COBRA Notice Errors Can be Costly
Lyndsey Barnett and Cassidy Zang*
McDonald’s recently notified a Florida federal court that a class-wide settlement was reached and ready for approval in the COBRA suit brought against them. This settlement is the result of an action filed in December 2020 by a former employee who alleged that the corporation was sending former employees deficient COBRA notices. The former employee heading the class action alleged that McDonald’s opted not to use the model notice to save money by pushing former employees not to elect COBRA coverage. Furthermore, the notices did not include an address to mail the COBRA payments, did not explain how to enroll in COBRA, provided only a general phone number for a third party entity, did not provide information on how participants can lose COBRA coverage, and sent the information in several separately mailed notices rather than one document.
McDonald’s is not the only company being hit with COBRA litigation. In 2022 alone, Home Depot settled a similar COBRA suit for $815,000, Costco for $750,000, and Fiat Chrysler for $600,000. With fines reaching up to $110 per employee per day that COBRA notices are deficient, damages can add up quickly.
This increase in COBRA notice litigation is not new. Last year Graydon discussed how the updated COBRA notices were unlikely to deter deficient COBRA notice litigation claims. Most of the recent cases allege that the COBRA notices are missing required information, are too complicated for people to understand, or are designed to scare people from electing COBRA by warning against filing false information. Incidentally, most cases are being brought in conjunction with employment litigation by people who may never have elected COBRA.
With the continuing uptick in litigation surrounding deficient COBRA notices, now is a good time to review your notices as a precaution. While the Department of Labor’s Model Notices are a good place to begin, using the model notice alone does not insulate a plan from litigation. It is unlikely that the DOL will provide another update to the model notices to make them more litigation proof in the near future, making it even more important to review your plan’s notices as a precaution against any potential negative action. If you have any questions or need assistance drafting and reviewing your COBRA notices, please contact a Graydon employee benefits attorney.