Client Update: August 2026 by lcwlegal

August 2026

Client Update

Table Of Contents 03

Firm Victories

Discrimination

Labor Relations

Public Records

Workplace Safety

Consortium Call Of The Month

Did You Know?

Benefits Corner

Contributors: Bryce Bakewell Graduate Law Clerk | Los Angeles Andrew Dorado Senior Counsel | Los Angeles

Cynthia O’Neill Partner Emeritus | San Francisco Juliana Pech Associate | Los Angeles

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Client Update is published monthly for the benefit of the clients of Liebert Cassidy Whitmore. The information in Client Update should not be acted on without professional advice. To contact us, please call 310.981.2000, 415.512.3000, 559.256.7800, 916.584.7000 or 619.481.5900 or e-mail info@lcwlegal.com.

Los Angeles • San Francisco • Fresno • San Diego • Sacramento

Partner Paul Knothe And Associate Gabriella Kamran Persuade California Court Of Appeal To Affirm Dismissal In Union Retaliation Case. A fire engineer filed suit in the California Superior Court. He alleged his city employer retaliated against him for his union advocacy in violation of Labor Code section 1102.5, California’s whistleblower statute. During the court-required meet-and-confer process, LCW Attorney Kamran warned the fire engineer’s counsel that these claims fell within the Public Employee Relations Board’s (PERB’s) exclusive initial jurisdiction. When the fire engineer persisted with the lawsuit, the city obtained a dismissal without leave to amend because the superior court lacked jurisdiction. The fire engineer appealed. He argued that he should have been permitted to pursue his claims in court because PERB could not adequately address his related whistleblower claims under Labor Code section 1102.5. LCW continued to argue that PERB has exclusive initial jurisdiction over his action for retaliation based on union activity, even if the same alleged facts could also support a Labor Code violation. The California Court of Appeal agreed with LCW and held that public employees who allege retaliation based on union activity must first exhaust their administrative remedies before PERB. The decision reinforces the jurisdictional framework governing public-sector labor disputes and provides important guidance for public employers facing claims that are rooted in union-related conduct.

August 2026

firm victories Code section 1102.5. She sued in California Superior Court and asserted multiple claims against the county and several individual supervisors. Through a series of successful challenges to her complaint at the pleading stage, the LCW team narrowed the case substantially, securing dismissal of the individually named defendants and eliminating all claims except the whistleblower retaliation claim on the narrow theory that she had been subjected to a “sham” investigation. The LCW team then moved for summary judgment. The civilian director alleged that she was subjected to a “sham” investigation into a complaint made against her by one of her subordinates alleging that the civilian director had retaliated against the subordinate. The investigation in question was a “supervisory inquiry,” which is a pre-investigation evaluation of a personnel complaint to determine whether it merits being sent to the sheriff ’s Internal Affairs Bureau for a complete administrative investigation. The department determined in the supervisory inquiry that there was probable cause to believe that a policy violation may have occurred, and therefore the case was referred to the department’s Internal Affairs Bureau for an administrative investigation. The civilian director claimed the investigation was a retaliatory adverse action because: 1) she was not interviewed in the supervisory inquiry stage of the department’s process; 2) the notice of investigation required her to notify her unit commander, as opposed to her direct supervisor, of her absences during the pendency of the investigation; and 3) a counter allegation the civilian director made against her supervisor allegedly went uninvestigated. LCW argued that: 1) the civilian director had insufficient evidence of any retaliatory motive; 2) the county had legitimate reasons for conducting the investigation, and 3) the fact that the county investigated, standing alone, was not an adverse action that could support a retaliation claim, particularly because no action was taken against her as a result.

Partner Geoff Sheldon And Associates Lee Heard, Jordan Carman, And Moriah Denton Secure Summary Judgment In Whistleblower Retaliation Case. A civilian director in a sheriff ’s department alleged she was subjected to whistleblower retaliation under Labor

The court found that the civilian director provided no evidence to suggest that the investigation materially

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altered the conditions of her employment. She had no evidence that the changed process for reporting her absences impeded her ability to request them. Moreover, she provided no evidence that the department’s failure to investigate her claims altered her conditions of employment. Therefore, the court granted the LCW team’s motion for summary judgment in full and dismissed the case against the county.

