Walmart workers sue over tobacco fees levied for health plan trust
A group of Walmart employees has launched a class action lawsuit accusing the retailer of charging an unlawful fee related to tobacco use.
The workers alleged Walmart charged them between $30 and $195 every pay period as a surcharge for utilizing company-provided insurance. The fee is for workers who admitted to using tobacco products, and households with more tobacco users are charged the higher penalties.
The plaintiffs claim the policy—which effectively raises insurance premiums for employees and their families—is discriminatory and violates the Employee Retirement Income Security Act (ERISA), a law that regulates the practices of private insurance companies.
The funds taken from paychecks are deposited in a trust account used for Walmart’s health plans. If employees quit using tobacco, they are still subject to the surcharge until the next enrollment period—a policy that violates Department of Labor regulations, the plaintiffs said. The plaintiffs said each of them continues to lose roughly $1,150 in pay annually.
“This means participants who become tobacco-free partway through the plan year or who complete a smoking cessation program can avoid future surcharges but are not retroactively reimbursed for any surcharges already paid in that plan year,” the lawsuit reads. “This practice violates ERISA’s requirements that participants receive the ‘full reward’ after satisfying the alternative standard.”
While employers are allowed to offer incentives to reduce the cost of providing employees with health benefits, any initiative must aim to improve care outcomes. By hoarding the fees in a trust, Walmart can then reduce its own spending on the plans it offers employees, ultimately profiting when workers continue to pay in, the lawsuit argues.
Walmart operates worldwide and has more than 2.1 million people on payroll in the U.S.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.