What's Happening?
Mondelēz International, a major U.S. snack food company known for brands like Oreo and Cadbury, has become the latest large employer to be targeted in a growing wave of class action lawsuits challenging health plan tobacco surcharges. According to Bloomberg
Law, these lawsuits, filed under the Employee Retirement Income Security Act (ERISA), allege that wellness programs with tobacco surcharges violate ERISA if they fail to meet specific requirements. These requirements include offering a compliant reasonable alternative standard, such as a tobacco cessation course, disclosing that alternative in all required plan materials, and providing the 'full reward' when an employee completes the cessation program mid-year. This litigation trend began in late 2024 and has seen over 50 similar class actions filed in federal courts, with more than 30 occurring in 2026 alone. Other companies facing similar lawsuits include Target, Nestlé, Amgen, PepsiCo, Progressive, Campbell Soup, Waffle House, and Compass Group. Specific details regarding the plaintiff, court, and alleged surcharge amount in the Mondelēz case were not immediately available.
Why It's Important?
This wave of ERISA class actions against major U.S. employers regarding tobacco surcharges highlights a significant legal and compliance challenge for companies offering wellness programs. While federal courts at the district level have largely favored employers, appeals are pending in several circuits, indicating that the legal landscape is still evolving. The litigation underscores the importance of meticulously designed and documented wellness programs, particularly concerning the disclosure of reasonable alternative standards and the provision of full rewards for cessation. The ERISA Industry Committee (ERIC) has warned that broad class certification rulings could pressure employers to settle even defensible claims, potentially leading them to scale back wellness programs or pass costs to workers. This could impact employee benefits and corporate wellness initiatives across the U.S., affecting both employers' financial liabilities and employees' access to health-related incentives.
What's Next?
The legal proceedings against Mondelēz International and other companies will continue to unfold in federal courts. The outcomes of pending appeals in the First, Second, Sixth, and Seventh Circuits will be crucial in shaping the future of these tobacco surcharge class actions. Recently issued FAQ guidance (Part 74) from the Departments of Labor, Health and Human Services, and Treasury clarifies that plans are not required to retroactively reimburse surcharges when an employee completes a cessation program mid-year and addresses disclosure requirements. This guidance may provide plan sponsors with stronger footing against retroactive reimbursement claims but is unlikely to slow the pace of new filings, especially for plans with improperly designed surcharge programs or documentation failures. Employers, including Mondelēz, will likely need to review their wellness program disclosures against current ERISA requirements to mitigate litigation risks.
Beyond the Headlines
Beyond the immediate legal battles, these lawsuits bring to light deeper implications regarding corporate responsibility, employee well-being, and the interpretation of federal benefits law. The focus on 'documentation failures' rather than fundamental plan design problems suggests that many companies may be vulnerable due to administrative oversights in communicating their wellness programs. This situation could prompt a broader re-evaluation of how U.S. companies structure and communicate health incentives, particularly those tied to lifestyle choices. It also raises questions about the balance between encouraging healthier behaviors and potential discrimination, as well as the role of regulatory guidance in clarifying complex legal requirements. The long-term impact could lead to more standardized and transparent wellness program designs, potentially influencing how employers approach health benefits and employee engagement in health initiatives across the nation.
