New Cobra Laws Going Into Effect

December 28, 2009

President Obama Extends COBRA Subsidy Duration and Eligibility Period

As we originally reported in our February 2009 Client Alert and subsequent alerts, the American Recovery and Reinvestment Act of 2009 (“ARRA”) provided for a 65% COBRA premium subsidy for a period of up to 9 months for certain eligible employees who were involuntarily terminated from employment during the period from September 1, 2008 through December 31, 2009, and their eligible family members.  [The American Recovery and Reinvestment Act – COBRA Revisions; U.S. Department of Labor Issues Model COBRA Subsidy Notices And Other Guidance; Finally: Answers To Unanswered Questions – IRS and DOL Issue Guidance On The COBRA Premium Subsidy]  ARRA has now been amended by the Department of Defense Appropriations Act (“DDAA”), which was signed by President Obama on December 19, 2009.  The DDAA increases the maximum COBRA subsidy period to 15 months and extends the eligibility period so that individuals involuntarily terminated from employment through February 28, 2010 (rather than December 31, 2009) (and eligible family members) may now qualify for the subsidy. 

Longer Subsidy Period

The DDAA amends ARRA to extend the 9-month subsidy period for an additional 6 months.  Accordingly, the subsidy will now be available for up to a maximum of 15 months.  The amount of the subsidy (i.e., 65% of the required premium) remains unchanged.

 Extended Eligibility Period

 The DDAA amends ARRA to extend the eligibility period for the COBRA subsidy for two additional months.  Accordingly, individuals who experience involuntary terminations of employment between January 1, 2010 and February 28, 2010 also will be eligible for the subsidy.  In addition, the law clarifies that COBRA eligibility (i.e., the loss of coverage) need not occur by February 28, 2010 in order for an individual to qualify for the subsidy.  (This changes prior guidance from the government.)  Accordingly, an individual may now qualify for the subsidy if he or she is a COBRA “qualified beneficiary” whose qualifying event is an involuntary termination of employment that occurred between September 1, 2008 and February 28, 2010, even if the COBRA coverage does not commence until after February 28, 2010.      

 Individuals Who Exhausted the 9-Month Subsidy Period Prior to Extension

 The law includes a provision that allows eligible individuals who exhausted the original 9-month subsidy period to take advantage of the 6-month extension.  These individuals must pay the reduced premium within 60 days of the DDAA’s enactment or, if later, within 30 days of notice of their right to do so (which is a required notice as described below).   

 In addition, “assistance eligible individuals” who pay the full COBRA premium for a period of coverage during the new 6-month extension will be entitled to a credit for, or refund of, the excess amounts paid for coverage periods to which the subsidy applies.      

 Notice Requirements

 Notice of the changes made by the DDAA must be provided to individuals who were “assistance eligible individuals” at any time on or after October 31, 2009 and to individuals who experience a COBRA qualifying event of termination of employment (either voluntary or involuntary) relating to COBRA coverage on or after that date.  The notice must be provided within 60 days of the DDAA’s enactment or, if the qualifying event occurs after that date, in accordance with the timing rules otherwise set forth in ARRA.  In addition, notice must be provided to individuals who exhausted their premium subsidy (before the effective date of the new extension) and either failed to timely pay for COBRA coverage after exhausting the subsidy or paid the full premium for a period during which the new 6-month extension would apply.  This notice must inform them of their right to pay a reduced premium (including for the retroactive period) and must be provided within 60 days of the date the 9-month subsidy expired.

 For example, suppose a 9-month ARRA subsidy period expired November 30, 2009 (9 months after March 1, 2009).  The individual needs to be provided with notice of the new ARRA extension within 60 days of December 1, not 60 days from the date of enactment.  Therefore, it is essential that administrators get ready to provide new ARRA extension notices as soon as possible.


 As explained above, ARRA’s COBRA subsidy provisions have been extended so that eligible individuals may receive the subsidy for a longer period of time and a greater number of individuals will qualify for the subsidy.  As a result, plan sponsors and administrators will need to revise their existing COBRA notices to account for these changes and also provide a separate, supplemental notice to certain affected individuals who are (or were) receiving COBRA coverage.  The DOL has stated that it intends to issue a new set of model notices incorporating the new requirements within 30 days.  In addition to providing the required notifications, changes will need to be made to internal administrative processes in order to take into account the new eligibility period and the longer subsidy period.   We also note that plan sponsors and administrators should continue to monitor developments, as there has been talk of possible additional subsidy changes coming in early 2010. 

Note: The above information was obtained from one of our sources but because of the complexity of COBRA I wanted to ensure that the information was conveyed exactly how we received it.

Employee Text Messages On Employers Equipment-A Protected Right Of Privacy?

