REBECCA MOREHOUSE; WILLIAM MOREHOUSE, Plaintiffs-Appellees, v. STEAK N SHAKE, Defendant-Appellant.
No. 18-4186
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT
September 13, 2019
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b). File Name: 19a0241p.06. Argued: May 8, 2019. Appeal from the United States District Court for the Southern District of Ohio at Columbus. No. 2:16-cv-00789—Edmund A. Sargus, Jr., District Judge.
Before: BOGGS, BATCHELDER, and BUSH, Circuit Judges.
COUNSEL
ARGUED: Eric P. Mathisen, OGLETREE DEAKINS, NASH, SMOAK & STEWART, PLLC, Valparaiso, Indiana, for Appellant. Sonia T. Walker, CALIG LAW FIRM, LLC, Columbus, Ohio, for Appellees. ON BRIEF: Eric P. Mathisen, OGLETREE DEAKINS, NASH, SMOAK & STEWART, PLLC, Valparaiso, Indiana, for Appellant. Sonia T. Walker, CALIG LAW FIRM, LLC, Columbus, Ohio, for Appellees.
BOGGS, Circuit Judge. Defendant Steak N Shake (“SNS“) appeals a grant of summary judgment in favor of Plaintiffs Rebecca and William Morehouse. The Morehouses sued to recover damages stemming from SNS‘s failure to send them a notification under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA“) after SNS put Mrs. Morehouse on workers’ compensation and allowed her to take a leave of absence. The district court agreed that SNS had not fulfilled this obligation and consequently awarded damages to the Morehouses. However, we now reverse because the terms and conditions of Mrs. Morehouse‘s insurance coverage did not change upon her taking a leave of absence and therefore no “qualifying event” occurred that would have obligated SNS to send her a COBRA notification.
I
Mrs. Morehouse began working for SNS as an Assistant Manager in October 2011. After her husband lost his job and insurance coverage following his hospitalization, Mrs. Morehouse enrolled both herself and her husband in SNS‘s health-benefits coverage with coverage beginning on September 1, 2012 (“the Plan“).
The Plan‘s terms are set forth in benefit booklets issued each September 1 for the following year. The Plan states:
You have coverage provided under the Plan because of your employment with . . . the Employer. You must satisfy certain requirements to participate in the Employer‘s benefit plan. These requirements may include . . . Actively At Work standards as determined by the Employer or state and/or federal law and approved by the Administrator, on behalf of the Employer.
. . . .
To be eligible to enroll as a Subscriber, an individual must:
- Be either: An employee, Member, or retiree of the Employer, and:
- Be entitled to participate in the benefit Plan arranged by the Employer;
- Have satisfied any probationary or waiting period established by the Employer and be Actively at Work[.]
According to the Plan, “Actively at Work” includes an employee who is “absent from work due to a health related absence or disability[.]” The Plan requires its participants to pay their portion of the cost for coverage in order to maintain benefits:
If you fail to pay or fail to make satisfactory arrangements to pay any amount due to the Plan . . . the Employer may terminate your coverage and may also
terminate the coverage of all your Dependents, generally effective immediately upon their written notice to you.
In addition, “premium must be paid for the time period that services are rendered.” Mrs. Morehouse‘s plan included medical, dental, and vision insurance, and it cost her approximately $230 in biweekly payroll deductions.
On May 25, 2013, Mrs. Morehouse fell at work and injured her right knee. She returned to work the next day, but her injury was too severe to permit her to continue working. Prior to leaving, she completed and signed a Management Personnel Action Form requesting to open a workers’ compensation claim and to receive a leave of absence due to her work injury. The form did not mention “FMLA” or the “Family and Medical Leave Act.”
On June 5, 2013, an SNS Benefits Specialist sent a letter to Mrs. Morehouse instructing her to complete paperwork so that SNS could process her absence under the
Beginning May 26, 2013, Mrs. Morehouse also began receiving workers’ compensation benefits in connection with her injury. Since Mrs. Morehouse was no longer receiving her normal salary and therefore was no longer paying premiums from her usual payroll deductions, SNS began deducting all required insurance contributions from her workers’ compensation checks instead. SNS continued to pay Mrs. Morehouse workers’ compensation until August 13, 2013.1
On September 9, 2013, Mrs. Morehouse received an email from Eric Salyers, a Benefits Coordinator at SNS. Salyers indicated that $193.18 of Mrs. Morehouse‘s insurance premiums had not been paid and that Mrs. Morehouse would have to pay the premium in order to continue her insurance coverage. On September 20, 2013, SNS notified Mrs. Morehouse by letter that her FMLA leave had expired August 19, 2013, that she should contact SNS to discuss a reasonable accommodation, and that, if her employment was terminated, she would have the opportunity to continue health benefits through COBRA upon termination of her employment. Having received no payment on the premiums from Mrs. Morehouse, SNS on October 3, 2013, notified the Morehouses that their medical, dental, and vision benefits had been discontinued, effective August 14, 2013, due to the nonpayment of premiums. SNS eventually terminated Mrs. Morehouse‘s employment on February 11, 2014.