Partner Che Johnson And Associate Morgan Johnson Convince Court To Affirm 124-Hour Suspension. A police officer received a total of 124 hours of suspension from duty for two incidents: 1) his conduct during an officer-involved shooting; and 2) delaying his response to a call to issue a minor traffic ticket to a man who was known for filming police as they responded to calls. After the city council upheld the advisory arbitrators’ findings, the officer challenged his discipline in the California Superior Court. The officer argued that the discipline was disproportionate and violated his rights under the Public Safety Officers Bill of Rights Act. LCW successfully defended the city by arguing that the officer’s misconduct was supported by the facts and the facts supported the decision to suspend the officer. First, LCW convinced the court that the officer did not understand the danger he posed by firing behind the other officers in the officer-involved shooting, and that the officer had offered contradictory justifications for shooting from his location. Second, it was poor judgment to issue such a minor traffic citation while a call for service was pending. The citation also created a perception of retaliation against the subject. After independently reviewing the full administrative record, the court concluded that the weight of the evidence supported the city council’s decision to uphold the 124-hour suspension. Following oral argument, the court denied the officer’s petition, leaving the city’s disciplinary action intact.

Partner Elizabeth Arce And Senior Counsel Alison Kalinski Secure Sergeant’s Demotion. A police department demoted a sergeant to police officer after he accessed court records without an official purpose and failed to report another officer’s misconduct. A hearing officer upheld the demotion, and the former

sergeant sued in superior court to challenge the hearing officer’s decision. During oral argument in the superior court, the former sergeant’s counsel argued that the discipline was unwarranted because the former sergeant could have obtained the information independently of the court system; and was unaware of his duty to report misconduct. LCW responded that the central issue was the employee’s continued failure to acknowledge any wrongdoing. LCW argued that supervisors in a law enforcement organization are held to a higher standard; and the department reasonably concluded the employee could no longer be trusted in a supervisory role. The court focused on the former sergeant’s lack of accountability and agreed that supervisors in law enforcement must meet higher standards. The court stated that the fact that reasonable disagreement existed over the appropriate penalty did not mean that the demotion was an abuse of the department’s discretion. The court ultimately denied the writ petition and upheld the city’s decision to demote the former sergeant.

Partner Brian Walter And Associate Olga Bryan Deliver Complete Defense Victory In Nurse’s Employment Case. A traveling nurse alleged race discrimination, defamation, and due process violations against one of LCW’s public hospital clients. The claims arose after the hospital reported concerns to the nurse’s staffing agency. Parents had repeatedly complained about the nurse’s handling of NICU infants, and the nurse had an unprofessional confrontation with the hospital’s supervisory staff. The staffing agency reassigned the nurse to another hospital, where he continued working at a higher rate of pay. LCW prevailed at every stage of the nurse’s litigation in both federal and state courts. The federal court denied the nurse’s attempt to withdraw deemed admissions, granted summary judgment on the federal claim, and remanded the remaining state law claims. LCW then renewed the hospital’s motion for summary judgment in state court, successfully opposed the nurse’s untimely efforts to reopen discovery, and won summary judgment on the remaining claims.

