As discussed in my earlier posts  here, congress has repeatedly extended the benefits to employees under COBRA. And now, for the third ime, the COBRA premium subsidy program has been extended, this time through May 31, 2010, under the Continuing Extension Act of 2010 (Act). The key provisions of the Act include:

• The extension of the eligibility period for the COBRA subsidy through May 31, 2010.
• A new special election period and related notice requirement for individuals who experience a qualifying event that is related to a termination of employment on or after April 1, 2010, and before April 15, 2010.

The excerpts below are from an article posted by the law firm of Drinker Biddle, a large national law firm.

Special Election Period

A health plan must extend a special COBRA election period to an individual who experienced an involuntary termination of employment on or after April 1, 2010, and prior to April 15, 2010, and who would be an “assistance eligible individual” (AEI) but who does not have a COBRA election in effect on April 15, 2010. The special election period runs from April 15, 2010, through the date 60 days after the Notice of Special Election Period is provided to that individual.

Note about effective date of COBRA subsidy. Although not specifically addressed in the Act, due to the short, 15-day gap between the expiration of the COBRA subsidy on March 31, 2010, and enactment of the Act, we believe that an individual’s COBRA subsidy becomes effective as of the first day of COBRA coverage if he or she elects coverage during the special election period.

Notice of Special Election Period

In the case of any individual who experienced a qualifying event related to a termination of employment on or after April 1, 2010, and prior to April 15, 2010, a plan administrator must provide the general COBRA notice, including a description of the availability of premium reduction in the case of a qualifying event that is an involuntary termination of employment, within 60 days of enactment of the Act (i.e., by June 14, 2010). If the plan administrator has already distributed the general COBRA notice to such individuals, then the plan administrator may simply supplement it with an additional notice describing the extension of the availability of premium reduction with respect to involuntary terminations through May 31, 2010, and the special election period.

Note about the notice requirement. The Act is not clear on whether this notice applies only to AEIs, or to any individual who has a qualifying event related to a termination of employment, whether voluntary or involuntary, during the period April 1, 2010, through April 14, 2010. The more conservative approach is for a plan administrator to provide the special election notice to any individual who experienced a qualifying event related to a termination of employment on or after April 1, 2010, and prior to April 15, 2010, in order to notify all individuals who may potentially be eligible for the COBRA subsidy, including those who an employer may have incorrectly classified as voluntarily terminated.

A Reminder – Expansion of Assistance Eligible Individuals

Under ARRA, only individuals who experienced a qualifying event that was an employee’s involuntary termination of employment could become AEIs and take advantage of the COBRA premium subsidy. The Temporary Extension Act of 2010 expanded the premium subsidy to include as a qualifying event for purposes of the subsidy, a reduction of hours that occurred at any time on or after September 1, 2008, and is followed by an involuntary termination of employment that occurs on or after March 2, 2010 (and before June 1, 2010). Individuals who experience a qualifying event that falls under this expanded definition and are otherwise eligible AEIs (Reduced Hours AEIs) will be eligible for the COBRA subsidy beginning with the first day of the first period of coverage for which the individual is a Reduced Hours AEI. The Reduced Hours AEI’s maximum continuation coverage period is determined as if the individual had elected COBRA when initially eligible due to the reduction of hours.

Action Items

Plan sponsors and administrators should consider the following immediate action items:

• Notices. Plan administrators should update their COBRA notices and other plan communications to include the extension of the eligibility period to May 31, 2010.
• Assess Prior Terminations. Identify covered employees (and their qualified beneficiaries) who became eligible for COBRA on or after April 1, 2010, and before April 15, 2010, as well as their COBRA elections. Provide an updated COBRA notice to these individuals that includes a description of the extended eligibility period and the special election period. Identify those employees and beneficiaries in the group whose qualifying event is the employee’s involuntary termination of employment and who are eligible for the COBRA subsidy.
• Continue to Monitor Reduced Hours AEIs. Plan administrators should continue to identify any Reduced Hours AEIs, and provide a new notice to them upon involuntary termination. An individual in this group may be eligible for the special election period if, upon a reduction in hours the individual did not elect, or elected and later discontinued, COBRA.
• Stay Tuned. Two separate bills in Congress propose to further extend the COBRA subsidy eligibility period through June 30, 2010, or year end.

COBRA Update, Again…

It’s important for employers to remember that while the default employment rule in California may be “at-will” (Labor Code §2922) there are some other factors and circumstances that can bear on your decision to move forward with the termination of an employee.

Having a termination check list can be helpful to remind you of any red flags that warrant further consideration before moving forward with a termination decision.  Below, is a list of items you will want to consider before terminating someone. This is not an exhaustive list, but includes several key factors to consider. You may also want to consult with counsel on termination decisions.

• Is there any documents (write-ups, warnings, etc..) or other objective evidence (i.e., video of employee theft) to support the termination?
• Are the managers or those who are participating in the termination all in agreement about the grounds for termination?
• Is this termination consistent with what the company has done in the past under similar circumstances or is the person being singled out for different treatment?
• Are there overlapping concerns about workers compensation leave, medical issues, or family leave rights that warrant the consultation with counsel?
• Have internal company policies been followed?
• If your company policy calls for progressive discipline (system of warning and write-ups before termination) have these steps been followed? Is there documentation to support the progressive discipline action taken before termination?
• Does the termination potentially violate any state or federal statutes prohibiting discharge under the present circumstances (i.e., can’t fire someone for filing a workers comp claim, or taking time off to serve on jury)?
• Is anyone making the termination decision based on the person’s protected class (i.e., sex, race, national origin, gender, age, family status, etc..) or because the employee engaged in a protected activity (i.e., notified a state agency of a product liability issue (whistleblowing), serves on a volunteer fire department, filed a complaint with the Dept. of Fair Employment and Housing, harassment complaint, etc..) – can’t make a termination decision based on these factors.
• Is the termination decision consistent with the performance or conduct of the employee that has been discussed or documented in the past?
• Is the termination decision consistent with previous reviews of the employee (last review was a glowing report two weeks ago and now the person needs to be fired, what changed – is it something legitimate)?
• Has the employee been talked to about the incident? Is there sufficient evidence to reject the employee’s version of events?
• Is there a contract, or were any employment promises made (i.e., how long a position will last) that converts the “at-will” employment relationship into something other than an “at-will” employment relationship? Have any alternatives to termination been considered?
• Is the employee suffering from any disability, medical condition, pregnancy, etc.. (or is employee tending to someone in the employee’s family with a medical condition)? The employer may need to consider an accommodation or other alternative to termination.

Reviewing the checklist above before you decide to terminate someone will help you avoid some common termination pitfalls.  Like I said before, this is not an exhaustive list of items to consider, but it is a good starting point. You may want to build on this list, using employment issues you have seen in the past that are particular to your place of employment.

For some help with compliance issues – check out this post too on hiring outsourced general counsel.