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Compliance Q&A: COVID-19 vaccine and testing mandates, incentives

By Rich Gisonny , Anu Gogna and Benjamin Lupin | September 8, 2021

This Q&A focuses on issues surrounding vaccine requirements for employees to return to work as well as vaccine incentives.
Health and Benefits|Employee Experience|Benessere integrato
Risque de pandémie

As the COVID-19 pandemic continues, employers are considering whether to require employees to be vaccinated in order to reenter the workplace and whether to offer employees vaccine incentives.

The following Q&As are intended to help employers and group health plan sponsors understand some of the legal issues surrounding COVID-19 vaccine mandates and incentives.

Guidance and rules around COVID-19 vaccinations — including in the employment and group health plan context — are evolving, and employers should consult with legal counsel before implementing any decisions.

Q. Can an employer mandate that employees receive a COVID-19 vaccine to return to the workplace?

Under federal law, an employer may mandate COVID-19 vaccinations subject to EEOC guidance. Under that guidance, if an employee refuses to be vaccinated and objects due to disability-related reasons or sincerely held religious beliefs, then the employer must engage in an “interactive process” with the employee and, subject to the “undue hardship” standards, provide the employee with a reasonable accommodation.1

The EEOC guidance appears to be limited to mandates for employees returning to the workplace. It is not clear whether an employer can legally require employees who only work remotely to be vaccinated.

In a unionized workforce, collective bargaining issues should also be considered. A unionized employer generally cannot impose a vaccine policy unilaterally, since it would likely be considered a mandatory subject of bargaining between the employer and the union. Before adopting such a policy, employers should be prepared to bargain with the union(s), although a union may waive its right to bargain. At least one union has recently sued over an employer’s mandatory vaccination policy, maintaining that an employer adopted the policy without proper bargaining.

While federal law generally supports an employment-based mandatory vaccination policy, it is important to note that certain states have enacted or are considering enacting laws that prohibit employers from mandating vaccines or targeting employees who refuse to be vaccinated (see the last Q&A below for more details).

Q. How does the U.S. Food and Drug Administration’s (FDA’s) emergency use authorization (EUA) for the COVID-19 vaccines affect employer mandates?

The U.S. Department of Justice (DOJ) issued a recent opinion stating that employers and other entities are not prohibited from imposing vaccination requirements solely because the vaccine(s) are only available subject to EUA.

In addition, federal courts have ruled that EUA status did not prevent a hospital from imposing a mandate as a condition of employment, or a university from requiring vaccination for students, faculty and staff — assuming reasonable accommodations were available to those unable to receive the vaccine for legally protected reasons.

FDA approval of the vaccines should resolve this issue. On August 23, 2021, the FDA granted full approval of the Pfizer-BioNTech COVID-19 vaccine.

Q. Can employers offer incentives for employees to be vaccinated for COVID-19 (outside of a group health plan)?

According to EEOC guidance, employers may offer incentives to employees to voluntarily provide proof of COVID-19 vaccination obtained from a third party (such as a pharmacy, personal health care provider or public clinic). Employers must keep such vaccination information confidential pursuant to the Americans with Disabilities Act (ADA).

However, employers that are administering COVID-19 vaccines to their employees (either at the workplace or through an agent) may only offer incentives for employees to be vaccinated if the incentives are “not so substantial as to be coercive.” Because COVID-19 vaccinations require employees to answer pre-vaccination disability-related screening questions, the EEOC is concerned that a very large incentive could make employees feel pressured to disclose protected medical information. Because the meaning of “so substantial as to be coercive” is not clearly defined in the guidance, any incentive amount should be discussed with legal counsel.

Q. Can an employer impose a premium surcharge on COVID-19 unvaccinated employees or incentivize COVID-19 vaccinated employees through a group health plan?

An employer may implement a COVID-19 vaccination penalty or reward incentive policy using its group health plan if it is done through a HIPAA-compliant wellness program.

As background, HIPAA prohibits group health plans from charging similarly situated individuals different premiums or contributions, or imposing other cost-sharing requirements, based on a health factor, except through a wellness program.

As a result, any offer of a financial reward in exchange for getting the COVID-19 vaccine — or imposition of a penalty/surcharge for those who don’t get the vaccine — must comply with the wellness rules under HIPAA/ACA and, depending on the scope of the vaccinations, EEOC wellness rules under the ADA and the Genetic Information Nondiscrimination Act (GINA).


A COVID-19 vaccination surcharge or incentive program could be considered a health-contingent wellness program under HIPAA. Under HIPAA (as amended by the ACA), the eight “health factors” are health status, medical condition (including both physical and mental illnesses), claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising out of acts of domestic violence) and disability. A COVID-19 vaccine would appear to fall within “receipt of health care.”

Therefore, an employer would need to meet the requirements for health-contingent activity-only wellness programs. Those requirements are as follows:

  • Individuals must have the opportunity to qualify for full reward at least once per year.
  • Reward cannot exceed incentive limits (30% of plan cost by tier of coverage if dependents can participate; otherwise, 30% of self-only plan cost; up to 50% for tobacco programs).
  • The program must be designed to promote health or prevent disease.
  • Notice must be given to employees.
  • It must be uniformly available to all similarly situated individuals, with a reasonable alternative standard (RAS) offered.

