Gross Misconduct Means No COBRA, But …
Termination for gross misconduct is not a qualifying event under COBRA, so COBRA continuation coverage does not have to be offered to an employee and his or her spouse and dependent children if the employee was terminated for gross misconduct.
Unfortunately, the term “gross misconduct” is not defined either in the statute or in the regulations, and there has been no consensus among experts as to what the term means. Accordingly, any decision to deny COBRA coverage based on an employee’s gross misconduct should be reviewed by an attorney.
To avoid the severe penalties of COBRA, some experts advise a very conservative approach to what constitutes gross misconduct. They recommend that gross misconduct be defined only as discharge because of criminal activities that can be proved. Others assert that an intentional and flagrant violation of a company policy may be gross misconduct (e.g., rudeness to a customer).
Still others equate gross misconduct with the kind of misconduct that will disqualify an employee from unemployment benefits (e.g., the employee engaged in willful misconduct that harmed the employer). For example, consuming alcohol on company premises in violation of a known company policy would be viewed as gross misconduct under this standard.
Note: A reduction of hours of a covered employee’s employment, such as a disciplinary suspension (even if for gross misconduct), does not constitute a termination of employment and is a qualifying event if group health care is lost.
COBRA compliance is easy … not. Good news—Check out BLR’s October 19 webinar, COBRA 101: The Legal Dos and Don’ts of Complying With Federal COBRA Regs. Click here to find out more about this timely webinar.
Legislative History Helps
COBRA’s legislative history is the primary source for analyzing the meaning of “gross misconduct.” The legislative history indicates that gross misconduct is something more than conduct that justifies a discharge for cause. Initially, the Senate version of COBRA used a “for cause” standard. This phrase was changed to “gross misconduct” in the final bill.
This change obviously suggests a stricter standard. It follows that gross misconduct is a very difficult standard to meet, particularly because the spouse and dependent children also lose the right to continue coverage, even though they may have had nothing to do with the employee’s misconduct.
Case Law Offers Hints
The Federal District Court for the Western District of Louisiana has provided a definition of gross misconduct in the COBRA context (Boudreaux v. Rice Palace, Inc., 491 F. Supp. 2d 625 (W.D. LA 2007)). The court defined the term as follows:
"The term ‘gross misconduct’ has generally been understood to include misconduct that is intentional, wanton, willful, deliberate, reckless, or in deliberate indifference to an employer’s interest. It is misconduct beyond mere minor breaches of employee standards, but conduct that would be considered gross in nature. Mere inefficiency, unsatisfactory conduct, failure in good performance due to inability, inadvertencies, ordinary negligence in isolated instances, or good-faith errors in judgment or discretion are not deemed as gross misconduct. Gross misconduct is carelessness or negligence of such a degree or recurrence to show an intentional and substantial disregard of the employer’s interests of the employee’s duties and obligations to his employer."
Eliminate COBRA headaches for good—with practical, field-tested techniques. Attend October 19.Click here to find out more about this timely webinar.
Problems Applying a Gross Misconduct Standard
It is often difficult to apply the gross misconduct standard, and whatever standard an employer decides to apply in determining gross misconduct should be consistent. The problem is illustrated by the example of an employee who strikes a fellow worker for making a racial slur:
While the employer may have a very firm rule against fighting in the workplace, and may view that as justification for immediate discharge, is it gross misconduct in light of the provocation? Also, what action should be taken against the employee who made the racial slur? Is it also a violation of company policy, and does it justify immediate discharge? Is it gross misconduct?
While the employer will likely win any wrongful discharge claim if it fires both employees, and is likely to win any unemployment claim, it is not as certain that the conduct amounts to gross misconduct justifying a denial of COBRA coverage.
In tomorrow’s Advisor, the annoying business of calculating the duration of COBRA coverage, plus notice of a special new COBRA 101 webinar just for those who are unsure about the details of COBRA eligibility, coverage, and compliance