Employer Games: Hide & Seek with Employee Health Benefits

ERISA cases are full of games – games plan administrators play to avoid liability. The latest example from the Middle District of Alabama involves the failure to give notice that the employee has been terminated (which means the employee no longer has health insurance).

Grooms v. Asplundh Tree Expert, LLC, CIVIL ACTION No. 2:19cv597-MHT (WO) (M.D. Ala. Apr. 22, 2020).

In that case, Mr. Grooms was employed by a tree service company which provided him with health insurance as a benefit. He was terminated. Interestingly, his employer failed to let him know. That weekend, he was seriously injured in a four-wheeler accident. His health insurance failed to pay his medical bills because his employment had been terminated and he was no longer covered. He filed suit in state court.

The defendants removed the case to federal court claiming that his claims were preempted by ERISA. Plaintiff alleged that the defendants had fraudulently concealed the fact that he had been terminated.

Judge Myron Thompson, in a short and concise opinion, made it clear that the defendants had the burden of proving federal jurisdiction and they had not met it. They failed to show that the plaintiff could have alleged his claims as an ERISA claim. The plaintiff’s fraudulent concealment claim was a state law matter. He remanded the case back to state court.

Of course, when I read this opinion, I immediately ask whether this was simply a game by the employer? Wasn’t this tree service company large enough to be subject to the COBRA notice requirements? Giving the notice would have insulated them from liability. Maybe he was terminated for gross misconduct, in which case COBRA benefits would not have been available. This is risky because gross misconduct requires threading the needle of many cases which have tried to define it.

Regardless, given the importance of health insurance coverage, why wouldn’t they let an employee know when he was terminated so that he could obtain his own coverage? I guess that’s the point of the state court case. Nonetheless this is an interesting game for employers to play – terminate the employee but don’t tell him. It can have a widespread impact.

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