December 21, 2009

In another case that addresses work place privacy, the United States Supreme Court has granted review of a California case whereby the employer was found liable for reading text messages on an employer-provided two-way pager.  Apparently, and with good reason, the employer had a general computer usage policy applicable to all employees that basically stated that the use of such equipment was limited to company business, and that users should have no expectation of privacy or confidentiality when using email or the Internet. Furthermore, the policy was very specific that the using the equipment for personal use was a “significant violation” of the stated policy.

The problem with text messaging, be it a pager or cell phone, are the charges. This particular employer had begun to notice that the amount of charges were increasing each month. After several months the supervisor started to become frustrated with the overage charges for the plaintiff and other employees and decided to review transcripts of the  text messages to determine if they were business or personal. The transcripts revealed personal messages sent by the plaintiff to his wife and co-workers, some of which were sexually explicit in nature. The supervisor discussed the matter with the plaintiff and he, and the recipients of the messages, brought suit alleging violation of their privacy rights under the Fourth Amendment and Article 1, Section 1, of the California Constitution.

The initial superior court decision was in favor of the employer because the jury felt (weighing the difference between the employee’s expectation of privacy and the reasonableness of the search) that the supervisor’s actions were based on trying to determine  the basis for the overage charges. Upon review, the Ninth Court Circuit of Appeals reversed the decision because, in their opinion, although the search was intended for a valid reason, the scope of the search as “too broad.” The Court further stated that there was a “less intrusive means” of finding the desired information, such as simply “asking the plaintiff to redact the personal content of any text messages” so that the company could still obtain the desired information.

The U.S. Supreme Court will now make the decision on this one. In the interim, put out a memo (whether you have a computer policy in place or not) that specifically “Text messages on company issued phones, or other such electronic devices, are not private and that the company reserves the right to conduct searches at any time.” 

I will keep you posted.

Does “At Will” Really Mean “At Will”??

December 14, 2009

The California Labor Code does state that California is an “At Will” state. That’s not the problem! It’s how the term is improperly used that creates the headache. The California Supreme Court has actually strengthened the employers ability to terminate employees without cause. Okay, that’s a good thing. However, let me point out for unemployment purposes if an employer uses “At Will” as the reason for termination, the former employee will more than likely be found qualified for benefits. The Employment Development Department requires the employer to give a “reason” why the employee was terminated. If it was due to some form of misconduct, they want to know “what” was the behavior and the specific policy that was violated. The language in the at will statement does state “with or without cause.” Well the EDD wants the portion “with” or they will grant the benefits.

Some employers put the at will statement in offer letters, employee handbooks and other documentation setting forth the status of employment to ensure there is no room for doubt concerning the at will status of their employees. With respect to the offer letter, the langauge has to be clear. It cannot just state that the employment relationship is “at will.’ It must read:

“…your employment with________ is at will. This simply means that________has the right to terminate your employment at any time with or without cause just as you have the right to terminate your employment with_________with or without cause.” 

This same basic language can appear in your handbook or other documentation. But you also have to understand that the at will provision does not protect you from a wrongful termination lawsuit based on a violation of public policy (i.e. discrimination or retaliation).  As many of you have heard me state over and over again “I wish employers would forget the at will statement!” You should always have a “reason” why you’re ending the relationship. Have your documentation in place and don’t worry about being an at will employer (but still have the policy in place LOL!).

California Courts Do It Again!”Negligent Failure To Prevent Retaliation” Supervisors Personally Liable!!

December 7, 2009

Well, it never stops! The California Court of Appeals handed plaintiffs lawyers another favorable holding to use against employers in retaliation lawsuits. The Fair Employment & Housing Act (FEHA) already contains an express provision stating that employers must “take all reasonable steps necessary to prevent discrimination and haraasment.” In drafting this particular section the legislators elected to omit any reference to retaliation claims so, as a result, the court of appeals decided to extend the reach of this statutory provision to include retaliation as its own form of discrimination.

In the Court’s opinion, the Court specifically held that retaliation is different from discrimination when it comes to imposing personal liability on supervisors which means that “a supervisor may be held personally liable for retailiation under a FEHA (California claim for discrimination) claim.” In short, retaliation may be treated as either the same or different from discrimination, depending on which one provides the most “liberal construction” for plaintiffs in suing the employer.

With this decison in mind, you have to understand that once an employee lodges a potentially protected complaint, ANY subsequent job changes in his job assignments or status may be cited as a form of alleged “retaliation.” My best advice is to take all reasonable steps to advise managers and supervisors that they have to leave out emotional knee jerk reactions when an employee complains about any form of harassment whether it is based upon a portected class (race, religion, age, disability, etc.) or sexual harassment. Remember, the employee can loose on a discrimination allegation and still win on a retaliation claim. The Court will look at the perception of the individual, the facts that appear to support that some adverse action was taken, and not consider your intent (just the act that took place).

As always you must understand that documentation plays a key role. If you were consistent with your documentation before and after the employee complained and that documentation is consistent, it goes a long way toward your defense.