Employees Terminated For Data Theft Still Entitled To COBRA Coverage

CATEGORY: Client Update for Public Agencies, Public Education Matters
CLIENT TYPE: Public Education, Public Employers
DATE: Feb 02, 2024

Deborah Johnson and Rodney Johnson were spouses and long-time employees of the City of Kewanee, Illinois.  Deborah was the Account and Finance Director and Rodney was the Public Works Operations Manager.  In September 2020, the Johnsons provide notice of their intent to retire from the City in January 2021.  Shortly after the retirement notice, the City accused Deborah of stealing data files that belonged to the City by taking or copying information from a City computer.  When the City asked Deborah to collect her belongings and sent her home, Deborah removed a flash drive from her computer and took it with her.  Thereafter, the City was unable to locate certain files on Deborah’s computer and retained an outside information technology specialist to investigate.  The Johnsons eventually brought several flash drives to the police station.  The flash drives contained approximately 55,000 files and included personally identifiable information of City residents and employees, such as social security numbers and bank account numbers.  The Johnsons denied improperly taking any City files.

The City terminated both Johnsons in December 2020 and did not provide them with a notice of Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage.  In March 2021, the Johnsons filed a complaint against the City alleging that it had failed to provide them with the COBRA notice.

Under the federal Public Health Services Act, governmental group health plans are required to provide qualified employees with the option to continue their health coverage when the employee experiences a qualifying event, such as termination of employment.  However, there is an exception for termination of employment for an employee’s gross misconduct.  The City denied that it had any obligation to provide a COBRA notice in this situation because the Johnsons were terminated for gross misconduct for stealing City property.  The City filed a motion for summary judgment.

The Court found that the City did not provide sufficient evidence to prove the Johnson’s committed theft of the City’s data files, which would constitute “gross misconduct” under the COBRA standard.  The Court assessed that none of the City’s witnesses had personal knowledge of what files were missing from Deborah’s computer or the City server.

The Court also wrote that even assuming arguendo that the Johnsons had taken the data files from the City and deleted them, the Court was not convinced that these actions would constitute gross misconduct as a matter of law.  COBRA does not define “gross misconduct.”  Courts look to the ordinary meaning of the phrase, which is defined as outrageous, extreme, or unconscionable misconduct.  The Johnsons denied committing criminal theft.  Deborah claimed she was an authorized user of the data and had no intent to permanently depriving the City of any files.  The Court stated that whether Deborah was authorized to access and use the files in the way she was alleged to have used them was a factual question.

The Court denied the City’s motion for summary judgment and found the City was not exempt from providing COBRA continuation coverage notice in this situation.  The Court also found that the City presented no admissible evidence that would allow the City to impute any misconduct by Deborah to her husband Rodney.

Johnson v. City of Kewanee (2023) 2023 U.S.Dist. LEXIS 208408; 2023 WL 8091963.

Note: The decision to not provide a COBRA notice to a terminated employee should not be made lightly.  The Court in Johnson cited cases that found gross misconduct where an intoxicated employee crashed an employer vehicle, another where an employee called a coworker a racial slur and also threw an apple toward her, and finally, where a supervisor beat his employee to the point that she required five days of hospitalization.  While there is an exception where an employer does not need to provide a COBRA notice to an employee who has been terminated for gross misconduct, there is a very high standard for what actually constitutes gross misconduct.  It is a higher standard than termination for cause.

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