COBRA generally requires that group health plans sponsored by employers with 20 or more employees offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) at the employees' costs upon a job loss or other defined event. A small business should not assume, however, that merely because it has less than 20 employees that COBRA can never apply.
In Thomas v. Miller, the Sixth Circuit today held that an employer with fewer than 20 employees can be equitably estopped from arguing that it is not covered by COBRA. In Thomas, the employer unquestionably had less than 20 employees at all times during Thomas's employment. It did not offer Thomas COBRA coverage after her termination, even though it had previously such coverage to another employee. When she suffered several post-employment strokes, Thomas sued her former employer, claiming that it had failed to offer COBRA coverage to her, as it had done for another former employee. The Sixth Circuit recognized that estoppel can bind a small employer to provide COBRA coverage even if the employer falls outside of the threshold size. Thomas's claim ultimately failed because her employer had not made an representations to her:
In order for a party to employ equitable estoppel against another party, the following elements must be satisfied. First, the party to be estopped must have used “conduct or language amounting to a representation of material fact.” Second, that party must have been aware of the true facts. Third, that party must have had an intention that the representation be acted on, or have conducted himself in such a way toward the party asserting estoppel that the latter had a right to believe that the former’s conduct was so intended. Fourth, the party asserting estoppel must have been unaware of the true facts. Finally, the party asserting estoppel must have detrimentally and justifiably relied on the representation.
No one ever represented to Thomas that she would be eligible for COBRA coverage. She merely assumed that fact by eavesdropping in their small office: "Without more, inferences drawn by a party from overheard conversations about another employee do not amount to representations to or about the overhearing party." Also, because Thomas only overheard the conversations of others, the employer harbored no intent for her to rely upon any statements.
Although Thomas could not prove her right to COBRA coverage based on the specific facts of her case, Thomas v. Miller nevertheless underscores a point made in an earlier blog post: misrepresentations will come back to bite you, and companies must judiciously select their words when talking to employees about benefits.