In Johnson v. City of Kewanee, 2023 WL 8091963 (C.D. Ill. 2023), a married couple filed suit after the city fired them for allegedly stealing data and deleting over 55,000 files from the city computer system. The couple claimed that the city failed to provide COBRA election notices as required by law. In response, the city alleged that since the employees had committed “gross misconduct” in stealing and deleting data, the city was not required to provide the employees with the required notices.
Generally, termination of employment for any reason triggers COBRA coverage, except if the employer terminates the employee for gross misconduct. In that instance, both the employee and their dependents lose the right to COBRA coverage, and the employee need not provide the COBRA election notices that it otherwise is mandated to provide.
However, neither the statute nor regulations define gross misconduct. As a result, whether a situation qualifies as gross misconduct within the meaning of the COBRA exception constitutes a case-by-case analysis that must occur at trial. Therefore, the court denied the city’s motion for judgment without a trial and set the case for further proceedings.
In its ruling, the court acknowledged that prior case law established that criminal theft by an employee indisputably qualified as gross misconduct. However, in this case, the former employees denied committing any theft, and the city offered no admissible evidence proving that the theft had occurred. The court remained “unconvinced” that the city’s allegations against the employees rose to the level of gross misconduct as a matter of law.
The Johnson ruling illustrates that gross misconduct terminations typically involve high stakes for the employer and the employee. These situations also almost always involve contested facts, which often preclude the resolution of litigation by anything other than a costly trial. Suppose an employer fails to prove that an employee has committed gross misconduct at trial. In that case, penalties for failing to provide the required COBRA election notices include an award of retroactive COBRA coverage and fines of $110 per day. Therefore, given this potential exposure and uncertainty, employers should avoid denying COBRA coverage based on gross misconduct except in cases involving flagrant and outrageous conduct that demonstrates an obvious and willful disregard of the employer’s interests. Employers also should consult their legal counsel before making this determination.
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