Lane v. Compass Group USA
(United States District Court, District of Connecicut, 2005 U.S. Dist. LEXIS 25119 (D. Conn. 2005))
Determining when employment terminates after a leave of absence can be challenging. For one Connecticut
employer, it will probably prove costly as well.
In this case, a Connecticut District Court refused to grant summary judgment to an employer that communicated
two separate termination dates to a former employee, who never elected COBRA coverage. As a result, the
case proceeded to trial with the prospects for victory looking dismal for the employer, Compass Group.
How did this happen? After the employee, Ms. Lane, suffered a workers compensation injury in March, she took
time off until early May. She last worked on May 22. In early August, Compass Group sent a COBRA election
notice with a May 22 qualifying event date. This meant that Compass Group was late in sending the election
notice. Compass Group later argued that the real termination date was August 3, thus making the election
notice timely. According to Compass Group, the May 22 notation was due to "carelessness having no legal
repercussions."
The Court disagreed. The Court noted that the insurance carrier, CIGNA, had later requested reimbursement for
claims it had paid after May 22. Lane did not elect coverage because she was under the impression she was
still employed, having never been notified otherwise until she received the election notice.
The bottom line is this: Compass Group's confusion over the termination date – in communications to both
CIGNA and Lane – could result in ERISA daily penalties, attorneys’ fees and payment of all related medical
claims for an employee who worked less than nine months and earned $8 per hour.
Employers sometimes overlook COBRA compliance in managing leaves of absence. While it is not apparent in
this case, a leave of absence can sometimes trigger a qualifying event (reduction of hours) if it causes a loss
of coverage per the terms of the group health plan. It is imperative that employers communicate timely and
accurately when a qualifying event occurs.