Nestle Waters Hit with Class Action Over Allegedly ‘Insufficient’ COBRA Notices

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Nestle Waters North America, Inc. failed to provide former employees with proper notice of the availability of continued health insurance coverage under COBRA, according to a proposed class action lawsuit.

The case explains that under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), employees who experience a “qualifying event” such as termination must be given proper notice of their right to continued health insurance coverage. According to the suit, Nestle’s COBRA notice is not written “in a manner calculated to be understood by the average plan participant” in that it “attempts to scare” individuals away from electing COBRA coverage.

The lawsuit alleges that the defendant’s COBRA notice unnecessarily includes an “ominous warning” suggesting that a consumer could suffer civil, or even criminal, penalties by submitting “false, incomplete, or misleading” information. Moreover, the notice supposedly references a potential “$50 penalty from the IRS for each failure to provide an accurate tax identification number for a covered individual.” The case claims such warnings are “needlessly” included without context, “much less with an explanation of why potential criminal penalties, or IRS penalties, are somehow relevant to the COBRA election process.”

“Threats of criminal penalties and IRS fines simply have no place in a COBRA election notice, a process which is supposed to facilitate COBRA coverage election rather than intimidating people into not electing coverage,” the complaint states, alleging that the inclusion of such in the defendant’s notice constitutes a violation of federal law.

The lawsuit further alleges that Nestle’s COBRA notice contains “conflicting information” with regard to when the form is actually due and fails to provide the name, address and phone number of the plan administrator.

The suit stresses that although the Department of Labor (DOL) has issued a model COBRA notice meant to facilitate compliance, Nestle has refused to use the DOL’s example. According to the case, the DOL notice does not contain a “warning” regarding IRS penalties yet “still manages to convey the required information” in only seven pages, as compared to the defendant’s 19-page COBRA notice.

In all, the “conflicting, inadequate, and misleading” COBRA notice provided by the defendant fails to apprise consumers of their rights under the law and is insufficient to allow them to make an informed decision regarding the election of continued coverage, the case claims.