Compliance September 9, 2005

Employer's 'Honest Error' Still Warrants Penalty Says Judge

September 9, 2005 (PLANSPONSOR.com) - Even though an employer's failure to provide COBRA notice to a former employee was an "oversight" or "honest error" according to the company, a judge still fined the employer $20 per day plus attorney's fees.
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Landau Uniforms, Inc. failed to provide COBRA notice to one of its former employees for over 13 months after his termination, according to an EBIA report.   The former employee sued in connection with his termination of employment and included a claim for statutory penalties under ERISA due to the notice failure.

In the case of Sluka v. Laundau Uniforms Inc., Landau argued that the employee provided no proof of damages, therefore the company should not be liable.   However, according to EBIA, the judge determined that the company had “the resources and the ability to follow important federal regulations, and should be held to its obligations.”

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Due to the fact it was an “honest error” and the employer had agreed to provide retroactive COBRA coverage, the judge did not enforce the maximum penalty allowable under ERISA of $110 per day.   However, in addition to the $20 per day in statutory damages awarded, the court awarded to the employee attorney’s fees that it said will be determined at trial, according to EBIA.

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