PepsiCo Defeats Lawsuit Over Health Plan's Smoker Fee

Judge rules company's quit-smoking program satisfies ERISA requirements.

Published on Mar. 2, 2026

Got story updates? Submit your updates here. ›

PepsiCo Inc. has defeated a proposed class action lawsuit challenging the company's practice of charging tobacco-using employees an additional $900 per year for health care coverage. A federal judge ruled that PepsiCo's policy of waiving the tobacco penalty for employees who complete a quit-smoking program satisfies the requirements of the Employee Retirement Income Security Act (ERISA).

Why it matters

This case highlights the ongoing legal and regulatory debates around employer-sponsored wellness programs and the use of financial incentives or penalties to influence employee health behaviors. The ruling affirms PepsiCo's ability to incentivize employees to quit smoking, but the broader question of how far employers can go in mandating or penalizing certain health choices remains a contentious issue.

The details

In her opinion, Judge Cathy Seibel said PepsiCo's policy of allowing employees to avoid the $900 annual tobacco surcharge by completing a quit-smoking program between May 1 and November 30 of the preceding plan year meets ERISA's requirement for employers to provide workers with at least one opportunity per year to obtain a waiver of such penalties.

  • The lawsuit was filed in the U.S. District Court for the Southern District of New York.
  • The judge issued her ruling on February 27, 2026.

The players

PepsiCo Inc.

A multinational food, snack, and beverage corporation.

Judge Cathy Seibel

The federal judge who presided over the case and issued the ruling in favor of PepsiCo.

Got photos? Submit your photos here. ›

What they’re saying

“PepsiCo's policy of allowing employees to avoid the $900 annual tobacco surcharge by completing a quit-smoking program between May 1 and November 30 of the preceding plan year meets ERISA's requirement for employers to provide workers with at least one opportunity per year to obtain a waiver of such penalties.”

— Judge Cathy Seibel, U.S. District Court Judge (Ruling)

The takeaway

This ruling affirms that large employers like PepsiCo can use financial incentives and penalties as part of their employee health and wellness programs, as long as they provide workers a reasonable opportunity to avoid such charges. However, the broader debate over the extent to which companies should be able to mandate or penalize certain health behaviors remains an ongoing legal and ethical issue.