Pension & Benefits News Class claims against Walmart for deficient COBRA notice can proceed
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Friday, May 24, 2019

Class claims against Walmart for deficient COBRA notice can proceed

By Pension and Benefits Editorial Staff

A terminated employee who alleged Walmart violated COBRA’s election notice requirements can proceed with her class action claims where the notice did not include the plan administrator’s name, address and telephone number, a federal district court in Florida ruled.

Walmart terminated the employee on April 8, 2016. In her first amended class action complaint and demand for jury trial, the employee alleged Walmart violated COBRA by failing to provide required notices of her and her children’s right to continued health coverage. Walmart now moves to dismiss the complaint, arguing the employee lacks standing, the election notice complies with the COBRA regulations, and it is not liable as it is not the plan administrator. Walmart also requests that the court strike the employee’s jury demand.

Allegations support standing. Focusing on the “injury-in-fact” prong of the standing requirements, the court denied Walmart’s motion to dismiss for lack of standing, finding the employee had sufficiently alleged a concrete and particularized injury in which she suffered actual harm via her alleged temporary loss of insurance coverage. Walmart disputed the employee suffered a temporary loss in coverage based on its COBRA notice, which it mailed to the employee on April 28, 2016. It also pointed to a statement from its COBRA manager who indicated the employee and her children were added to the coverage of her domestic partner, effective April 14, 2016. The statement noted the employee and her children have maintained coverage since that date. Nevertheless, based on the employee’s allegations that the deficient notice caused her and her children to lose coverage, the court found that at this stage in the proceedings, it must accept her allegations as true and deny the motion based on the record currently before it.

Contents of notice deficient. Turning to the issues involving the sufficiency of the COBRA notice, the court found Walmart’s notice did not satisfy the election notice requirements because, while it included the COBRA administrator’s name, address, and telephone number, it did not include the plan administrator’s name and contact information. The court rejected Walmart’s argument that the regulations governing the general notice apply to the election notice. Those regulations only require the identification of the COBRA administrator in the general notice, but the regulations governing the election notice require the identification of the plan administrator. In a footnote, the court noted it solely relied on its reading of the regulations cited because the parties did not offer any other authority that would be binding on the court. Because Walmart did not include the plan administrator’s information in the election notice, the court denied its motion to dismiss on this issue.

Average participant’s understanding. The court also found Walmart’s election notice did not satisfy the COBRA regulation that requires the notice be "written in a manner calculated to be understood by the average participant." The court found that without the plan administrator’s name, address, and telephone number, Walmart’s notice was not "sufficient to permit the discharged employee to make an informed decision whether to elect coverage." Thus, the court denied Walmart’s motion to dismiss on this issue.

Other content violations not challenged. Because the employee stated she was not challenging Walmart’s motion to dismiss based on two other subsections of the COBRA notice regulations, the court granted Walmart’s motion to dismiss on these claims.

Failure to designate plan administrator. Turning to the issue of liability, the court rejected Walmart’s argument that because it is the employer sponsor of the plan, but not the administrator, it was not responsible to provide the COBRA election notice. The employee relied on ERISA’s definitions section for the proposition that an admitted plan sponsor must be considered the administrator in cases where the plan documents fail to designate a party as the administrator. The court found that at this point in the proceedings, the employee alleged the plan documents failed to designate a party as the administrator, and, therefore, Walmart as the plan sponsor is the de facto administrator.

The court acknowledged Walmart’s argument that "as a matter of law," "the COBRA notice does not constitute a plan document and the notice’s failure to designate an administrator does not result in it being deemed the administrator as the plan sponsor" under ERISA’s definitions section. Walmart cited no authority for this proposition, however. Thus, the court denied Walmart’s motion to dismiss on the liability issue.

Trial will be by judge, not jury. Lastly, because the employee did not oppose Walmart’s request that the court strike the jury demand, the court granted the motion to strike it.

SOURCE: Bryant v. Wal-Mart Stores, Inc., (S.D. Fla.), April 18, 2019.

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