Los Angeles • San Francisco • Fresno • San Diego • Sacramento

August 2026

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Labor Relations PERB Defines Remedy For UC’s Faulty Response To Union’s Request For Information. AFSCME, Local 3299 submitted a request for information (RFI) to the University of California (UC). The RFI sought health and safety records about employees at Lawrence Berkeley National Laboratory (LBNL), a national research laboratory that UC operates. The U.S. Department of Energy (DOE) owns LBNL, but UC runs it under a contract with DOE. UC is the employer of all AFSCME-represented employees at LBNL. AFSCME requested that UC provide six categories of records for the prior five years related to the health and safety of AFSCME-represented employees at LBNL. UC responded that 1) the RFI was overbroad and burdensome; 2) DOE owned the records; and 3) AFSCME must file a federal Freedom of Information Act (FOIA) request with DOE. AFSCME filed an unfair practice charge with PERB. The charge alleged that UC violated its duty to meet and confer under the Higher Education Employment Relations Act (HEERA) by failing to provide the records it requested. The ALJ sustained AFSCME’s claim and issued a compromise remedy intended to comply with the U.S. Privacy Act of 1974. Both parties filed exceptions to the ALJ’s order. PERB outlined the requirements an employer must follow to respond to an exclusive representative’s RFI. An employer generally must provide a representative with all information that is necessary and relevant to the right to represent employees regarding mandatory subjects of bargaining. Employers must respond with diligence and thoroughness, because an unreasonable delay is the same as an outright refusal to provide information. An employer must provide all information that is available to it, and not just information it owns. Once an agency receives a request for relevant information, it must either promptly and fully supply the information or timely and adequately explain its reasons for not doing so. If the RFI meets the necessary and relevant standard, the employer’s unjustified failure to provide that information is a per se violation of its bargaining duty, and a charging party is not required to show harm or prejudice as part of its prima facie case. If, as in this case, the employer believes that the RFI seeks confidential information, the employer must meet and confer in good faith to negotiate a potential accommodation, such as redactions of private information in the records or a confidentiality agreement. If the parties cannot reach agreement, then PERB will decide the remedy through the resolution of an unfair practice charge. If the employer raises a significant privacy interest, then a balancing test applies: the employer has the burden of showing that the privacy interest outweighs the representative’s interest in the information. When privacy rights do outweigh the union’s interest in the information, the sensitive information can be withheld and/or redacted. PERB remedied this case by directing a PERB compliance officer to: oversee the disclosure process; ensure prompt implementation of PERB’s order; and accommodate all legitimate competing interests. This decision details PERB’s analysis of the state and federal privacy laws involved in the RFI, the redactions of information within a record that would be required, and explains that AFSCME was not required to use a FOIA request to DOE. AFSCME v. Regents of the University of California PERB Decision No. 3034-H, July 1, 2026.

City Attorneys’ At-Will Status Under City Charter Was Not Arbitrable. The Municipal Attorneys Association of San Francisco (Union) filed an unfair-practice charge with the Public Employment Relations Board (PERB). The Union represents 500 city attorneys whom the City and County of San Francisco (City) employs. The City Charter provides that city attorneys serve at-will. The Union proposed that the city attorneys only be terminated for just cause and that layoffs occur in inverse order of seniority. The City rejected the

Los Angeles • San Francisco • Fresno • San Diego • Sacramento

August 2026

Union’s proposal and proposed to maintain the status quo. The City refused to submit the Union’s proposals to binding interest arbitration because adopting those proposals would contradict the attorneys’ at-will status under the City Charter. The Union filed an unfair practice charge alleging that the City’s refusal violated the Meyers-Milias-Brown Act (MMBA). An administrative law judge ruled for the Union, and PERB affirmed based on its interpretation that the City Charter permitted the proposed protections to be established through a collective-bargaining agreement or interest-arbitration award. PERB found that the City had engaged in bad-faith bargaining and ordered it to allow the proposals to proceed to arbitration and reimburse the Union for bargaining costs. The City petitioned the California Court of Appeal for relief from PERB’s decision. The Court of Appeal reversed, holding that the City Charter excluded the Union’s proposals from binding interest arbitration. The Charter provisions gave the Civil Service Commission authority over the merit system and covered the appointment and removal of employees, the designation of positions as exempt, and the order of layoffs. Because the proposals were not arbitrable, the City’s refusal did not violate the MMBA, and the Court set aside PERB’s unfairpractice rulings. City and County of San Francisco v. Public Employment Relations Board, 121 Cal. App. 5th 243 (2026).

