The release of the COVID-19 vaccine came as welcome news for employers. With it, however, employers will now confront myriad new questions about how the vaccine will affect workplace terms and conditions. The foremost question across all sectors has been simple: Can and should employers mandate that their employees get vaccinated? While issuing a mandate may seem appealing, doing so creates a variety of both legal and practical risks that, for many businesses, may militate in favor of a voluntary compliance program.

Faced with this reality, many employers have begun exploring incentive-driven voluntary programs, including offering additional PTO, gift cards, and even cash “bonuses” to employees who provide proof of vaccination. While such a voluntary system avoids many of the pitfalls of a mandatory system, it also carries its own complexities and risks in an already complicated and unsettled area of law. This post examines some of those risks while also highlighting the unique uncertainty surrounding this emerging issue.

Defining “voluntary”

Employer incentive programs can be inherently coercive if not carefully managed. This risk is particularly acute where an employer strongly encourages participation to address an urgent situation, like the current pandemic. Such inherent coercion can convert a nominally voluntary program into a de facto mandatory program. To avoid this, employers should consider certain proactive measures.

First, any attempt to implement a voluntary program should be accompanied by clear instruction to supervisors that employees should not be pressured to participate. If supervisors pressure or even strongly encourage employees to get the vaccine, their efforts could be viewed as suggesting that failure to secure a vaccine will result in adverse impacts on the terms and conditions of their employment.

Second, if the incentives offered are too rich, employers could again be accused of having a de facto mandatory policy. Specifically, excessively generous incentives could lead to claims that the employer is punishing non-vaccination rather than rewarding vaccination.

Why does making a “voluntary” program actually voluntary matter? As noted above, vaccine mandates will carry additional compliance requirements. For instance, the analysis concerning reasonable accommodation will be materially different than in the voluntary context. A voluntary program later deemed mandatory may give rise to claims for failure to address those compliance obligations.

Navigating the uncertain “wellness” regulatory framework

Assuming an employer’s program is indeed voluntary, one of the first challenges will be complying with the vagaries of “wellness” program regulations. At the outset, it is unclear whether a voluntary, incentive-driven vaccination program will qualify as a “wellness” program under existing regulations. That analysis will turn upon the specifics of each employer’s particular plans.

For covered programs, a “rich” incentive offering could also run afoul of limits on such “wellness” activities created by regulations enacting the Americans with Disabilities Act (ADA) and Genetic Information Non-Discrimination Act (GINA). Previously, employers could incentivize employees and their family members to participate in wellness programs that required the disclosure of health information without violating the ADA or GINA. On January 7, 2021, the US Equal Employment Opportunity Commission (EEOC) proposed two new rules that would significantly restrict the value of any incentive—in most cases to a de minimis amount—that an employer may use to encourage its employees to participate in a wellness program. However, these proposed rules may not take effect in light of the Biden Administration’s recently-issued regulatory freeze on January 20, 2021. As a result, employers are left without clear instruction. Employers can find a full discussion of the proposed rules and the ADA rule’s safe harbor allowing more than a de minimis incentive here.

Discrimination risks in incentive programs

Offering incentives to employees to encourage them to get the vaccine could also raise discrimination-related issues. Specifically, risks may arise when employees who are unable to receive a vaccine for legally-protected reasons—e.g., due to a disability or sincerely-held religious belief—claim that they are being treated less favorably than other employees who are able to get the vaccine and related incentive. This potential risk may be more likely to generate exposure when a cash bonus incentive is offered, as such an incentive relates to compensation, and therefore may be considered a term or condition of employment. Even offering non-monetary perks to incentivize vaccination, however, such as gratuitous PTO so that employees can take time off to receive the vaccine, could give rise to employee claims of unfair treatment.

Under both the ADA and Title VII, employers will have an obligation to provide reasonable accommodations to employees with disabilities or sincerely-held religious beliefs that prevent them from getting a vaccine, as long as the accommodations do not place an undue burden on the employer. If an employee raises a religious or disability-related objection to vaccination, employers should consider offering an alternative means by which the employee can earn the incentive, such as participating in COVID-19 safety training. Further, employers may be able to mitigate this risk by offering de minimis incentives or something unrelated to the terms and conditions of employment, such as a gift card, which may help reduce the risk of discrimination claims brought by employees with disabilities or sincerely-held religious beliefs who cannot receive the vaccine.

Given the lack of guidance and certainty in this area, employers should balance the risk of discrimination allegations against the benefit of encouraging as many employees as possible to receive a vaccination.

Latent wage-and-hour risks in incentive programs

Cash “bonuses” to incentivize employees to get vaccinated carry substantial wage-and-hour risks. Specifically, such payments could be deemed nondiscretionary bonuses under the Fair Labor Standards Act (FLSA), thereby requiring ancillary overtime adjustments for some employees.

Why does this matter? Because under the FLSA, nondiscretionary bonuses must be included in an employee’s regular rate of pay for purposes of calculating overtime. This requirement means that in the pay period in which an employee receives a vaccination incentive bonus, the employee’s regular rate of pay may increase. As a result, any overtime pay the employee earns during that period would also increase, creating unanticipated payroll expense, and attendant additional administrative burdens for the employer. Offering some form of non-monetary, “in kind” incentive instead of a cash “bonus” would likely obviate this particular issue. This risk is amplified by the fact that employers likely will implement incentives uniformly across their workforce—creating a tailor-made collective to pursue a large joint action.

The FLSA also requires employers to compensate employees for expenses they incur on their employer’s behalf, if such expenses would effectively reduce the employee’s wages. If employers encourage/incentivize their employees to get vaccinated (especially if the “voluntary” nature of the program could be called into question), therefore, they may want to consider compensating the employees for the time spent receiving the vaccination and reimbursing the employees for any costs incurred, such as transportation expenses or vaccination costs, to the extent they are not covered by insurance.

While addressing these issues may be challenging, they can be overcome and employers should be able to craft pathways to incentivizing employees to get vaccinated without violating the law.