Under what circumstances can I deny COBRA to a terminated employee?

A covered employee (spouse and dependents, if applicable) is entitled to COBRA when a loss of group health coverage is caused by a qualifying event that is the termination of employment. This includes a termination of employment that is voluntary or involuntary, including layoff, resignation, furlough, and retirement.

COBRA allows plans to deny COBRA if an employee was terminated for "gross misconduct". Unfortunately, the term "gross misconduct" is not specifically defined in COBRA or in regulations under COBRA. Therefore, whether a terminated employee has engaged in "gross misconduct" that will justify a plan in not offering COBRA to that former employee and his or her family members will depend on the specific facts and circumstances. Generally, it can be assumed that being fired for most ordinary reasons, such as excessive absences or generally poor performance, does not amount to "gross misconduct."

Planning Pointer

What to do.

Employers should consult with an experienced attorney to review policies and procedures. At the very least, the employer should include a list of actions and behaviors that will be considered "gross misconduct".

Employers should also consider the following when determining which actions and behaviors rise to the level of "gross misconduct."

•  Was the employee's action illegal?
•  Were other indiviudal's (employees or customers) harmed?
•  Was the business harmed?
•  Should the employee have known such actions were likely to cause harm?

This is a brief list of question and is by no means complete. It is designed to get you started. If you need help developing policies and procedures for your company, you should contact your attorney.