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Public Records Deadline To Produce Public Records Determined On Case-By-Case Basis. An online news service called the Voice of San Diego and its editor-in-chief (Voice) alleged that the San Diego Unified School District (District) routinely obstructed and delayed disclosing public records pursuant to the California Public Records Act (CPRA). According to Voice, the District took 399 days on average to produce records responsive to its past five years of CPRA requests. Voice filed a petition for writ of mandate to enjoin the District from violating the CPRA. The District provided proof that from 2015 through 2020, the Voice was the District’s most prolific requester of public records. The District provided the trial court all of its document production dates, including the dates on all of its rolling productions to Voice. The District argued the CPRA only requires a public entity to make the disclosable records “promptly available” and does not specify any deadline to produce records. (Gov. Code section 7922.530(a).) The trial court agreed with the District. Voice appealed and lost. The California Court of Appeal held that the CPRA does not define the precise timeframe for the actual production of requested public records. Whether an agency has promptly produced records is to be determined case-by-case, considering the scope and burden imposed on the particular agency by the particular request. Substantial evidence supported the trial court’s factual findings that the District had no practice of violating the CPRA. The trial court properly denied the petition for writ of mandate. Voice of San Diego v. San Diego Unified School District, 120 Cal. App. 5th 923 (2026).

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August 2026

WORKPLACE SAFETY Release In Separation Agreement Did Not Waive Employer’s Right To Seek Workplace Violence Restraining Order. Three employees complained that Adelanto Elementary School District Superintendent Michael Krause engaged in a years-long pattern that included angry outbursts, intrusive text messages, unsolicited photographs, monitoring them at or near their homes and workplaces, and jabbing his finger at two of them. The employees sought mental-health treatment and feared retaliation. The District terminated Krause’s employment pursuant to the terms of a separation agreement and general release. The agreement included provisions that required Krause to stay away from the employees and the District to waive all employment-related claims against Krause. Next, Krause successfully ran for a seat on the District’s Board of Trustees. The District then sought a workplace violence restraining order (WVRO) against Krause. The California Superior Court issued a WVRO that prohibited Krause from harassing, contacting, or disturbing the peace of the employees and generally required him to remain 100 yards away from them and their workplace. The order permitted him to attend Board meetings under specified conditions. Krause appealed. Krause argued, among other things, that the District’s waiver of claims against him in the separation agreement barred the WVRO proceeding. The California Court of Appeal affirmed the WVRO with modifications. The Court held that an employer’s right to seek a WVRO on behalf of employees cannot be waived under California law because preventing workplace harassment and violence is not only an individual right, but serves a fundamental public purpose. The Court held that the District proved that there was a reasonable probability of future harassment due to Krause’s repeated conduct, renewed presence as a Board member, and lack of insight or remorse. The Court modified the WVRO to accommodate Krause’s First Amendment rights, and shortened the four-year duration of the WVRO to three years so it would not exceed the statutory maximum. Adelanto Elementary School District v. Krause, 121 Cal. App. 5th 699 (2026).

Cal/OSHA Has Broad Subpoena Powers. An Uber Eats driver completed a delivery, fell down a flight of stairs, and died several days later. The California Division of Occupational Safety and Health (Cal/OSHA) sought records concerning the driver’s work status, the circumstances of the accident, and similarly situated drivers to determine whether the driver was an employee and whether Uber had complied with workplace-safety laws. Uber objected and produced no documents. Cal/OSHA petitioned the California Superior Court to enforce its subpoena, and the court ordered Uber to produce documents in all 20 requested categories. Uber appealed, arguing that under Proposition 22, Uber Eats drivers are independent contractors and therefore Cal/OSHA had no jurisdiction. Uber also argued that Cal/OSHA could issue a subpoena only in connection with an on-site workplace inspection. Uber also claimed the requests were overbroad and implicated confidential information. The California Court of Appeal rejected Uber’s principal arguments, holding that an administrative agency may subpoena records to determine whether a matter falls within its jurisdiction. Cal/OSHA was not required to prove that the driver was an employee before investigating whether the conditions for independent-contractor status www.lcwlegal.com

under Proposition 22 were met. The court also held that Cal/OSHA’s subpoena authority was not limited to on-site inspections. However, the Court of Appeal concluded that the lower court had failed to adequately assess the relevance and breadth of some of the requests, which could encompass records concerning customers and other unrelated users. The Court affirmed enforcement of the subpoena in principle, but remanded the case for the lower court to reconsider and narrow the requests. Division of Occupational Safety and Health v. Uber Technologies, Inc., No. B340734 (Cal. Ct. App. June 18, 2026).

