Benefits and Compensation, Uncategorized

Employer Faces More Fees as 11th Circuit Affirms $126K COBRA Penalty Award

A federal appeals court not only affirmed a ruling that an employer/plan administrator must pay more than $126,000 in penalties and legal costs for intentionally violating COBRA notice requirements, it also held that about $2,460 in expenses excluded from the legal award should be revisited by the lower court. The case is Evans v. Books-A-Million, 2014 WL 3882506 (11th Cir., Aug. 8, 2014).

A federal district court in Alabama had ruled against Books-A-Million due to the company’s “inefficient, unwieldy” COBRA notice process, and the evasive and contradictory answers from employees on why the former employee did not receive a notice. In assessing the statutory penalties, legal fees and costs, however,  it disallowed approximately $2,460.67 in expenses for legal research, court-ordered mediation, postage and travel, on procedural grounds.

The former employee appealed, arguing that the court abused its discretion in excluding those expenses. Books-A-Million cross appealed, contending that: (1) the court clearly erred in finding an intentional COBRA violation; and (2) the court’s assessment of a $75 per day COBRA penalty was an abuse of discretion.

In looking to it own precedent, the 11th Circuit held that, in fact, the disputed expenses could be awarded as attorney’s fees if the district court determines they were reasonably incurred in the course of case preparation, settlement or litigation. The key will be if it is the prevailing practice in the legal community to bill fee-paying clients separately for those expenses. The 11th Circuit remanded that issue to the lower court for resolution.

The 11th Circuit also used its precedent to review the lower court’s finding of an intentional COBRA violation for “clear error.” The appeals court noted that the lower court based its findings “largely upon its assessment of the credibility of Books-A-Million’s witnesses.” Because the evidence could have been seen in different ways, the 11th Circuit concluded that there was no clear error.

In addition, the 11th Circuit reviewed the penalty award for an abuse of discretion. None occurred, the appeals court found, because the lower court acted in its discretion in awarding the penalty in light of its finding that Books-A-Million intentionally violated COBRA. Therefore it affirmed the lower court’s decision.

More details on this case, and COBRA compliance, can be found in hr.complianceexpert.com.