Cigarette? No Thanks, I’ll Take the Extra Vacation Days Instead

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Companies that want to reap the benefits of a healthier workforce have long sought to discourage employees from smoking. But few have gone as far as Japanese marketing firm Piala Inc., which recently made headlines by offering its non-smoking employees six extra paid vacation days per year.Piala’s program is aimed at compensating non-smoking employees for the frequent smoke breaks taken by colleagues, according to one report by The Telegraph.In the U.S., where the American Lung Association estimates that a smoking employee costs employers nearly $6,000 more per year than a nonsmoking one, employers have plenty of incentive to discourage their workers from smoking. But a U.S. employer considering a policy like Piala’s would need to think through the complex rules governing employee wellness programs, along with state discrimination and labor laws, attorneys told Bloomberg Law.

Thinking through the legal implications is especially important now that the Labor Department has shown a willingness to sue employers that it believes are running noncompliant wellness and tobacco cessation programs. In August, the department filed a federal court lawsuit against Macy’s, Anthem, and Cigna over the retailer’s smoking cessation program, which the DOL says is discriminatory.

Wellness Programs

Wellness programs, in which employers offer workers incentives to adopt healthier behaviors, are subject to federal laws governing health information privacy and disability discrimination. An employer that offers extra vacation days to non-smokers could become subject to these rules, depending on how the program is structured.For example, an employer that simply conditioned extra vacation days on an employee’s smoking status might not fall under the wellness program rubric. That’s because such a program wouldn’t be connected to a group health plan, which can trigger the wellness program rules under federal health privacy law, Monica A. Novak, an employee benefits associate in Drinker Biddle’s Philadelphia office, told Bloomberg Law.

Frank C. Morris Jr., a Washington-based member of Epstein Becker Green who specializes in employee benefits, agreed that such a policy likely wouldn’t fall under the wellness program rules.

“I wouldn’t call this a wellness program, because I don’t think it has anything to do with wellness,” Morris told Bloomberg Law. “It’s a fairness program, is what I would call it.”

Administrative Considerations

Would the calculus change if an employer required workers to undergo a nicotine test before receiving the vacation days? That might raise concerns under federal disability law, Novak said, because the program would be doling out benefits based on whether an employee completed a medical exam. Disability law limits an employer’s ability to require medical examinations, Novak said.

If nicotine testing were required to qualify for extra vacation days, it’s possible the program could be subject to rules that limit the value of the incentive that can be given to employees—here, paid vacation days. Those rules are currently in flux, but they generally limit the value of a financial incentive to a certain percentage of the cost of coverage under the employer’s group health plan.

If these wellness plan rules applied to a vacation day program, it could pose an administrative challenge for employers, Morris said. That’s because the employer likely would have to calculate the value of a vacation day across a number of employee pay grades if it was a health contingent program, Morris said.

Finally, employers would need to be aware of any state laws that could throw a wrench into such a program. In addition to state labor laws that regulate working hours and breaks for certain workers, some states have enacted laws that ban or limit “lifestyle discrimination,” which could include smoking, Novak said.

Good Idea? Maybe Not

A final, important consideration for any company considering a program like this is whether it’s likely to lead to good outcomes, either for the company’s workforce or its bottom line.

Morris expressed doubt that such a program would benefit either a company or its workers, because it doesn’t give smokers any significant tools to kick their habit.

“The employee doesn’t get healthier, the employer doesn’t see the benefits of a healthier workforce, and money has been spent in what’s essentially a lose-lose situation, except for maybe from the perspective of equalizing things among smokers and non-smokers,” he said.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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