Employer Groups Seek Class Certification Reversal in Tobacco-Use Surcharge Case

Large employer groups are urging a federal appeals court to reverse a class certification ruling in a lawsuit against Compass Group USA, arguing that the decision could have sweeping consequences for employer-sponsored health plans and wellness programs nationwide.

In an amicus brief filed Wednesday in the U.S. 8th Circuit Court of Appeals—which hears appeals from federal courts in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota—the ERISA Industry Committee and the American Benefits Council backed Compass Group’s bid to appeal a Missouri federal judge’s decision to grant class certification in a lawsuit challenging tobacco-use surcharges imposed through the company’s health plan.

The case, brought by employees, alleges Compass violated the Employee Retirement Income Security Act by charging tobacco users higher health insurance premiums without properly providing or disclosing alternatives that would allow participants to avoid the surcharge.

Compass denies wrongdoing and is seeking appellate review of the class certification order issued by U.S. District Judge Stephen Bough in U.S. District Court for the Western District of Missouri. The district court granted certification of the class challenging ERISA tobacco surcharges, but the industry groups’ brief argues the court did so without meaningfully analyzing key individualized defenses, including whether plaintiffs had qualifying medical conditions or timely claims.

The brief also argues that the district court largely adopted the plaintiffs’ approach and prior precedent, while failing to assess how those issues affect requirements under Rule 23 of the Federal Rules of Civil Procedure, such as predominance and typicality.

The dispute has emerged as a test case in a growing wave of litigation targeting employer wellness programs that use tobacco surcharges to encourage smoking cessation. According to the amicus filing, at least 75 similar lawsuits are pending nationwide, with more than 25 of those filed in 2026.

Congress authorized employers to offer wellness incentives through amendments to ERISA and later through the Affordable Care Act. Those laws permit health plans to tie rewards or penalties to health-related activities, including tobacco use, while requiring accommodations for individuals for whom meeting a health standard would be medically inadvisable or unreasonably difficult because of a medical condition.

ERIC and the benefits council argued that the district court failed to adequately consider whether that medical-condition requirement creates individualized issues that make class treatment inappropriate. They also contended that the court did not sufficiently analyze Compass’s statute-of-limitations defenses or the implications of certifying overlapping opt-in and opt-out classes.

The employer groups warned that allowing the class certification order in the Compass case to stand could encourage similar rulings across the country and increase settlement pressure on companies defending ERISA cases.

“Wrongful certification of large ERISA class actions creates enormous pressure for defendants to settle even meritless claims,” the ERIC ABC brief stated, adding that litigation costs and potential liability could ultimately lead employers to scale back wellness programs or increase costs for workers.

The groups’ filing also highlighted the case’s significance because it reinforces another tobacco-surcharge class action, Lipari-Williams v. The Missouri Gaming Co., which had class certification granted by the same judge and was later settled for $5.5 million—although it is currently under appeal. According to the amicus brief, the Compass case now serves as “ground-zero for protecting Congressionally authorized wellness programs, long-term health of participants, and employer-sponsored health plans relied upon by nearly half the U.S. population.”

The 8th Circuit has not yet decided whether it will hear Compass’s appeal. The employer groups urged the court to intervene now, arguing that “early appellate guidance promotes consistent application of Rule 23, reduces uncertainty, and provides clarity regarding individualized defenses in this emerging category of ERISA class actions.”