Discrimination Motion To Compel Arbitration Denied On Sexual Orientation Harassment Claim. Trevor Decloedt alleged that a coworker repeatedly condemned him for being gay, told him that homosexuality was sinful, threatened to kill him, and touched or forcefully grabbed his hair. Decloedt repeatedly reported the conduct to supervisors and human resources, but he alleged that they took no action. He alleged severe emotional distress, including suicidal thoughts, and that he was later terminated without a meaningful explanation. Decloedt sued Radnet Management, related RadNet entities, his former supervisor, and the coworker, asserting 11 state-law causes of action, including hostile-work-environment and sexual harassment claims under California’s Fair Employment and Housing Act (FEHA). The employer moved to compel arbitration under an agreement Decloedt had signed when his employment began. The California Superior Court denied the motion, finding that Decloedt had alleged sexual harassment covered by the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 (EFAA), which makes predispute arbitration agreements unenforceable for cases relating to sexual harassment. The employer appealed, arguing that harassment based on sexual orientation was not “sexual harassment” under FEHA and that Decloedt’s allegations were not sufficiently severe or pervasive to state a viable harassment claim. The California Court of Appeal rejected those arguments and affirmed. Relying in part on the U.S. Supreme Court’s reasoning in Bostock v. Clayton County that discrimination based on homosexuality necessarily involves discrimination because of sex, the Court held that sexual orientation harassment is a form of sexual harassment under FEHA. Sexual harassment does not have to involve sexual advances, sexual desire, or explicitly sexual conduct; the critical question is whether the employee was harassed because of sex. Decloedt’s allegations of repeated anti-gay condemnation, threats, unwanted physical contact, and an assault described severe or pervasive harassment motivated by hostility toward his sexual orientation. Because Decloedt sufficiently alleged at least one sexual harassment claim, the EFAA exempted his entire case from compelled arbitration. Decloedt v. Radnet Management, Inc., No. B343963 (Cal. Ct. App. June 26, 2026; certified for publication July 7, 2026).

No Summary Judgment For Employer Who Terminated Employees After Their Pro-Religious Comments. Two former Alaska Airlines flight attendants sued the airline and their union, alleging religious discrimination after being terminated for the comments they posted on Alaska’s internal employee network. The flight attendants had posted in response to Alaska’s post in support of the proposed Equality Act, which would expand federal protections involving sex, sexual orientation, and gender identity discrimination.

Los Angeles • San Francisco • Fresno • San Diego • Sacramento

August 2026

Flight Attendant Marli Brown posted that the Act would endanger the Christian church, suppress religious freedom, and eliminate conscience protections. Flight Attendant Lacey Smith posted whether it was possible for a company to “regulate morality.” Alaska investigated both employees and terminated them for violating its anti-discrimination policies. The Association of Flight Attendants-CWA (AFA) participated in the investigations and disciplinary proceedings, and some union officials made statements that the flight attendants alleged could be interpreted as hostile toward the employees’ religious beliefs. Brown and Smith sued Alaska and AFA under Title VII of the Civil Rights Act of 1964 and Washington and Oregon anti-discrimination laws. They alleged that Alaska’s stated policy-based reasons for terminating them were a pretext for religious discrimination and that AFA attempted to cause, or knowingly acquiesced in, their terminations. The district court granted summary judgment to Alaska and AFA. The court found insufficient evidence that Alaska discriminated against them because of their religious beliefs. The U.S. Court of Appeals for the Ninth Circuit reversed, holding that the evidence created genuine disputes of material fact that should be decided by a jury. Brown’s statement was facially religious, and both Alaska and AFA understood its religious basis; a jury could therefore find that Alaska used its workplace policies as a pretext for terminating her because of her beliefs. Although Smith’s comment did not expressly mention religion, the majority concluded that Alaska investigated her together with Brown, knew that opposition to the Equality Act could involve religious concerns, and later characterized Smith’s brief question in terms a jury could find exaggerated or pretextual. The Court held that the AFA’s involvement and its officials’ disparaging statements could support a finding that the union attempted to cause or acquiesced in the terminations because of religion. The Court reversed the summary judgment and dismissal orders and remanded the case. Brown v. Alaska Airlines, Inc., 179 F.4th 707 (9th Cir. 2026).

