Employers are seeing an increase in lawsuits from former employees alleging deficient (COBRA) election notices, with statutory penalties of up $110 per person per day. These lawsuits are generally class actions and can result in significant attorneys’ fee awards for successful ex-employees. The fact employers are struggling to comply with COBRA notice requirements means employers should brace for increased election notice litigation.
Employers’ difficulty in complying with election notice requirements plus lucrative class action lawsuits seem to be causing the increase in litigation. The recent barrage of COBRA notice lawsuits claims employers’ COBRA election notices are inaccurate, confusing or threatening. Lawsuits have targeted COBRA notices that fail to include:
- The mailing address for payments
- The plan administrator’s identity
- An explanation of how to enroll
- The actual election form to elect coverage
In 2020, the U.S. Department of Labor (DOL) revised its model COBRA election notice. While employers can simply use the DOL’s model COBRA notice, many do not rely on it because most use third-party vendors to provide notices to their former employees. These third-party vendors typically provide their own notices that do not strictly adhere to the DOL’s model notice. Even though vendors prepare and send most notices, COBRA notice litigation is directed at the employer or plan sponsor, not the vendors.
While the recent rise in COBRA notice litigation has targeted mainly large employers, all employers should consider reviewing their COBRA notices to ensure compliance, identify potential liabilities and avoid litigation. Even technical violations that do not result in actual harm to former employees—since they rarely elect COBRA—can expose employers to expensive litigation because of statutory penalties and attorneys’ fees.
We will keep you apprised of any notable updates on COBRA notice litigation. Contact Consolidated Insurance + Risk Management for more COBRA compliance resources.