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Employer perks for COVID-19 vaccinated workers could draw legal challenges

Alexis Keenan
·Reporter
·5 min read
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U.S. employers are largely encouraging rather than mandating their employees to receive COVID-19 vaccines, according to two recent surveys. And a growing number of companies have dangled legally untested bargains, from extra compensation to paid time off, to entice employees to get the vaccine.

Target Corporation (TGT) on Wednesday became one of the latest major employers to offer extra compensation to its frontline and essential hourly workers. The company is paying workers up to four extra hours, and picking up the tab for round-trip Lyft (LYFT) rides to and from vaccination appointments.

McDonalds made a similar announcement in January, offering its U.S. employees four hours of bonus pay. Grocery chains Trader Joe’s and Aldi, and coffee chain Starbucks (SBUX), incentivised workers with two hours of extra pay. Grocery platform Instacart and Kroger (KR) offered more modest stipends of $25 and $100, respectively.

Companies should be wary about the incentives they offer for workers who get vaccines, as these rewards are largely untested against federal health privacy law, experts say. However, it’s unclear exactly how generous these employer perks can be before they could become legally problematic.

More clarity could come in March, when the Equal Employment Opportunity Commission (EEOC) will decide whether it’s adopting proposed rules that could restrict employers that up the ante on vaccine incentives.

‘It’s not 100% clear for a variety of reasons’

The uncertainty arises because the Department of Labor (DOL) has never issued specific guidance on how employer vaccination programs and vaccine incentives fit into the Employee Retirement Income Security Act (ERISA), which sets minimum standards for company health plans.

NEW YORK, UNITED STATES - 2021/02/13: View of the Pfizer covid vaccine vial used at community-based pop-up covid vaccination site in Chinatown at Confucius Plaza Community Center. Pop-up site was managed by NorthWell Health System personnel and activated on order by Governor Andrew Cuomo. (Photo by Lev Radin/Pacific Press/LightRocket via Getty Images)
View of the Pfizer covid vaccine vial used at community-based pop-up covid vaccination site in Chinatown at Confucius Plaza Community Center. (Photo by Lev Radin/Pacific Press/LightRocket via Getty Images)

The gray area leaves questions about whether vaccine incentives trigger employee protections of the Americans with Disabilities Act (ADA) and compliance requirements of the Health Insurance Portability and Accountability Act (HIPAA). Both set limitations on incentives offered through employer wellness programs.

“It’s not 100% clear for a variety of reasons...there are a lot of schools of thought on it,” Ogletree Deakins employment benefits attorney Stephanie Smithey said, explaining that if employers want to be conservative, they should assume wellness program rules apply to vaccine incentives.

For wellness programs subject to HIPAA, incentives can’t exceed 30% of the total cost of the healthcare premium, and workers who can’t get vaccinated due to a medical issue must receive an alternate way to get the incentive.

Under ADA guidance, wellness programs that offer incentives to employees who receive the vaccine should not be coercive, Cozen O’Connor labor and employment John Ho told Yahoo Finance. “It has to be voluntary,” Ho said.

“Where the line gets drawn on whether an incentive is so significant that it makes employees feel coerced to disclose protected medical information to receive the reward, or avoid a penalty, is somewhat unclear,” Ho explained. “Employers have to make sure that it’s not so much that it’s no longer voluntary, and that they are not essentially forcing people to do it.”

NEW YORK, USA - FEBRUARY 10: Citi Field baseball stadium is converted into a Covid19 vaccination site for Queens residents and food service workers, taxi drivers and among other groups in Queens of New York City, United States on February 10, 2021. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images)
NEW YORK, USA - FEBRUARY 10: Citi Field baseball stadium is converted into a Covid19 vaccination site for Queens residents and food service workers, taxi drivers and among other groups in Queens of New York City, United States on February 10, 2021. (Photo by Tayfun Coskun/Anadolu Agency via Getty Images)

Companies should avoid implying that workers will face repercussions for not getting the vaccine, according to Barry Hartstein of Littler Mendelson, who spoke generally to Yahoo Finance without commenting on particular companies,

“Whether [the employer] is saying ‘Oh yeah, it’s a voluntary vaccine,’ but all of the sudden you get the circumstances where it’s with a wink and a nod, and they’re basically saying we expect you to get it, or you’re going to get in trouble,” said Hartstein, who co-chairs the Equal Employment Opportunity (EEO) and Diversity Practice Group.

One concern is that disparities between workers’ compensation could widen as incentives for vaccinations increase. “That gives people who earn more, more flexibility to decide if that is right for them or not,” Kathy Dudley Helms, a leading member of Ogletree's COVID-19 task force, told Yahoo Finance.

In the EEOC’s proposed rules the agency suggested a gift card of “modest value” or a water bottle would qualify as legally acceptable incentives, whereas airline tickets or an annual gym membership dues would not.

'Like catching a greased pig'

While the new rules would provide more clarity, there’s no guarantee the EEOC will adopt them. Under the current guidelines, employers can mandate that their employees get vaccinated or take certain precautions such as wearing a mask. However, federal law permits exceptions for employees who request an accommodation based on a sincerely held religious belief, underlying medical condition, or disability.

“Determining a religious exemption is like catching a greased pig,” Dudley Helms said. “They’re hard.” She said employers could face additional hurdles under a mandate approach, as some state legislatures, including South Carolina, Alabama, and Wisconsin, have already considered outlawing employer-required vaccination.

In certain industries where employees are at high risk for contracting or transmitting illness — such as health care and food service and manufacturing — the same employee legal protections apply. However, employers can often make a stronger legal case that the high risk justifies that fewer exceptions should be made.

Dudley Helms said before adopting a mandate, employers need a clear system in place for making equitable determinations in response to employee requests for exemptions.

Hartstein said employers that mandate COVID-19 vaccination could also face pushback if a group of workers collectively oppose it. Whether unionized or not, a group of employees, he said, can invoke employee protections under the National Labor Relations Act (NLRA).

While federal guidance remains unsettled, most companies have been steering away from vaccine mandates in light of the many exceptions and legal challenges that could accompany them. And while companies may test the water by offering varying levels of perks to vaccinated employees, lawyers say, for now, they will likely advise them to steer clear of awarding workers major incentives for getting their shots.

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Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.