Lowe’s Companies Inc. is facing a proposed class action lawsuit alleging the home improvement retailer illegally overcharges tobacco-using employees for health insurance in violation of federal benefits law. The lawsuit was filed in North Carolina federal court by employees Randy Denny and Michele Golembeck.
The plaintiffs accuse Lowe’s of imposing health insurance surcharges on tobacco users without offering required alternatives to avoid the fees, as mandated under the Employee Retirement Income Security Act. According to the complaint, Lowe’s also failed to inform employees of their right to avoid the surcharge through alternative means.
ERISA Compliance Issues
Under ERISA, employers can only impose tobacco surcharges alongside wellness programs that meet strict federal requirements designed to promote health and prevent discrimination. The regulations require employers to provide “a clearly defined, reasonable alternative standard” allowing plan participants to receive retroactive refunds of surcharges while completing cessation programs.
The lawsuit alleges that while Lowe’s benefits materials mention higher premiums for tobacco users, they make no mention of alternative methods to avoid the surcharge. According to the complaint, a benefits flyer states that tobacco-using employees must pay higher premiums but provides no information about enrolling in smoking cessation programs.
Golembeck, who lives in Texas and worked for Lowe’s there, paid approximately $45 extra per pay period for health insurance as a tobacco user. Denny, a former store manager from North Carolina who worked at a Connecticut location, claims Lowe’s human resources never provided instructions on avoiding the tobacco surcharge through cessation programs.
Allegations of Cost-Shifting
The plaintiffs argue that Lowe’s wellness program operates as a “cash grab” that “directly contradicts ERISA’s purpose of protecting workers from health-based discrimination.” They claim Lowe’s “withholds millions of dollars in tobacco surcharges from participants’ paychecks and uses these funds to offset its own obligations to contribute to the plan.”
According to the complaint, rather than operating a lawful wellness initiative, “Lowe’s uses its surcharge program to shift costs onto employees, retain funds improperly, earn interest on those funds, and reduce its own contributions to the plan.”
The lawsuit seeks to represent all plan participants subjected to the allegedly discriminatory surcharge and asserts claims for ERISA violations and breach of fiduciary duty. Siri & Glimstad LLP attorneys Dana Smith and Oren Faircloth represent the proposed class.
The case is Denny et al. v. Lowe’s Companies Inc. in the U.S. District Court for the Western District of North Carolina.