Compliance January 2, 2002

COBRA Rights OK if Employer Acts In Good Faith

February 1, 2002 (PLANSPONSOR.com) - Companies don't have be certain that former employees receive notice of their medical benefits rights under the Consolidated Omnibus Budget Reconciliation Act (COBRA) as long as they try in good faith to deliver the notice, a federal appeals court ruled.

Reported by

Fred Schneyer

According to a Bureau of National Affairs report, the decision by the US Court of Appeals for the Fifth Circuit concerned Monty Degruise, a former Sprint Corp. employee, who was terminated in February 1998.

A week later, Sprint sent Degruise a certified mail letter outlining his rights under COBRA to continue getting benefits through Sprint at his expense.

The US Postal Service tried unsuccessfully twice to deliver the letter and then sent Degruise a notice it was being held at his local post office, according to court papers.

When Degruise went to the post office, he was told the letter couldn’t be located. It was finally unearthed and returned to Sprint.

Dispute Goes to Court

Degruise later sued Sprint, claiming his COBRA rights were violated because he didn’t get the notice. A federal judge in the US District Court for the Eastern District of Louisiana sided with Sprint, throwing out Degruise’s suit and concluding Sprint was acting in good faith.

The appeals court agreed and upheld the lower-court judge, writing: “The law requires nothing more than for an employer to make a ‘good faith’ attempt to provide notification. Sprint sent Degruise a notification letter by certified mail to the address Degruise listed. It had no knowledge why and was not responsible for the letter going undelivered. Therefore, Sprint did nothing to undermine the presumption of ‘good faith’ established under the case law once it attempted to notify Degruise of his COBRA benefits by certified mail,” the appeals court said.

The case is Degruise v. Sprint Corp.