Michigan Employer Cleared of COBRA Violations

August 25, 2005 (PLANSPONSOR.com) - A federal judge has cleared the former owner of a company that made television commercials for advertising agencies of wrongdoing for not providing his employees with notice of continuing health coverage when he went out of business.

US District Judge George Caram Steeh of the US District Court for the Eastern District of Michigan ruled that former Producers Color Services (PCS) owner, Ronald Balousek, wasn’t required to provide the continuing coverage notices after the firm’s health plan was terminated because it didn’t pay the premiums, BNA reported.  Once the plan was terminated, Steeh ruled, the company had no more duties under the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Steeh also rejected the five plaintiffs’ allegation that Balousek had illegally failed to pay them severance benefits, noting that the severance plan was legitimately terminated by the company in 2003, several months before the company went out of business.

The court also dismissed one employee’s claim that PCS had violated the Fair Labor Standards Act (FLSA) by classifying him as an exempt employee.  According to Steeh, the employee was properly classified as an exempt employee because his wages and responsibilities set him apart from those he supervised.

The case is Ayres v. Balousek, E.D. Mich., No. 04-CV-71802, 8/22/05.

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