Gross misconduct provides a basis for denying COBRA coverage to the employee and to the employee’s dependents. The only California case on this subject applied the same standard used to deny unemployment benefits under California law.1 See Unemployment Insurance for more information on this standard.

Mere inefficiency, inability, ordinary negligence or bad judgment does not equal gross misconduct for COBRA purposes. You could face substantial consequences if disqualifying an employee due to gross misconduct.

Be extremely careful in using the “gross misconduct” designation. You may want to avoid using disqualifications or seek qualified legal advice before taking action.

COBRA coverage terminates either at the end of the coverage period required by law, or when one of the following events occurs:

Termination of all employer-provided group health plans.
The employee fails to pay required premiums (keep in mind that grace periods apply).
A qualified beneficiary becomes entitled to Medicare benefits after a qualifying event.
A qualified beneficiary becomes covered under any other group health plan if the plan does not exclude or limit coverage for a qualified beneficiary’s existing conditions.2

COBRA Termination Notice

The plan administrator must provide notice of termination of coverage occurring before the end of the maximum coverage period to qualified beneficiaries receiving continuation coverage.3 There is no particular format or time limit specified, but the notice must be given as soon as is practicable and must include all of the following:

Reason for early termination.
Date of termination.
Any rights the qualified beneficiary may have under applicable law or the plan to choose alternative group or individual coverage.

Notice of Ineligibility for COBRA

If a plan administrator determines that an individual is not eligible for continuation coverage upon receiving notice of a qualifying event or a second qualifying event, the plan administrator must send a notice to the individual explaining the reason for ineligibility. The law does not require a specific form to be used, but the notice must be in language that can be understood by the average plan participant. It must be sent within 14 days of receiving the notice of a qualifying event.

1. Paris v. F. Korbel & Bros., Inc., 751 F. Supp. 834 (N.D. Cal. 1990)

2. 29 U.S.C. 1162(2)(B), (C), (D); Treas. Reg. sec. 54.4980B-7, Q&A-1, Q&A-2

3. 29 CFR sec. 2590.606-4(d)

Denying and Terminating COBRA Coverage

COBRA Termination Notice

Notice of Ineligibility for COBRA

COBRA and Cal-COBRA