FORTUNE Small Business:

Can I tell my employees not to smoke?

An employer wonders whether he can lower insurance costs by discouraging employees from lighting up on their free time.

By Anne Fisher, Fortune senior writer

(FSB Magazine) -- Dear FSB: I want to offer medical coverage to my employees, but my budget is limited. Insurance companies say I could get a much lower rate (and my employees would have smaller co-payments and deductibles) if they were all nonsmokers. Well, they are nonsmokers at work, because a local ordinance bans smoking in workplaces here. But I feel uncomfortable telling my workers what they can or can't do on their own time. Aren't there laws about this? --Randall Seale, New York City

Dear Randall: Yes, as a matter of fact there are laws about this. Thirty states (New York is one of them) and the District of Columbia have enacted "lifestyle statutes," which are designed to discourage employers from discriminating against an employee or job applicant based on the person's behavior when he is off the clock. That includes fundraising or campaigning for a political candidate or participating in (the statute reads) "any lawful leisure-time activity," presumably including mud wrestling, bungee jumping or watching "American Idol."

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The law also covers "the individual's legal use of consumable products outside of work hours and off the employer's premises," says Susan Lessack, an employment lawyer and partner at Pepper Hamilton (pepperlaw.com) in Philadelphia. Because tobacco is a legal product, an employer would be on exceedingly thin ice deciding to, say, fire all smokers.

Luckily for you, lifestyle statutes recognize that insurance premiums go up when tobacco enters the picture. Paragraph 6 of the New York law says that if an insurer charges you more because somebody lights up at a party now and then, you're allowed to pass that extra cost along to the employee - provided you pass along only the extra cost you incur and not a penny more, and provided you make available to employees a statement showing the differing rates you have to pay for smokers and abstainers. If any smoker wants to ante up less for his medical coverage, all he has to do is quit.

Do you think employers have a say in employee behavior outside of work if it affects health costs? Have you encouraged your employees not to smoke? Post your thoughts on the Ask FSB blog.

Do you have a small business question for our experts? Ask the editors.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.