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The Gross Misconduct Exception to the Termination Rule

November 21, 2002
Santa Rosa, CA
When an employee is terminated for "gross misconduct," the employee, covered spouse and dependent children are not entitled to COBRA benefits because no qualifying event has occurred. COBRA legislation does not define the term "gross misconduct," and courts have not agreed on when it is proper to apply this exception to the COBRA rules. Employers who terminate workers for gross misconduct may run the risk of being sued for wrongfully denying COBRA benefits.

What is the definition of "gross misconduct"?
Although illegal or dangerous acts committed in the workplace are likely to qualify as gross misconduct, the acts need not be criminal or otherwise unlawful in nature. In some instances, even acts that occur away from the workplace have qualified as gross misconduct. A definition widely used by the courts goes something like this: Acts of gross misconduct are intentional, wanton, willful, deliberate, reckless, or in deliberate indifference to an employer's interest. Often, acts that will prompt an employer to terminate an employee are those done in deliberate violation of the employer's known standards. However, those acts may not constitute gross misconduct for COBRA purposes unless they go beyond simple negligence or incompetence.

What are examples of gross misconduct?

A look at some court cases that have challenged the denial of COBRA benefits for gross misconduct yields a wide variety of acts:

Airline attendant strikes coworker during a flight.

Teacher arrested for sex crimes.

Repeated warnings to properly perform job ignored.

High school math teacher misappropriates funds.

Why it is important to use caution when denying COBRA benefits for gross misconduct.
Terminations for gross misconduct, by their nature, run a high risk of being challenged in the courts. If a terminated employee successfully sues for denial of COBRA benefits and the act for which he was fired is ruled not to be gross misconduct, the employer may be liable for ERISA penalties, IRS taxes, medical expenses, courts costs and attorney's fees.

As always, consult competent counsel before changing your COBRA administration policies.
This information is provided by OnQue Technologies, Inc. for educational purposes only and does not constitute legal advice. If legal advice or other professional assistance is required, the services of a competent professional should be sought.
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