Companies Consider Financial Penalties for Unvaccinated Staff

It’s a strong incentive to encourage workers to get shots but not a one-size-fits-all solution.

September 03, 2021

Vaccinated vs Unvaccinated Stamps

ALEXANDRIA, Va.—Last week, Delta Air Lines announced it will implement a $200 monthly surcharge on employees who haven’t been vaccinated against COVID-19 and are enrolled in the company’s health-care plan, and other businesses may follow suit, according to the The Delta announcement is of interest to firms seeking stronger incentives for getting employees vaccinated.

Many see the surcharge as a way to increase vaccinations without laying off or taking other disciplinary action against workers who refuse to get the shot. Some employers worry that boosting health-care premiums or imposing other financial penalties could generate administrative and regulatory burdens, and even prompt anti-vaccine employees to seek work elsewhere amid record job openings.

Recently, several major corporations—Walmart, Tyson Foods Inc., Goldman Sachs Group and Google parent Alphabet Inc. among them—rolled out vaccine mandates or stricter restrictions on the unvaccinated following a spike in COVID-19 cases that threatens workplace safety and could saddle employers with enormous health-care costs.

A national survey of nearly 1,000 employers indicates that 52% say they will have policies in place by the fourth quarter of this year mandating that their employees be vaccinated against COVID-19, Reuters reports. The policies could include vaccination to enter common areas to requiring all employees to be inoculated, according to the Willis Towers Watson survey conducted between Aug. 18 and 25.

“We expect even more employers to institute vaccine mandates in the wake of FDA approval of the Pfizer vaccine,” Jeff Levin-Scherz, Willis Towers Watson's population health leader, told Reuters.

Ed Bastian, CEO, Delta, said in a letter announcing the new coronavirus restrictions that each unvaccinated employee hospitalized with COVID-19 costs the company an average of $50,000.

“We’ve always known that vaccinations are the most effective tool to keep our people safe and healthy in the face of this global health crisis,” he stated. “That’s why we’re taking additional, robust actions to increase our vaccination rate.”

COVID-19 hospitalizations involving unvaccinated patients in June and July cost the U.S. health system $2.3 billion, according to the Kaiser Family Foundation. And while tougher vaccine rules are meant to lower the risk that COVID-19 presents to employees, firms that impose stricter rules might lose workers who decide to take advantage of today’s 10 million U.S. job openings.

Geoff Freeman, president, Consumer Brands Association, said that workplaces with substantial risk of COVID-19 transmission, such as meatpacking plants, are more likely to implement vaccine restrictions. But some manufacturing facilities that have more space for social distancing have been able to keep the virus under control without doing so.

Many believe that mandating vaccines companywide is simpler than hiking employee health- insurance premiums. Surcharges are implemented as an “employer wellness program” under the 2010 Affordable Care Act, which allows employers to either raise or reduce an employee’s health-insurance premium by no more than 30%. The plan must comply with several different federal laws, while also meeting Equal Employment Opportunity Commission rules and state and local laws.

Steve Bernstein, regional managing Partner at Fisher Phillips and NACS labor counsel, urges employers to take their time when considering imposing such a surcharge or vaccine mandate.  “Convenience stores considering such actions should keep their culture front of mind,” said Bernstein. “Obviously safety takes priority these days and every workplace is different, but I do worry that some employers are implementing off-the-shelf approaches simply because the media is reporting others are doing so,” he said.

“For some clients the carrot seems to be working more effectively than the stick, but I certainly sympathize with those who believe they are running out of incentive options,” Bernstein said.

Fisher Phillips recently published two client alerts that may be of interest to convenience retailers. One deals with considering vaccine mandates, and the other questions to consider before implementing a surcharge

An August study from benefits consulting firm Mercer found that roughly 14% of employers will require their workers to be vaccinated before returning to the workplace, up from just 3% in May, when COVID-19 cases appeared to be declining.

The wave of new vaccine requirements may be making an impact. An Axios-Ipsos poll published Tuesday found that 20% of Americans said they are either not very likely or not likely at all to get the vaccine, a new low. Of those respondents, 43% said they would likely get vaccinated if their boss required them to, up from 33% a month ago. Still, most private employers don’t have vaccine restrictions in place, and many are waiting to see which vaccine rules prove to be most effective.

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Coronavirus Resources

NACS has compiled resources to help the convenience retail community navigate the COVID-19 crisis. For news updates and guidance, visit our coronavirus resources page.