Surgical costs assessed for notice violations, but no per diem sanctions

A former employee who did not receive a timely COBRA notice was entitled to equitable relief, but only for her medical costs, because her former employer’s actions did not warrant a more severe per diem penalty since they were merely notice violations, according to a district court in Pennsylvania.

Background. Melinda Hosler (Hosler) requested time off from her job at Jay Fulkroad and Sons (Fulkroad) in order to undergo a hysterectomy in January 2013. While she was on Family and Medical Leave Act (FMLA) leave for the surgery, Fulkroad terminated her employment and her benefits, and then failed to provide her with a timely notification of her right to continuing health coverage under COBRA. Hosler filed suit in district court, and, after a jury found in her favor, both she and Fulkroad filed post-trial motions, with Fulkroad seeking to set aside the jury’s verdict and Hosler seeking additional, equitable relief for Fulkroad’s violations of COBRA, ERISA, and the FMLA. Hosler requested equitable relief in the form of either a $100 per diem penalty or compensation for her medical bills.

The court explained that an employer must notify a health plan administrator within 30 days of a qualifying event, such as an employee’s termination, and the administrator then has 14 days to notify beneficiaries. Fulkroad apparently sent Hosler a COBRA notice around January 8, 2013, based on what it later claimed was her termination as of December 2012. However, Fulkroad did not actually terminate Hosler’s employment until at least February 2013, and the court agreed with Hosler that any COBRA notice sent prior to that was null. The mere taking of FMLA leave is not a qualifying event triggering COBRA notice responsibilities, the court explained.

Equitable awards. The court declined to assess per diem sanctions against Fulkroad, explaining that the $100 per day penalty would add up to $72,000, which it found to be too onerous for the mere failure to send a required COBRA notice.

The court did, however, decide that there was an equitable basis for awarding Hosler the cost of her surgery, plus interest, despite what it said was the lack of any specific citation on the part of either Hosler or Fulkroad to decisions where such awards had been issued or to any other legal authority on that topic. The court pointed out that such legal authority exists in support of Hosler’s position that reimbursement of uninsured medical expenses traceable to a COBRA violation could be ordered by the court, citing Gomez v. St. Vincent Health, Inc., No. 1:08-CV-153 (S.D. Ind. May 6, 2010), aff’d, 649 F.3d 583 (CA-7) 2011, as modified (September 22, 2011) and also citing the per diem provisions of ERISA Sec. 502(c)(3).

The court pointed out that the FMLA provides that an employer must maintain an employee’s group health coverage while the employee is on leave on the same terms as the employee would have had if he or she were continuously employed during the leave period, citing 29 C.F.R. 825.209(a). The court continued that it would be “patently unfair” for Hosler to have to pay a high medical bill that would have been covered by her insurance if Fulkroad had not taken improper steps to terminate her benefits at exactly the time she needed them. The court held that, based on Fulkroad’s federal violations, the clear harm caused to Hosler, and the court’s legal authority to order equitable relief, Fulkroad was to reimburse Hosler $24,905.26, which was the cost of her surgery, plus interest of $1,780.73, in addition to other damages, including back pay.

SOURCE: Hosler v. Jay Fulkroad and Sons, (DC-PA), No. 1:13-CV-1153, June 23, 2015.

Visit our News Library to read more news stories.