The current surge in the COVID-19 pandemic and the availability of vaccines have led many employers to consider ways to incentivize their employees to get vaccinated. Large employers on the national stage have even announced plans to impose penalties on employees through either a vaccine mandate or surcharges on their group health plan. However, any employer that seeks to adopt one of these programs should first consult with employment law counsel to ensure they are compliant with applicable laws.

Specifically, offering incentives or imposing surcharges that are tied to vaccination status brings up several compliance concerns that need to be addressed. Consider the following compliance obligations for common designs:

  • Providing a reward or applying a surcharge on the group health plan cost based on vaccination status. This design requires employers to comply with HIPAA’s wellness plan rules, the Americans with Disabilities Act (ADA) and other rules such as the ACA’s employer mandate affordability rules. HIPAA limits the amount of the incentive, requires notice to employees and requires a reasonable alternative standard for those who cannot get the vaccine because of a medical reason.
  • Providing a cash benefit, prize or PTO to all employees based on vaccination status. The ADA rules apply. Under HIPAA, this option enters a grey area because there is an argument that offering this benefit to all employees could create a stand-alone wellness plan that would also be subject to the HIPAA wellness rules discussed above. If that argument is correct, this option would make it harder for employers to comply with other benefits-related laws (like ERISA and the ACA). Employers should also remember the obligation to tax the benefit.
  • Offering the vaccination through the employer/onsite or through an employer-appointed third party (with or without a reward). ADA rules will apply and require that the vaccination program not be “coercive.” There is also the concern that HIPAA wellness rules could apply in addition to HIPAA and ADA privacy concerns. Employers may also need to consider any liability issues that could be caused by adverse vaccine reactions.
  • Excluding COVID-19 treatment for unvaccinated participants. HIPAA likely prohibits this practice altogether, as it is discrimination based on a health factor. This design is likely so prohibitive that it would not meet the HIPAA wellness plan standard of being “designed to encourage health” versus penalizing employees who get sick. Also, the HIPAA privacy rules may prohibit employer’s access to medical records, which they would need to specify those individuals who received such treatment under the plan.
  • Mandating the vaccine. Under federal law, it appears that employers may mandate the vaccine for employees returning to the office. Employers must comply with the ADA by providing a reasonable accommodation to employees with a medical disability or sincerely held religious belief that prevents them from taking the vaccine. Laws in some states may restrict this practice. Employers looking to impose a vaccine mandate with employment consequences for refusing a vaccination will need to consult with employment law counsel.

Disclaimer: EBI and any of its employees do not provide legal or tax advice. Compliance, regulatory and related content is for general information purposes and is not guaranteed to be accurate or complete. We recommend you should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.