Two federal district courts recently dismissed challenges to employer wellness programs that charge tobacco users higher health plan premiums. Both found the plaintiffs lacked standing and declined to enforce Department of Labor’s (DOL) notice requirements. One also held that employers don’t need to refund surcharges already collected. These decisions add to a growing body of employer-favorable rulings.
Background
Employers have faced class-action lawsuits alleging that tobacco-related premium surcharges violate federal wellness-program requirements. The claims generally focus on failing to disclose reasonable alternatives including physician-approved options and failing to provide the full reward, such as reimbursing surcharges paid before completion. Some suits also allege ERISA fiduciary breaches and seek refunds, interest, disgorgement, and attorney fees.
Recent Court Decisions
Although some tobacco surcharge lawsuits have proceeded, most recent rulings have dismissed challenges to employers’ tobacco-free wellness programs. Here are the key takeaways:
- Williams v. Target Corporation (July 22, 2026): A Minnesota federal court held that the plaintiff lacked standing to challenge a tobacco surcharge and declined to enforce the DOL’s notice requirement for physician-approved alternatives, finding that the agency’s general rulemaking authority did not extend beyond Congress’s requirements;
- Spencer v. Campbell Soup Company (July 22, 2026): A New Jersey federal court dismissed a tobacco surcharge lawsuit on grounds similar to Williams and held that the full-reward requirement does not require reimbursement of previously paid surcharges.
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