meritless because he never communicated a need for such leave to the employer. Even viewing the record in the light most favorable to the employee, the court found that there was no causal link between an FMLA request and his termination.

Judicial estoppel.

Although the district court resolved the issues of the employee’s entitlement to COBRA and FMLA damages based on the facts in the case, it pointed out in a footnote that each of his claims was barred by judicial estoppel. During the time period at issue, the employee filed a petition seeking Chapter 13 bankruptcy protection, but he never disclosed his claims against the employer as assets during the pendency of that bankruptcy action. Although he disclosed the claims in a subsequent Chapter 13 case, several creditors listed in the first case were not listed in the second case. Thus, he was precluded by his failure to disclose assets from pursuing those claims against the employer.

SOURCE: Sanders v. Temenos USA, Inc., (DC-FL), No. 16-cv-63040-BLOOM/Valle, October 13, 2017.
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