McDonald’s Settles Class Action Lawsuit Over Improper COBRA Notices

McDonald’s has settled a class action lawsuit for $156,783.00 over allegations that it failed to provide former employees with sufficient notice of continued health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Class members consist of 9,000 former employees, all of whom received the deficient COBRA notices between December 15, 2017, and February 9, 2021, and did not opt to receive continued COBRA coverage. These individuals will receive estimated net payments of between $7 and $10. The case is Johnson v. McDonald’s Corp., No. 1:21-cv-24339, S.D. Fla.

The plaintiffs filed the suit in the U.S. District Court for the District of Florida in January 2022. They alleged that the popular fast-food chain omitted required information from its COBRA notices and confusingly provided some information in multiple notices. More specifically, the COBRA notice failed to provide an address to which participants could mail COBRA payments or the procedures for enrolling in coverage. McDonald’s also failed to use the COBRA model notice that the U.S. Department of Labor (DOL) provides for employers. 

McDonald’s is one of many major corporations recently that have faced class action lawsuits over insufficient COBRA notices. Well-known companies have settled similar lawsuits, including Home Depot USA Inc., Costco Wholesale Corp., and Fiat Chrysler Automobiles. From a plan sponsor perspective, if a class can be certified and the defendant company is unable to convince the court to dismiss the lawsuit at an early stage, early settlement may be wise. Otherwise, defending the lawsuit can be quite expensive. Although the court has discretion in assessing penalties, the statutory fine for COBRA violations is up to $110 per day per participant. 

Whether companies oversee COBRA notices in-house or outsource them to a third-party administrator, they should take care to avoid common errors involving COBRA notices. The most frequent COBRA notice violations include:

  • Failing to give employees notices for all their plans subject to COBRA;
  • Omitting the legal name of the plan or the contact information for the plan administrator; 
  • Not properly describing when COBRA will terminate early; 
  • Not properly describing the maximum coverage period; and
  • Not indicating how to make COBRA payments and when the payments are due.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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