On August 15, 2016, the Morehouses filed a complaint in the United States District Court for the Southern District of Ohio alleging (1) that SNS failed to notify them of their right to temporarily continue health-benefit coverage under COBRA, in violation of that statute, and (2) that SNS breached its fiduciary duty in violation of the Employee Retirement Income Security Act of 1974 (“ERISA“) by failing to notify the Morehouses of their COBRA rights.
II
The court reviews de novo the district court‘s grant of summary judgment, “applying the same standards as the district court.” FTC v. E.M.A. Nationwide, Inc., 767 F.3d 611, 629 (6th Cir. 2014). “Summary judgment is appropriate ‘if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.‘” Ibid. (quoting
Because
III
In 1974, Congress enacted
The question in dispute is whether a COBRA-qualifying event occurred. COBRA defines a “qualifying event” as follows:
[T]he term “qualifying event” means, with respect to any covered employee, any of the following events which, but for the continuation coverage required under this part, would result in the loss of coverage of a qualified beneficiary: . . . (2) The termination (other than by reason of such employee‘s gross misconduct), or reduction of hours, of the covered employee‘s employment.
A “reduction in hours” alone is not necessarily a qualifying event; it must also lead to a loss in insurance coverage. See
In determining whether there was a loss of coverage here, the district court analogized the case to Aquilino v. Solid Waste Servs., Inc., CIVIL ACTION NO. 2:07-cv-00928-LDD, 2008 WL 11469292 (E.D. Pa. June 13, 2008), an out-of-circuit district-court decision. There, the plaintiff suffered a head injury at work, resulting in a deduction of his health-insurance premiums from workers’ compensation payments rather than from paychecks. Id. at *1. The court found that a change in the manner by which an employee must contribute to
[T]he method and means by which a plan participant is required to make contributions . . . is an implicit term and a condition of the health plan. Accordingly, a change in the method or means by which an employee is required to make contributions to a health care plan that occurs as a result of a reduction in hours qualifies as a loss of coverage for the purposes of COBRA.
SNS, in turn, relies heavily on Jordan v. Tyson Foods, Inc., 257 F. App‘x 972 (6th Cir. 2007). In Jordan, the plaintiff was enrolled in his employer‘s benefits plan, and premiums were automatically deducted from his paycheck. Id. at 973. The plan required employees to pay on their own any required contributions to their plan if they took an approved medical leave. Ibid. The plaintiff requested a leave of absence under FMLA; the leave was granted; and the plaintiff stopped receiving his monthly paychecks. Id. at 973-74. The plaintiff did not continue to pay his premiums, so the company disenrolled him from the plan and ultimately terminated his employment when he failed to return to work. Id. at 974. This court held that no “qualifying event” occurred either as a result of the plaintiff‘s FMLA leave or upon his termination. Id. at 980. Therefore, the employer was not obligated to send a COBRA notification. Ibid.
As the district court in the instant case noted, the plaintiff in Jordan argued that the “qualifying event” occurred upon his termination, not upon the change in payment methods occasioned by his taking FMLA leave. By contrast, here, the Morehouses argue that the “qualifying event” was Mrs. Morehouse‘s reduction in hours accompanied by the change in payment method. But in Jordan we also addressed the plaintiff‘s suggestion that he had been entitled to receive a COBRA notice during or at the end of his FMLA leave (which occurred several months before his termination). See id. at 979-80.
The Jordan plaintiff had argued that he was entitled to COBRA notice under regulations addressing the interaction of FMLA and COBRA. See id. at 979. Under
- An employee . . . is covered on the day before the first day of FMLA leave (or becomes covered during the FMLA leave) under a group health plan of the employee‘s employer;
- The employee does not return to employment with the employer at the end of the FMLA leave; and
- The employee . . . would, in the absence of COBRA continuation coverage, lose coverage under the group health plan before the end of the maximum coverage period.
We held that the plaintiff had failed to satisfy the third component because “[w]ithout COBRA continuation coverage Plaintiff would have remained covered under the [Company] Plan . . . as long as he paid his premiums.” Id. at 980 (emphasis added). With that statement, we implicitly held that the change in payment method that accompanied the plaintiff‘s taking FMLA leave did not result in a “loss of coverage,” a sine qua non for a “qualifying event.” In other words, the plaintiff‘s failure to pay premiums, not the FMLA leave
We find Jordan persuasive and adopt similar reasoning here.5 Furthermore, we now clarify that altering the contribution method alone, as SNS did here when it began deducting premiums from Mrs. Morehouse‘s workers’ compensation checks, does not inherently change the “terms and conditions” of coverage and therefore does not produce a “loss in coverage.” See
Nor have the Morehouses identified any other “term” or “condition” of coverage that changed when SNS altered the contribution method. For example, the Morehouses do not contend that the amount of their premiums changed. See, e.g.,
Thus, because the Morehouses did not “cease to be covered under the same terms and conditions” when their contribution method was altered, no qualifying event occurred that would have triggered a mandatory COBRA notification.
IV
Accordingly, we REVERSE the district court‘s decision in its entirety, including the awards of damages, statutory penalties, and attorney‘s fees, and direct the district court to GRANT Defendant SNS‘s motion for summary judgment.