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A recent COBRA case in Georgia had some interesting elements. Allegations of Gross Misconduct at a yacht club. A personality conflict with the “Commodore”. Five officers whose perks arguably made them employees. And difficulty in counting to the number 20.
Twenty, of course, is a special number for COBRA. This law does not apply if an employer “normally employed fewer than 20 employees on a typical business day during the preceding calendar year”.
Jeffrey Giddens worked as General Manager for University Yacht Club (UYC). He reported directly to the president, also known as the “Commodore” of this non-profit organization. Giddens and his family had coverage under UYC’s health plan. During his tenure, Giddens suffered several job-related injuries. Ultimately, he required spinal fusion surgery. When his employment terminated in September, he received no continuation of health benefits.
UYC gave two reasons. First, Giddens was fired for Gross Misconduct. Second, UYC did not have to offer COBRA because it was subject to the small-employer exception to COBRA. The Court disagreed with the first argument, but concurred with the second argument.
On the Gross Misconduct issue, UYC’s stated termination reasons included Giddens’ dereliction in his financial dealings, use of UYC property for personal use and payment of personal items with a company credit card. Giddens saw things in a different light. He argued that the dismissal was due to a conflict with the Commodore. The Court saw this as a factual dispute; thus, summary judgment was inappropriate on this issue.
The case would have proceeded to trial, if the Court had not ruled in UYC’s favor on the small-employer exception. The discussion on this issue is instructive to employers who are on the cusp of 20 employees from one year to the next. Despite reviewing the same payroll records, both parties came up with different employee counts. As expected, Giddens’ count was more than 20; UYC’s count was less than 20.
The Court laid down the following rules in resolving this conflict:
- Averaging 30 hours per week (not 32) was enough for full-time employment status, based on UYC’s personnel policy.
- Count only actual hours worked and exclude vacation, holiday and sick time hours.
- Even if an employee works in more than one capacity (in this case, 30 hours in administration and 10 hours in the clubhouse), it was inappropriate to double-count the employee (i.e., a 1.3 full-time equivalent).
- UYC’s five officers were unpaid and elected, serving on a voluntary basis. Therefore, they were not employees, even though under Georgia law they were considered employees and even though they received some perks from their position. These perks included special parking privileges, free food and drinks at meetings, preferred seating at events and free maintenance services. The Court instead looked to common-law principles of agency, focusing on the officers’ lack of payment and the absence of employee benefits.
As a result, UYC qualified for the small-employer exception, and the motion for summary judgment was granted.
- Counting to 20 is not always a straightforward proposition in the COBRA context. This case highlights some of the principles that apply to employer eligibility for the small-employer exception and how some careful planning (i.e., how you define “full-time” and counting only actual hours) worked.
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