Labor and Employment Law: Current Developments

For purposes of the ARRA, the term “involuntary termination” means more than simply being laid off or downsized. An employee is considered to be involuntarily terminated if:

• Layoff.The employee is laid off, regardless of whether or not the employee enjoys recall rights.

• Other Suspension.The employee is suspended in some other fashion which results in the loss of group health insurance coverage.

• Resignation-Transfer.The employee resigns as the result of a material chagne in the geographic location of employment. For example, an employee living and working in New York resigns rather than moving to California when her employer relocates.

• Resignation–Hours Reduction.The employee resigns when the employee’s hours are cut sufficiently to constitute a “material negative change” in the employment relationshiip for the employee. A reduction from 40 hours per week to 35 hours per week is unlikely to be considered a “material negative change,” while a reduction from 40 hours per week to 40 hours per month would almost certainly constitute such a change. The range in between such extremes will be open to interpretation and likely litigation. A reduction of hours which does not constitute a “material negative change” does not make an employee eligible for the subsidy.

• Retirement.An employee who retires in lieu of being terminated is deemd “involuntarily” terminated, if he or she knows that the only alternative to retirement is termination.

• Strikes and Lockouts. If employees strike, they do not have any rights to COBRA continuation coverage or the subsidy. Their suspension from work is voluntary. However, if an employer engages in a lockout so taht employees cannot work, the employees are deemed “involuntarily” terminated.

• Buyouts. If an employee accepts a “buyout” in return for a severance package, the employee will be considered terminated “involuntarily” if after some period of time at lest some employees not bought out will be terminated.

• Discharge. If an employee is discharged because of an extended illness or disability or “for cause” because of poor performance, poor attendance, or some other reason, the employee is deemed to have been involuntarily terminated for purposes of the ARRA. However, if the discharge is for “gross misconduct,” then the termination is not a qualifying event and the employee is not eligible for COBRA continuation coverage or the subsidy.