Rentokil, a United Kingdom-based pest control company, moved to dismiss a proposed class action suit alleging it charged tobacco users more for health benefits than non-tobacco users without providing a reasonable way to avoid the surcharges. In support of its motion to dismiss, Rentokil claimed that the named plaintiffs lacked standing to bring the suit because they were ineligible for an exemption from the tobacco-free wellness program and had chosen not to stop using tobacco. The case is Leslie et al. v. Rentokil North America Inc., Case Number 5:25-cv-01423, U.S. District Court for the Eastern District of Pennsylvania.
According to their workers, Rentokil charges between $12.50 and $218.00 per month more for health insurance premiums for employees who use tobacco, and the company offers no alternative to avoid paying the surcharge. The workers claim that the "nondiscrimination" provision of the Employee Retirement Income Security Act (ERISA) prevents plans from implementing a surcharge based on a health-related factor without properly informing employees of a reasonable way to avoid the fee through a wellness program.
Furthermore, the employees claimed that Rentokil violated ERISA's requirement that plan participants receive the "full reward" of any alternative wellness program. Rentokil allegedly failed to completely reimburse workers for the tobacco surcharges they paid in a plan year before they completed the alternative wellness program. The workers also accused Rentokil of breaching its fiduciary duty under ERISA by establishing the tobacco surcharge and retaining the surcharge to pay for plan expenses, which constitutes prohibited transactions.
Rentokil countered that it must provide employees with an alternative to the surcharge only if it would be "unreasonably difficult" due to a medical condition or "medically inadvisable" for them to quit using tobacco. Furthermore, Rentokil pointed out that the 2013 regulations by the U.S. Departments of Labor, Treasury, and Health and Human Services explicitly eliminated the requirement that plan participants demonstrate they are medically qualified for an alternative to the wellness plan. Nonetheless, Rentokil maintained agency regulations cannot remove a statutory requirement that Congress has approved.
Additionally, Rentokil argued that it wasn't acting as a fiduciary in administering the wellness program, so it could not be accused of ERISA violations for retaining the surcharges to pay for plan expenses. The company also maintained that employees weren't entitled to reimbursement of the tobacco surcharges they paid before completing the wellness program, as plan participants must participate in the wellness program before they are eligible for relief from the surcharges. Therefore, the company contended that it did not unlawfully deny the participants the chance to obtain the "full reward" for participating in the wellness program.
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