Pepsi Levies a Sin Tax on Its Workers

PepsiCo workers object to a $50 fee tied to smoking and obesity
Boxing Ring: Shawn Frederick/Corbis

Four years ago, PepsiCo began rolling out a wellness program that charges its employees $50 a month if they smoke or have obesity-related medical problems such as diabetes, hypertension, and high blood pressure. Workers can avoid the surcharge if they attend classes to learn how to break their nicotine addictions or lose weight. When about 400 unionized PepsiCo bottlers and truck drivers in central New York learned early last year they’d be subject to the fee, they rebelled. It’s a “sin tax,” says Ozzie Martucci, secretary-treasurer of Teamsters Local 669 in Albany. “We’re against that type of tax, frankly. It feels wrong.”

The workers decided they wanted to withdraw as a group from Pepsi’s health plan, so Martucci began shopping for a new one. A dozen insurers were interested in the Teamsters’ business, but they wouldn’t provide quotes without seeing a history of employee health claims to get a sense of the costs they could expect. Martucci says Pepsi-Co failed to turn over everything the Teamsters requested, citing health-care privacy laws. “We have always been willing to provide the unions with as much information as possible,” says Dave DeCecco, a PepsiCo spokesman. Martucci filed a complaint with the National Labor Relations Board last fall alleging that the company violated its contract with the Teamsters. A spokesman for the NLRB says it’s trying to negotiate a settlement.

PepsiCo opposes so-called sin taxes when it comes to levying them on its own products—an idea Congress floated in 2009 as a way to pay for health-care reform. Thirty states introduced legislation for soda taxes meant to improve residents’ health and close budget gaps. PepsiCo spent at least $17 million on lobbying and advertising to battle the proposals from 2009 to 2011, according to the Center for Science in the Public Interest, a Washington advocacy group. In the end, none of the taxes passed. “Most rational people understand that one product is not the cause of obesity,” says DeCecco. “It’s caused by a multitude of factors.”

The soda maker doesn’t think of its $50 assessment as a sin tax. Says DeCecco: “What company wouldn’t want a healthy, engaged workforce?”


    The bottom line: PepsiCo has spent at least $17 million fighting soda taxes while assessing fees on its own employees who are overweight.

    Before it's here, it's on the Bloomberg Terminal.