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Consortium Call Of The Month Members of Liebert Cassidy Whitmore’s employment relations consortiums may speak directly to an LCW attorney free of charge regarding questions that are not related to ongoing legal matters that LCW is handling for the agency, or that do not require in-depth research, document review, or written opinions. Consortium call questions run the gamut of topics, from leaves of absence to employment applications, disciplinary concerns and more. This feature describes an interesting consortium call and how the question was answered. We will protect the confidentiality of client communications with LCW attorneys by changing or omitting details.

Answer: Question: Are public employers required to give employees performance evaluations?

There are no state or federal laws that require employers to give employees performance evaluations. But an employer’s policies, procedures, handbooks, civil service rules, or MOUs often establish requirements for performance evaluations. Providing regular and fair performance evaluations is vitally important to help employees to reach performance expectations and employers to both support disciplinary actions and avoid employment lawsuits.

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There are many ways to evaluate an employee’s performance. In addition to using the traditional “upward feedback” evaluations, these methods may be effective for particular categories of employees. Complete any collective bargaining duties before attempting to change current policies and practices: • If you are providing your subordinates complex or lengthy assignments, consider putting the instructions in writing so your employees can refer to them as needed. Written communication may also be appropriate if an employee does not respond to oral instructions. If a subordinate fails to meet performance expectations or violates agency policies, a supervisor should create a clear written record to support more intensive performance management or disciplinary action.

LCW In The News To view these articles and the most recent LCW attorney-authored articles, visit: www.lcwlegal.com/news. • LCW Partner Jenny Denny was recently featured in The 74, where she discusses the U.S. Supreme Court's decision upholding state laws that restrict transgender athletes from participating on girls' and women's sports teams. Jenny explains that while the ruling allows states to impose these restrictions, it leaves unresolved broader questions about whether Title IX requires schools to permit transgender students to compete consistent with their gender identity, meaning legal and policy developments are likely to continue. Read more here.

Visit the above link for more information.

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August 2026

Did You Know?

Whether you are looking to impress your colleagues or just want to learn more about the law, LCW has your back! Use and share these fun legal facts about various topics in labor and employment law.

benefits Corner IRS Increases Affordability Percentage For Affordable Care Act.

does not exceed 10.22% of the Federal Poverty Line for a single individual.

The IRS has set the new Affordable Care Act (ACA) affordability percentage to 10.22% for 2027. This new affordability percentage is 0.26% higher than the current 2026 affordability percentage (i.e., 9.96%). (Rev. Proc. 202626 (July 27, 2026).)

Please note that there are additional factors, such as health flex contributions and cash in lieu, that can greatly impact the amount of an employee’s Required Contribution and the affordability calculation. For more information about how to run the affordability calculation and whether you need to revise the employer contribution to maintain affordable offers of health coverage, please reach out to us.

While the Internal Revenue Code originally set the affordability threshold to 9.5%, the Internal Revenue Service (IRS) retains the authority to release an adjusted percentage each year. (See 26 U.S.C. section 36B(c)(2)(C)(i).) From 2015 to 2022, the IRS set an affordability percentage above 9.5%, going as high as 9.86% in 2019. For 2023, the IRS dropped the affordability percentage below 9.5% for the first time by setting it at 9.12%, then dropped it even lower to 8.39% for 2024. The affordability percentage increased to 9.02% for 2025 and 9.96% for 2026. The new 2027 affordability percentage of 10.22% is a new high. Applicable large employers are advised to check whether their offers of employer-sponsored health coverage for 2027 are affordable using the 10.22% threshold. To determine whether an offer of health coverage is affordable, an employer must run an affordability calculation to determine whether an employee’s “Required Contribution” toward the premium for the lowest cost employee-only coverage exceeds or does not exceed 10.22% of the employee’s household income for the 2027 taxable year. Since employers typically do not know the total household income of each of their employees, the ACA provides three affordability safe harbor options an employer may adopt and apply on a reasonable and consistent basis:

