Denying COBRA to fired employee depends on gross misconduct

Q         We fired an employee because of theft, and he is currently incarcerated. Do we have to offer COBRA due to these circumstances?

A   Probably not. A covered employer must offer COBRA continuation coverage only to those employees who experience a COBRA-qualifying event and who at the time of the event are enrolled in the employer’s group health insurance plan or program. One such COBRA-qualifying event is a loss of coverage because of a reduction in hours or loss of employment. Assuming your employee meets these two criteria, the next question is whether you fired him for gross misconduct.

Initially, the given facts indicate gross misconduct exists. The firing was on account of the theft, and therefore it was presumably work-related. If the incarceration is the result of the theft, this indicates it was sufficiently serious to warrant criminal prosecution, and the employee was found guilty. If the incarceration is not related to the theft, then it is irrelevant to the analysis.

An element of theft is an intent to deprive the owner permanently of the property. According to the case law, an employer’s decision not to offer a COBRA election based on gross misconduct indicates that proof the employee committed an intentional act of work-related wrongdoing will likely justify its decision. For example, the courts have held in favor of employers in cases where the employee was shown to have: