More companies weighing penalties for unvaccinated workers

More companies are considering imposing financial penalties on workers who refuse to get the coronavirus vaccine—from added health-care costs to withholding gym access—potentially adding a financial cost in addition to the severe health risks facing the unvaccinated.

After Delta Air Lines grabbed headlines Wednesday for saying it will charge unvaccinated workers an additional $200 monthly health-care-plan fee, a growing number of companies have been making inquiries with their legal counsels about asking unvaccinated workers to pay more for their health plans.

Some companies are exploring whether they can withhold raises for unvaccinated workers, decline to cover those workers’ COVID-19-related claims or restrict their access to workplace amenities such as gyms, according to lawyers and consultants who advise businesses.

Employers are increasingly moving from luring workers to get their shots to using threats, workplace experts say, frustrated by vaccine holdouts and emboldened by the U.S. Food and Drug Administration’s full approval of the Pfizer-BioNTech vaccine this week.

“I think a lot of employers are seeing the limitations of incentives for folks who are on the fence or who are really digging their heels in and don’t want to get the vaccine,” said Jeffrey Smith, an employee benefits partner at the law firm Fisher Phillips. “Every day we see more questions about ‘Can we charge more for health-care participants if they don’t get the vaccine?’ ”

Another employment lawyer, who spoke on the condition of anonymity to speak freely about an issue affecting clients, said: “I think what’s happening right now is people are mad. You’ve got decision-makers, people in boardrooms who’ve been vaccinated forever. They had their plan for hot conference room summer.”

Since the FDA’s full approval, more employers have been moving to vaccination mandates, with CVS Health, Deloitte, Walt Disney Co. and Goldman Sachs announcing or expanding requirements. Some employers that have mandates, including health systems and CNN, fired unvaccinated employees earlier in the summer.

Others, however, are stopping short of requirements, in part to avoid exacerbating worker shortages as the economy reopens.

Delta CEO Ed Bastian said Wednesday in a memo to employees that the surcharge is “necessary to address the financial risk the decision to not vaccinate is creating for our company,” noting the average COVID-related hospital stay has cost the airline $40,000 per person. As of Sept. 30, unvaccinated employees will no longer be eligible for additional paid leave for COVID-related absences.

The airline, which says it has a 75% vaccination rate and requires vaccinations from new employees, also said unvaccinated workers would have to wear masks and submit to weekly testing.

Wade Symons, a partner with Mercer, said he’s had at least 50 clients ask about adding surcharges for unvaccinated employees.

“If you have an employer that’s just philosophically opposed to a vaccine mandate, and they want to continue to give employees at least an appearance of a choice, [surcharges] go beyond just the incentives,” he said.

Yet employment lawyers also caution that adding such surcharges is legally complicated, noting that they implicate the Affordable Care Act, the Americans With Disabilities Act, the Health Insurance Portability and Accountability Act (HIPAA) wellness rules and other laws.

Those rules place a limit on surcharges or incentives tied to health-care plans if they can be considered “health-contingent,” lawyers said.

As a result, more-modest surcharges are more likely, Symons suggested—in the range of $30 to $50 per paycheck, he said.

“I’ve even had companies say, well, we’re just going to replace our tobacco surcharge with a vaccine surcharge,” he said. “This is the important thing of the moment.”

The rules may also require employers to offer a “reasonable alternative” for the rare employee who has a valid medical or religious reason not to be vaccinated, said Joseph Lazzarotti, an employee benefits lawyer at Jackson Lewis.

“The question then becomes, what’s the alternative?” he said. Unlike offering smokers the opportunity to take a course on quitting smoking, “there’s not a COVID-cessation program.”

Many employers would rather position economic incentives as a financial perk or discount for vaccinated workers than call it a surcharge for the unvaccinated.

Henry Albrecht, CEO of Limeade, which administers corporate wellness programs, said some companies are installing mandates or adding surcharges, but the bulk of his clients are giving workers “points” for becoming vaccinated that they can combine with other healthy behaviors to win rewards such as a gift card.

“They want to keep it a little more positive but also get those numbers up,” said Albrecht.

Lawyers cautioned that just because employers are asking about other tactics does not mean they will be implemented. And not covering COVID-related treatments carries substantial legal risk, said Lazzarotti.

Companies could in theory give notice they will cut pay or withhold raises if employees don’t meet certain conditions—unless they are governed by a contract or collective bargaining agreement, said Bob Lian, who leads the labor and employment practice at Akin Gump Strauss Hauer & Feld.

Other employers are considering limiting access to workplace gyms or transports for unvaccinated workers, according to research and advisory firm Gartner.

Brian Kropp, vice president of research for Gartner, said in an email that “what is most interesting about this approach is not the exact details of it—but the larger shift from encouraging vaccines for employees, to creating real costs for employees who don’t get vaccinated.”