Waffle House lawsuit: Employees seek refunds over alleged illegal tobacco health insurance surcharge

If you work at Waffle House and use tobacco products, you may have been paying an extra fee for health insurance that a new federal lawsuit alleges violated federal law. A Georgia woman wants that money back for herself and thousands of others.

A former Waffle House server named Corkeitha Hicks filed a class action lawsuit against the Norcross, Georgia-based restaurant chain, accusing the company of illegally charging tobacco-using employees an extra $92 per month, or $1,104 per year, to maintain their health insurance coverage. 

The lawsuit, filed June 23 in federal court, argues Waffle House's tobacco surcharge failed to meet wellness program requirements under ERISA, as amended by the Affordable Care Act, which together set strict rules about when employers can charge employees extra based on health-related factors like tobacco use.

What the law requires and what Waffle House allegedly did wrong

Under federal law, employers can charge tobacco users more for health insurance, but only if they offer a legitimate wellness program that gives employees a real way to avoid the extra fee entirely. That program must meet specific requirements, including offering a reasonable alternative, typically a tobacco cessation program, that, once completed, allows employees to get a full refund of any surcharges paid during the entire plan year.

The lawsuit says Waffle House fell short on multiple fronts.

Waffle House did offer a quit-tobacco program through a service called Quit for Life. But according to the lawsuit, employees who completed the program after Sept. 30 of a given plan year would not receive a full retroactive refund of surcharges already paid. They could only avoid the fee going forward. The lawsuit argues that it violates ERISA's requirement that employees receive the "full reward" upon completing an alternative standard.

Additionally, the suit claims Waffle House failed to properly notify employees in all plan materials that a tobacco cessation program existed and that completing it could help them avoid the surcharge. The lawsuit alleges enrollment guides and summary of benefits documents did not mention the surcharge or wellness program, and that plan materials never informed employees their personal physician's recommendations would be accommodated, another requirement under federal law.

The lawsuit also alleges the surcharge operated as a default charge, requiring employees to actively opt out to avoid paying it.

A Georgia server at the center of the case

Hicks, who worked as a server at a Waffle House location in Forsyth, Georgia, says she paid the $92 monthly surcharge to maintain her health insurance coverage. Waffle House deducted $23 from her weekly paycheck to cover the charge.

The lawsuit also alleges Waffle House improperly handled the surcharge funds it collected. According to the suit, the surcharge funds were not placed into a trust account for the health plan but instead deposited into Waffle House's general accounts, allowing the company to earn interest on the withheld money and reduce its own financial contributions to the plan.

"In sum, these practices demonstrate that Waffle House's wellness program is an unreasonable, revenue-generating scheme disguised as a health initiative," the lawsuit states, "directly contravening ERISA's requirements and purpose."

Thousands of workers could be affected

The lawsuit seeks class action status on behalf of all Waffle House employees across the United States who paid the tobacco surcharge at any point during the past six years. The suit argues the proposed class includes thousands of workers. Waffle House operates more than 2,000 locations across 25 states, primarily in the South and Midwest.

Hicks and her attorneys are asking the court to order Waffle House to return the tobacco surcharge payments the plaintiffs allege were unlawfully collected. The suit demands a jury trial.

Waffle House has not publicly commented on the lawsuit. CBS News Atlanta has contacted the company for comment and has not received a response yet.