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<\/div>\nCompanies around the U.S. have recently seen a barrage of cases alleging that notices required under the Consolidated Omnibus Budget Reconciliation Act (COBRA) fail to provide all information required by COBRA. Class action cases filed against high-visibility defendants in Georgia, Michigan, Florida, and elsewhere allege the companies violated federal law when they sent purportedly inaccurate, threatening, or confusing notices of former employees’ rights to elect to continue medical-insurance coverage after their employment ended.<\/p>\n
Under COBRA, election notices must contain information including a mailing address for payments, the identity of the plan administrator, an explanation of how to enroll, and a physical form to elect coverage. The U.S. Department of Labor (DOL) provides a model COBRA notice template, updated in 2020, which contains these items. Yet few companies use DOL’s model COBRA notice, for several reasons:<\/p>\n
Compliance Challenges<\/p>\n
Employers have long had difficulty adhering to COBRA’s technical requirements, which have become even more onerous over the past two years. In addition to revising model COBRA notices in 2020, the DOL and Internal Revenue Service (IRS) also extended many deadlines relating to COBRA; DOL and IRS provided additional guidance following the enactment of the American Rescue Plan Act of 2021.<\/p>\n
New COBRA litigation was already surging before these changes went into effect, and the increased complexity added by these new developments have added fuel to the fire. Purely technical violations of COBRA’s notice provisions not resulting in actual harm to the plaintiffs, when brought as a class action, can nevertheless expose defendants to staggering potential damages because of statutory penalties that accrue per person per day, as well as the potential for an award of attorneys’ fees.<\/p>\n
In sum, COBRA provides many avenues to sue companies\u2014many of whom do not even issue their own COBRA notices\u2014for technical violations of its quickly multiplying requirements. These cases, filed as class actions, can present the risk of protracted litigation, even where the underlying claims lack merit. Accordingly, many defendant companies opt for class settlements ranging from just over $100,000 to just under $1 million, often at the outset of litigation before any discovery has even been conducted. <\/p>\n
Even less surprising is that more and more plaintiff-side law firms are entering this field, eyeing the potential to take home one-third of a large common fund settlement shortly after filing a complaint.<\/p>\n
Charles F. Seemann III<\/em><\/a> <\/em>is office managing principal of the New Orleans, La., office of Jackson Lewis P.C. His practice emphasizes ERISA class action defense and employment law. <\/em> Kyle R. Bevan<\/em><\/a> is an associate in the Orange County, Calif., office of Jackson Lewis P.C. and a member of the firm’s ERISA Complex Litigation group. \u00a9 2022 Jackson Lewis P.C. All rights reserved. Republished with permission.<\/em><\/p>\n Related SHRM Resources:<\/strong><\/p>\n How to Administer COBRA<\/a>, SHRM How-To Guides, March 2021<\/p>\n