An employee’s leave of absence can raise a number of practical and legal issues. That is why employers need to include clear leave of absence policies in employee handbooks and in employee benefit plans. A recent federal court decision illustrates how important this is in the group health plan and COBRA context.

In Jennings v. D.F. Crane Constr. Corp., 2009 U.S. Dist. LEXIS 41794 (W.D. Ky. Apr. 10, 2009), Mr. Jennings was participating in the company’s health plan. Mr. Jennings took a leave of absence, and while he was on leave the company terminated his employment. The dispute boiled down to when Jennings lost his coverage under the company’s health plan (i.e., when the COBRA qualifying event occurred). The company argued that the qualifying event occurred when Mr. Jennings’ leave began. Mr. Jennings argued that the qualifying event did not occur until the company told him he was no longer needed. The court sided with Mr. Jennings, and as a result Crane Construction was responsible for providing medical coverage for Mr. Jennings for the period in dispute.

The problem with the Jennings case and many others like it is that the litigation could have been avoided. In the Jennings case, the dispute probably would have been avoided if the group health plan had included rules for non-FMLA leaves of absence. For non-FMLA leave, it is generally up to the employer to decide, when designing its group health plan, when a leave of absence will trigger loss of coverage and related COBRA rights. If the employer wants the leave of absence to trigger loss of coverage immediately, the employer can see to it that the appropriate language is included in the plan documents and summary plan description. Note, however, that if the plan is an insured plan the employer will have to work with its insurance company to address the leave of absence issues.

In summary, clear leave of absence policies are essential to the proper administration of group health plans and COBRA rights. Without clear leave of absence policies, it will be difficult in many cases to determine when an employee has lost coverage under his or her employer’s group health plan. That, in turn, will make COBRA disputes and COBRA noncompliance more likely.
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