Avoiding COBRA Consequences; New Federal Contract Minimum Wage

Increased Class Action Claims Over COBRA Notice Deficiencies

Class action claims based on a company’s failure to fully follow COBRA notice requirements are on the rise. The Department of Labor’s regulations set forth specific requirements on how an employer must provide notice to departing employees of their right to elect to continue their healthcare coverage. For example, the notice must clearly and adequately explain the procedures to elect continuation of healthcare coverage so that an average employee would understand it. The notice must also be specific about the date COBRA coverage is to end, state where to send premium payments and contain certain other required information. The Department of Labor’s regulations include a sample notice to employees of their COBRA rights, and using that notice is considered good faith compliance with COBRA’s election notice content requirements.

However, recent cases have shown that even when employers use the Department of Labor’s model notice, they can still run into trouble for a variety of deficiencies such as: (i) not using the model notice in its entirety; (ii) modifying the notice in a way that makes it confusing or ambiguous; (iii) failing to provide the name, address, and phone number of the person responsible for administering continuation of coverage benefits; (iv) failing to explain that a spouse of a covered employee may elect continuation coverage on behalf of all other qualified beneficiaries, as well as other types of notice deficiencies.

Employers should review the content of their COBRA notices and consult with counsel as necessary to ensure that proper notice is being provided.

Increase in Minimum Hourly Wage Under Federal Contracts

The Department of Labor recently issued a notice of applicable increased minimum wage rates beginning January 1, 2018, for workers performing work on or in connection with federal contracts covered by Executive Order 13658. Beginning January 1, 2018, the applicable minimum wage rate for such workers will be $10.35 per hour, which is an increase from the current rate of $10.20 per hour. Additionally, the minimum wage that generally must be paid to tipped employees performing work on or in connection with covered federal contracts, which is currently $6.80 per hour, will increase to $7.25 per hour.

Contact info: Meredith S. Campbell Chair, Employment and Labor Group, Shulman Rogers mcampbell@shulmanrogers.com | T 301.255.0550 | F 301.230.2891

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