A federal court has preliminarily approved a $1 million settlement in a class action lawsuit between a large company and its former employees over allegations that its COBRA notice was threatening and misleading. The case is Blessinger v. Wells Fargo & Co., 2023 WL 8432223 (M.D. Fla. 2023).
The former employees filed a class action lawsuit against the employer, claiming that in its COBRA notice, the employer attempted to intimidate them into not electing COBRA coverage by warning them that submitting incomplete information could result in civil and criminal penalties. The notice allegedly also referred to a $50 IRS penalty for each failure to provide a correct tax identification number for a covered individual. The former employees argued that due to the ominous and inappropriate language in the employer's COBRA notice, they chose to forego COBRA coverage, lost their healthcare coverage, and incurred out-of-pocket medical expenses.
The settlement terms require the employer to deposit $1 million into a settlement fund to pay settlement expenses, attorney's fees, and up to $20 each to the roughly 50,000 plan beneficiaries who received the notice and opted not to elect COBRA coverage.
Employers should note that the U.S. Department of Labor's (DOL) model COBRA notice mentions no potential civil or criminal penalties for failing to provide information or providing incomplete information. While employers should customize their notices to include additional information, they should ensure that they include no misleading information. They also should ensure that the average plan participant can easily read and understand the content of the entire notice.
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