You Asked: What Does Gross Misconduct Mean for the New COBRA Subsidy?

The recently enacted American Rescue Plan Act (ARPA) is expected to have a major impact on many Americans’ lives, both now and in the days and weeks ahead. One element of the law that escaped the attention of more than a few is a temporary six-month COBRA subsidy that allows qualified individuals to stay on their employer-sponsored health plan at no cost to the individual. Individuals qualify for the COBRA subsidy when they have lost group health plan coverage due to a layoff, furlough, or reduction in hours. The subsidy became available on April 1, 2021, and will generally end on September 30, 2021. You can find detailed information here.

“At no cost” means the employer pays the entirety of the premium for those who qualify. This aspect of the new law is not popular with some employers, as you may expect, and they may be looking for any reason to disqualify an employee from the subsidy.

There are several reasons an employee may be disqualified from receiving COBRA benefits, and among them is termination for what is called “gross misconduct.”  Gross misconduct is defined as “willful or wanton disregard for the employer’s interests, assault upon supervisors, co-workers, or others at the worksite, and threats of assault.” While there may be other examples, these are the ones most recognized as the most extreme instances of inappropriate workplace behavior.

For employers who may wish to claim gross misconduct on the part of a terminated employee as a reason to disqualify the said employee from obtaining COBRA benefits, it would be wise to heed the words of Katharine Marshall, principal in Mercer’s Law & Policy Group, who notes that COBRA is “highly litigated” and that “COBRA non-compliance is high risk,” and for a variety of reasons besides this type of attempt at benefits disqualification. Organizations are advised to contact an Employers Council attorney for guidance before engaging in this kind of activity. The potential for liability is significant and rarely worth the risk of the cost savings involved. Call Employers Council with questions; we can help.