Fifth Circuit Holds That Employee’s Retirement Constitutes a “Qualifying Event” and Triggers Employer’s COBRA Notice Obligation

In Randolph v. E. Baton Rouge Par. Sch. Sys., No. 21-30022, __F.4th__, 2021 WL 5577014 (5th Cir. Nov. 30, 2021), involving a dispute over Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) continuation coverage, the Fifth Circuit considered whether an employee’s placement on unpaid leave and the employee’s retirement constituted qualifying events under 29 U.S.C. § 1163. A qualifying event includes a termination or reduction of hours that is the “but for” cause of a loss of medical coverage. Plaintiff-Appellant Kathran Randolph worked as a principal for East Baton Rouge Parish School System when she was placed on paid administrative leave on September 4, 2014. She was taken off administrative leave on October 22, 2014 but used her sick leave to remain on paid leave. On August 13, 2015, after she exhausted any leave benefits, Randolph was placed on unpaid leave. East Baton paid Randolph’s portion of her insurance premiums while she was on unpaid leave until her retirement on February 15, 2016. Her insurance coverage ended on February 29, 2016. Not until a claim was denied in September 2016 did Randolph contact East Baton and was informed that she owed $2,900 in back payments for insurance premiums and owed $480/month going forward. East Baton sent Randolph a COBRA notice by letter dated October 6, 2016.

The Fifth Circuit determined that Randolph’s placement on unpaid leave was not a qualifying event under § 1163 because she was not terminated from employment and did not lose coverage. Randolph was able to keep her health insurance at the same rate. However, her retirement was a qualifying event since East Baton classified it as a separation of service and it was a termination under § 1163. Randolph experienced a loss of coverage when she retired since she was no longer eligible to continue her health insurance at the same contribution level of $200/month. Randolph’s retirement was the “but for” reason she was no longer allowed to pay only $200/month for coverage. A change in contribution level triggers the employer’s COBRA notice obligation. The district court erred when it determined that there was no qualifying event because the retirement was not contemporaneous with the loss of coverage. “A loss of coverage does not need to be contemporaneous to the qualifying event.” The loss of coverage need only occur within 18 months of a qualifying event. Randolph should have received notice within 44 days or by the end of March 2016. There was a COBRA violation because Randolph did not receive timely notice of her COBRA rights.

With respect to the proper remedy, the court remanded to the district court for consideration of whether a statutory penalty of $110/day for failure to meet the COBRA notice requirement is warranted. The court also remanded the consideration of whether Randolph should be allowed attorneys’ fees since Randolph presented a significant legal question regarding the interpretation of the COBRA amendment to ERISA and the relative merits of the parties’ positions favor Randolph following a reversal at the court of appeals. The court found that the district court did not err in denying Randolph’s request for unpaid medical expenses since East Baton continued to pay Randolph’s medical bills and the total amount of unpaid medical bills is less than the unpaid premiums.