ERISA class actions surge over health plans' tobacco surcharges

Class action lawsuits alleging violations of the Employee Retirement Income Security Act of 1974 are on the rise nationally against companies allegedly charging a higher premium for policyholders who use tobacco.

The lawsuits, which are filed in federal court in Connecticut, Pennsylvania, New Jersey, New York and other states, claim employers must offer alternatives, like a smoking-cessation program, to justify the surcharge.

Three law firms are responsible for eight cases filed since Oct. 3: Siri & Glimstad, Stueve Siegel Hanson and the McClelland Law Firm, according to Law.com Radar.

The defendants in each case include major retailers like Target Corp., 7-Eleven Inc., Tractor Supply Co., Walmart. Inc. and Campbell Soup Co.

“Walmart and Walmart Associates Health and Welfare Plan comply with all applicable state and federal laws and does not discriminate based on health status,” Kelly Hellbusch, a spokesperson for Walmart, said. “The lawsuit is without merit, and we will respond appropriately to the Court.”

The other defendants did not respond to requests for comment.

“It is typically illegal to charge employees fees for smoking, not vaccinating, or other lifestyle choices and we intend to hold these companies accountable,” said Oren Faircloth of Siri & Glimstad, counsel for the plaintiff in five of the lawsuits.

The most recent cases were brought in the U.S. District Court for the District of Connecticut on Oct. 23, and filed on behalf of the proposed class by Stueve Siegel Hanson and McClelland Law Firm.

The plaintiff, Arkansas resident James Richard Hill III, filed the class action against XPO Inc. and GXO Logistics Inc. He alleged the Greenwich, Connecticut-based companies charge tobacco users $100 more each month.

While the surcharge by itself is not a violation of the ERISA, the plaintiff claimed it does not comply with the anti-discrimination provisions of the act. The plaintiff argued there must be another option to avoid the surcharge for the entire plan year, and not just “on a going-forward basis.”

Related: Campbell Soup employees claim company penalizes smokers

In 2021, Stueve Siegal Hanson and McClelland Law Firm, two of the firms filing many of the tobacco surcharge cases, were granted class certification in Lipari-Williams v. Missouri Gaming Company LLC in the Western District of Missouri.

“Since Stueve Siegel Hanson and McClelland Law Firm pioneered private litigant ERISA tobacco surcharge claims in 2021 obtaining (as far as we are aware) the only class certification order and the only class settlement, we have continued to press these claims in courts around the country on behalf of workers subject to these unlawful fees,” Alex Ricke of Stueve Siegel said. “Employers cannot use ERISA’s provisions encouraging wellness programs as a subterfuge to penalize workers who use tobacco or have other medical conditions.”

The U.S. Department of Labor has also come down on tobacco surcharges. On Sept. 13, 2023, U.S. District Judge Edmond E. Chang of the Northern District of Illinois’ Eastern Division required Flying Food Group LLC to reimburse $134,222 to employees participating in the company’s health plan who were charged extra for using tobacco. The lawsuit was filed by the Department of Labor’s Office of the Solicitor in Chicago.

In addition, the DOL also filed a case against Macy’s Inc. in Ohio. The court has denied the defendant’s motion to dismiss.