COBRA benefits can be denied to employees who are fired for gross negligence. However, to avoid legal challenges, it’s important to ensure that your termination qualifies, and to follow protocols carefully.

  • DO understand what qualifies as gross negligence. The Department of Labor does not provide a concrete definition for gross misconduct. As a result, employers – and sometimes courts – must decide what does and does not qualify. In general, being a poor worker is not enough to qualify as gross misconduct, even if repeated or ongoing issues are enough to result in an employee’s termination, or if the employee is in a probationary period.

Instead, the designation must be reserved for extreme, reckless or deliberate actions, especially those that are criminal in nature. For example, theft and assault are likely to qualify as gross misconduct. An employee who causes the company to lose money due to a mistake might not be guilty of gross misconduct. An employee who purposefully steals money might be.

  • DON’T be inconsistent. According to Business Insurance, when a WinCo supervisor was fired and denied COBRA benefits after taking cake for the break room – a reportedly common practice intended to boost employee morale – allegations of gender discrimination resulted in a lawsuit against the company. If multiple employees commit the same offense but are disciplined differently, employees may be able to argue that discrimination is occurring. Having written policies and following them carefully can help. If disciplinary measures are different, be prepared to give a compelling reason.
  • DO document the incident thoroughly. If the denial of benefits is challenged, thorough documentation will prove necessary. This may include the termination letter, statements from the manager and any employees involved, as well as any evidence, such as photographs or damage, or police reports related to the incident that led to termination.
  • DON’T forget state laws. In addition to federal COBRA regulation, many states have their own CORBA rules, often referred to as mini-COBRA laws. Before denying a former employee coverage, check relevant state laws.
  • DO consider offering COBRA coverage on a voluntary basis. An article published in ERISA Benefits Law explains that because of the risk of lawsuits like Katie Mayes v. WinCo, it may be wise to offer COBRA coverage even amid allegations of gross misconduct. In order to preserve their termination defense, employers may include a letter stating that they are doing so voluntarily despite evidence for gross negligence.
  • DON’T forget to notify the employee and beneficiaries. Whatever your decision, you will need to provide a notice. Make sure notification is sent in a timely manner.
  • DO obtain legal advice. Because gross misconduct is not clearly defined, using it as a reason to deny COBRA coverage can be risky. Before making a coverage decision in a case that may involve gross negligence, your company should consider consulting a lawyer for guidance.

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