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COBRA when suspended then terminated for gross misconduct


Guest jackie
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An employee (not eligible for FMLA) is suspended for a positive drug test. He no longer qualifies for benefits under the plan because he is no longer an active full-time employee as defined by the plan. COBRA is offered and elected. He completes a rehab program but fails the drug test again upon return to work from the suspension, at which time he is terminated. Can COBRA be terminated? Does theemployee handbook need to state that failure of a second drug test, after a suspension, is considered gross misconduct and COBRA continuation would be terminated at the time of termination of employment?

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Interesting question! Return to work and eligibility for coverage under the plan as an active employee do not necessarily terminate COBRA rights; it is coverage "under any other group health plan" that can terminate COBRA rights. However, if the employee were back at work for a period beyond the grace period for paying COBRA premiums, it is likely that 102% of the premiums have not been paid and it may be possible to end his COBRA rights for that reason. If the subsequent termination was within the grace period so that COBRA premiums would be considered as timely paid, I believe that the employee would retain COBRA rights from the first suspension. Anyone else have any thoughts or actually dealt with this type of situation?

Do the plan and SPD define what constitutes gross misconduct in other situations? If yes, are they clear that additional situations could constitute gross misconduct? Is it your consistent policy to fire anyone who fails a second drug test (or written policy if this is the first time this has happened)? If the documents simply say that a person whose employment is terminated because of gross misconduct is not eligible for COBRA, I would be reluctant to specify only one situation that would be considered gross misconduct. As I am sure you are well aware, termination for cause and termination for gross misconduct are not necessarily coextensive.

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Guest kchristy

Couple of issues here: First, you imply that the employee was intially offered COBRA coverage under the "reduction in hours" definition of a COBRA qualifying event when he tested positive for illegal drug use and was put on suspension. Then, when he returned and tested positive again, he was terminated for "gross misconduct".

My advice is to refer this to a good ERISA/Labor attorney. It may cost a few hundred bucks, but that's nothing compared to a lawsuit - not to mention a judgement requiring your company to pay for claims the employee might incur should he be uninsured and go in for, say, inpatient detox.

If my employer was unwilling to hire an attorney, I would let the employee continue his COBRA. Trying to cut him loose is potentially very expensive.

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  • 3 weeks later...

If the employee has dependent coverage and you decided not to offer coverage for "Gross Misconduct" be sure that the dependents are offered COBRA. Since they are "Qualified Beneficiaries".

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Although a draconian result, I always understood that termination for gross misconduct was not a qualifying event, so that neither the participant nor his or her dependents could be qualified beneficiaries. See Section 4980B(f)(3)(B). Has there been a change that I missed? Of course, an employer (with insurance company approval, if applicable) could provide coverage to the dependents if it chose.

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I agree with WESSEX - termination for gross misconduct cuts off the rights of the employee and all other qualified beneficiaries. Tough result, but it is a cruel world. On the other hand, the gross misconduct cases are all over the map and unless the circumstances warrant (or the client is mad enough), it may certainly be cheaper to offer the COBRA coverage.

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