Q - A: No need to offer COBRA when employee fired for 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?

You are not required to offer COBRA coverage to a former employee, including his covered spouse or dependents, if his employment is involuntarily terminated for gross misconduct. It can be tricky to determine when gross misconduct exists, however, because the term is not defined by the COBRA statute or regulations.

Although courts have weighed in with their own definitions, decisions have been inconsistent. For example, some courts find gross misconduct is so outrageous that it shocks the conscience. Others find it is behavior resulting from intentional, wanton, willful, deliberate, reckless or in deliberate indifference to an employers interest. Regardless, however, courts agree the behavior of the employee must be affirmative and willful. Careless, negligent, or inadvertent actions are not gross misconduct.

While a theft perpetrated against an employer resulting in jail time will almost certainly be gross misconduct for purposes of COBRA, courts also agree the behavior need not be criminal. A substantial failure to follow an employerspolicies can be sufficient to support a finding of gross misconduct.

You should use caution when determining whether to deny COBRA continuation coverage to a separating employee. Your decision not to offer COBRA may be challenged legally, and penalties for failure to provide required notices and coverage can be substantialup to $110 per employee or family member for each day of noncompliance.