Starbucks Hit with Class Action Over ‘Deficient’ COBRA Notices

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A proposed class action lawsuit claims Starbucks Coffee Company has violated federal law by failing to provide eligible employees with proper notice of their right to continued health insurance coverage.

Alleging violations of the Consolidated Omnibus Budget Reconciliation Act of 1985, the lawsuit claims Starbucks, despite having access to a model notice designed by the U.S. Department of Labor (DOL), chose to use a “deficient” COBRA form in order to discourage employees from applying for coverage. The suit claims Starbucks’ goal in sending out the improper notice was to save money given COBRA coverage “is inherently expensive for employers.”

As the sponsor and administrator of the Starbucks Health Plan, the defendant was required to provide notice of the availability of COBRA coverage to each qualifying employee who would lose health insurance coverage as a result of qualifying event, such as termination, the complaint says. The case stresses that proper notice is critical for those who may be unaware that a law exists to protect their right to be insured in the event of a qualifying event.

“Notice is of enormous importance,” the lawsuit states. “The COBRA notification requirement exists because employees are not expected to know instinctively of their right to continue their healthcare coverage.”

Although Starbucks partially adhered to the DOL’s model notice, which was designed to help facilitate compliance with federal law, the company omitted “critical parts” and failed to include all required information in a single form “written in a manner calculated to be understood by the average plan participant,” the suit alleges. The case claims that the notice the plaintiff received “never actually explains how to enroll in COBRA,” and does not include a physical election form as can be found in the DOL’s model notice.

Instead, the lawsuit says, Starbucks’ form merely directs plan participants to a general “catch-all” phone number and website operated by a third party purporting to represent the company’s HR department.

Moreover, the case claims Starbucks’ notice fails to provide “all required explanatory information.” More specifically, the lawsuit alleges the notice was devoid of an address to where COBRA payments can be mailed, the identity of the plan administrator, and information concerning how COBRA coverage can be prematurely lost, such as by making late payments.

“Without information on how to elect COBRA, or where to send payments, or who is the Plan Administrator, or what happens if timely payments are not made, Defendant’s COBRA enrollment notice simply is not written in a manner calculated to be understood by the average plan participant,” the complaint scathes.

After his termination from Starbucks, the plaintiff was sent three separate COBRA notices that failed to meet the law’s requirements, the case says. Ultimately, the plaintiff was left “confused and misled” and without health insurance, resulting in unpaid medical bills, the suit claims.

“Simply put, Defendant’s COBRA notice and process violates the law,” the complaint avers.

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