Although the employer prevailed, this case stands as a warning to other companies.
After her termination, Norma Franco-Santos took her employer, Goldstar Transport, Inc., to court, claiming the company had failed to provide her with a COBRA election notice.
Goldstar didn’t deny not sending the notice, but instead argued that it wasn’t required to comply with COBRA because it fell within the law’s small employer exception.
COBRA regulations state that companies that employ 20 or fewer employees on at least 50% of its work days in a year are exempt from the law.
Goldstar said it fell outside the scope of COBRA because at most it employed 10 employees for more than 50% of that year and another 6 employees for less than half of the year.
However, the court didn’t see it that way.
Related employers must be combined, too
The court didn’t just count the number of workers employed under the Goldstar moniker. It also counted those employed by Puerto Rico Warehousing Management Corp., because both integrated with a third company J & M Associates and were all owned by Jennifer Maldonado.
After combining both workforces, 19.4 full-time equivalent employees were counted as being employed for at least 50% of the year.
Of course, that meant Goldstar still fell below the 20 employee required to subject its health plan to COBRA. So the court did eventually side with the employer.
But this serves as an important reminder: If you have multiple companies, all with fewer than 20 employees, you’re not necessarily exempt from COBRA requirements.
According to the Internal Revenue Service, when counting employees for COBRA purposes, organizations have to include all employees of all related employers under “common control.”
Cite: Franco-Santos v. Goldstar Transport, Inc.