The RAS could be a COVID-19 testing program (see below) or could include required masking and distancing, working from home or attending a COVID-19 vaccine education seminar. The RAS does not have to be the same for all employees but will need to be administered and tracked.

The employer must also determine how the COVID-19 vaccination surcharge (or incentive) interacts with other wellness surcharges/incentives the employer currently offers and how the additional incentive/surcharge will affect the offer of affordable coverage to full-time employees under the ACA employer mandate. This is because the amount of a COVID-19 vaccine surcharge must be added to the employee’s required contribution in determining affordability under the ACA’s employer mandate rules. For example, a $25 monthly surcharge would increase the employee’s required contribution by $25 when determining affordability.


If a wellness program provides incentives for disability-related inquiries or requires medical examinations of employees, regardless of whether they are participatory or health-contingent, then the EEOC wellness rules would apply.

However, EEOC guidance states that merely asking employees whether they have received a COVID-19 vaccination does not constitute a disability-related inquiry for purposes of the ADA. But a medical questionnaire that must be completed before a vaccine is received could be considered a disability-related inquiry subject to the ADA.

The EEOC has not issued final rules on how ADA and GINA apply to wellness programs. However, employers should be aware that rewards/penalties must be reasonable and structured in a way as to not be perceived as coercive. Further, according to the EEOC guidance, an incentive may not extend to an employee's family members receiving a vaccination administered by the employer or its agent, as that could violate GINA.

Employers considering a COVID-19 vaccine surcharge should discuss this with their legal counsel prior to implementation.

Q. Can an employer amend its group health plan to exclude coverage for COVID-19 related treatment for unvaccinated employees?

To date, there is no definitive guidance on this issue, but it appears that taking such a step is likely to violate HIPAA based on the use of a “health factor” to deny treatment and not treating “similarly situated” employees the same under the group health plan.

In addition, an employer-sponsored group health plan that does not cover COVID-19 treatments for unvaccinated employees may face legal challenges under the ADA (e.g., under recent guidance, “long COVID” may be considered a protected disability). In addition to the compliance concerns that should be discussed with qualified legal counsel, an employer should consider related public and employee relations issues.

Q. Can an employer require employees to take COVID-19 tests?

Federal laws do not prevent an employer from requiring all employees physically entering the workplace to be tested for COVID-19, subject to the reasonable accommodation provisions. In fact, the CDC has issued guidance that COVID-19 testing may be incorporated as part of a comprehensive approach to reducing transmission in workplaces.

In addition, under the available guidance, COVID-19 tests would be allowed either as (1) an accommodation for a mandatory vaccination requirement, or (2) a RAS under a wellness program to impose a premium surcharge.

The frequency of these tests should be discussed with legal counsel in consultation with medical professionals and current CDC guidance.

Q. If an employer requires testing for employees unvaccinated for COVID-19, is the employer (or the employer’s group health plan) required to cover the cost of COVID-19 testing?

While current federal guidance requires group health plan coverage for certain COVID-19 testing (for “individualized clinical assessments” regardless of whether an individual is symptomatic or has been exposed), under the same guidance, a group health plan would not be required to cover testing for “employment purposes” (such as testing as part of a “return to work” program).

While employer-sponsored group health plans are not required to cover return-to-work COVID-19 testing, under federal guidance a plan sponsor may choose to cover such testing. Several insurance carriers and third-party administrators have interpreted this guidance to mean that employment-based COVID-19 testing generally would not be covered by group health plans. Additional guidance may clarify this issue in the future, but for now, employers that wish to cover return-to-work COVID-19 testing through their group health plan should discuss this with their carrier or third-party administrator.

While a group health plan may not be required to cover the costs of COVID-19 tests required of employees as a condition of entering the workplace, the employer may be legally required to directly cover the costs of the tests. For example, ADA guidance that pre-dated the COVID-19 pandemic suggests that employers may be obligated to pay the costs of administering mandated medical tests in certain circumstances. Also note that, in certain states, it is our understanding that an employer may be required to pay the testing costs as an employment-related business expense.

Moreover, travel time and test-taking time under a COVID-19 testing program might also be compensable under the Fair Labor Standards Act or state law.

Q. Would any state laws need to be considered when mandating COVID-19 vaccines?

In response to federal guidance, legislation has been introduced in many states to prohibit or restrict private employers from requiring COVID-19 vaccinations as a condition of employment, or from discriminating against employees who refuse to be vaccinated.2

To date, different versions of such legislation have reportedly been enacted in five states (Arizona, Florida, Montana, New Hampshire and North Dakota). As a result, even when employers comply with all federal law requirements, it is possible that COVID-19 vaccine mandates (or other actions that may be considered work-based discrimination against those refusing to get vaccinated) could be challenged under state (and even local) laws. However, actions taken under the terms of an ERISA-covered self-insured group health plan would allow the employer to argue that ERISA would preempt the applicability and enforceability of those state laws.


1 See “New EEOC guidance on employer COVID-19 vaccine policies, incentives,” Insider, June 2021.

2 Additional state information on this topic can be found on the National Academy for State Health Policy webpage.

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