Can Time Theft Rise To The Level Of "Gross Misconduct" Under COBRA? A Federal Court Says Yes. When an employee is terminated, employers generally assume they need to provide a COBRA election notice so the employee has the opportunity to continue health coverage. But there is one important exception: COBRA’s continuation coverage requirements do not apply if the employee is terminated for gross misconduct. The challenge, of course, is that neither COBRA nor its implementing regulations define what "gross misconduct" actually means. As a result, employers have been left to rely on court decisions for guidance, and those decisions have often been highly factspecific. A recent federal district court decision provides additional guidance by concluding that an employee's intentional time theft constituted gross misconduct, relieving the employer of any obligation to offer COBRA continuation coverage. Background

COBRA generally requires employers to offer continuation health coverage to covered employees and their qualified beneficiaries following certain qualifying events, including termination of employment. However, an employee whose employment is terminated due to gross misconduct does not experience a COBRA qualifying event. As a result, the 2. Under the Rate of Pay Safe Harbor, coverage is employer has no obligation to provide a COBRA election affordable if the employee’s Required Contribution is less notice or offer continuation coverage. than or equal to 10.22% of the monthly wage amount for hourly employees (the hourly rate multiplied by 130 Despite the significance of this exception, Congress did not hours), or the monthly salary for salaried employees. define "gross misconduct," and the COBRA regulations likewise provide no definition. Consequently, courts have 3. Under the Federal Poverty Line Safe Harbor, coverage developed the standard through case law, often emphasizing is affordable if an employee’s Required Contribution 1. Under the Form W-2 Safe Harbor, coverage is affordable if the employee’s Required Contribution is less than or equal to 10.22% of the employee’s wages reported in Box 1 of Form W-2.

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The Court's Decision In Green v. Clement Auto Group, LLC, a federal district court in Missouri considered whether an employer properly denied COBRA coverage after terminating an employee for time theft. The employee had been approved for intermittent leave under the Family and Medical Leave Act but routinely clocked in before leaving work for medical appointments without recording leave. Although the employee admitted that he performed no work during the periods between clocking in and returning from his appointments, he nevertheless received compensation for those hours. Surveying decisions from multiple jurisdictions, the court observed that gross misconduct generally requires conduct that is significantly more serious than poor performance, negligence, or isolated lapses in judgment. Instead, conduct must be intentional, willful, wanton, deliberate, reckless, or demonstrate deliberate indifference to the employer's interests. Applying that standard, the court concluded that the employee's intentional falsification of time records and receipt of pay for unworked hours constituted gross misconduct. The court held that the employer had no obligation to provide COBRA continuation coverage following the employee's termination. What This Means for Employers Although this decision is not binding outside the federal district in which it was issued, it illustrates the type of conduct that courts may find sufficiently egregious to qualify as gross misconduct for COBRA purposes. The opinion reinforces that intentional dishonesty, particularly where an employee knowingly receives compensation for hours not worked, may satisfy the standard for gross misconduct. At the same time, employers should continue to exercise caution before relying on the gross misconduct exception. Courts have historically interpreted the exception narrowly, and an incorrect determination may result in

liability for failing to provide required COBRA notices and continuation coverage.

August 2026

that the exception should be applied cautiously because an incorrect determination may expose an employer to COBRA penalties and other liability.

Before concluding that an employee was terminated for gross misconduct, employers should carefully evaluate: • Whether the misconduct was intentional rather than merely negligent or inadvertent. • Whether the employer has thoroughly documented the facts supporting the termination. • Whether the evidence demonstrates deliberate misconduct rather than poor performance or misunderstanding of workplace policies. • Whether the employer has consistently applied its disciplinary policies in similar situations. Practical Considerations For most involuntary terminations, the safest course remains providing a COBRA election notice. Employers should consider relying on the gross misconduct exception only when the facts clearly demonstrate intentional or egregious misconduct and the supporting evidence is well documented. When employers believe the exception may apply, consulting legal counsel before withholding COBRA rights can help reduce the risk of later claims that continuation coverage was improperly denied. Takeaways While Green v. Clement Auto Group, LLC does not establish a nationwide rule, it offers useful insight into how courts may analyze the gross misconduct exception. The decision confirms that intentional time theft supported by substantial evidence may constitute gross misconduct sufficient to eliminate an employer's COBRA obligations. Nevertheless, because the exception remains highly fact-specific and is construed narrowly, employers should proceed carefully and ensure that any decision to deny COBRA coverage is supported by thorough documentation and a well-developed factual record.

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