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EEOC argument falls ill in wellness program challenge

January 6, 2016

Employers have a keen interest in helping their employees achieve and maintain a healthy lifestyle. To that end, employers have developed and implemented wellness programs. The thinking is that employees who are well will likely perform better than those who are not and employers of employees who are well will likely incur less healthcare-related costs.

The federal government has recognized this important employer interest. Joint guidance issued by the U.S. Department of Health and Human Services, the U.S. Department of Labor and the U.S. Department of the Treasury encourages the use of wellness programs by employers.

The Chicago office of the Equal Employment Opportunity Commission (EEOC) apparently did not pay attention to or was not impressed by the guidance. Since August 2014, this EEOC office has filed several claims in court challenging wellness programs as violative of the Americans with Disabilities Act (ADA).

The ADA generally prohibits covered employers from making disability-related inquiries or requiring medical examinations unless they are job-related and consistent with business necessity. Health risk assessments (HRA) are common features of wellness programs, and they almost always contain disability-related inquiries and biometric screenings that are generally considered to be medical examinations. Consequently, a wellness program might violate these provisions of the ADA.

The ADA, however, permits an employer to make disability-related inquiries or to request a medical examination as part of a voluntary wellness program. The ADA also contains what is called a “safe harbor” that would permit medical and disability-related inquiries in certain cases if done as part of a bona fide benefit plan.

One of the claims raised by the EEOC challenged a program established by Flambeau, Inc., a Baraboo, Wisconsin, manufacturing company. In EEOC v. Flambeau, Inc., the company mandated that employees complete an HRA and biometric screening to be eligible for its health plan. An employee who did not complete his or her HRA and screening at the appointed time would be subject to disciplinary action. In addition, non-participating employees would be required to pay the full premium in order to stay covered.

In its lawsuit against Flambeau, the EEOC alleged that when employee, Dale Arnold, did not complete the biometric testing and HRA, Flambeau cancelled his medical insurance and shifted the responsibility for payment of the entire premium cost to him. The EEOC said that employees who had taken the biometric testing and HRA, by comparison, did not have their health insurance coverage cancelled and were only required to pay 25% of the premium cost.

The EEOC argued that the biometric testing and HRA constituted “disability-related inquiries and medical examinations” that were not job-related and consistent with business necessity as defined by the ADA. The EEOC also argued that the plan was not a “voluntary” plan. Lastly the agency argued that the plan did not qualify for the “safe harbor” protections.

U.S. District Judge Barbara Crabb (W. D. Wis.) ruled that the ADA did not prohibit employers such as Flambeau from requiring employees to undergo medical exams as part of a wellness program tied to a voluntary company-subsidized health insurance plan. Judge Crabb held that, while the ADA generally bars employers from requiring employees to undergo health-related tests unless the exams are job related, Flambeau fell under the law’s “safe harbor” provisions because the mandatory health assessment and biometric testing were conditions for employees to voluntarily receive the insurance offered by the company.

Judge Crabb determined that employees were not at risk for losing their jobs if they did not sign up for the insurance or participate in the program. As such, Flambeau did not violate the ADA. Flambeau required all employees who wanted the insurance to fill out a health history questionnaire and allow their blood to be drawn and their blood pressure to be measured. Judge Crabb recognized that the EEOC might be correct in arguing that the ADA safe harbor provision may not be appropriate for examinations that are part of a stand-alone wellness program, but the program involved in Flambeau was tied to the administration of its insurance program. Judge Crabb also disagreed with the agency’s assertion that Flambeau was using the “safe harbor” provision as a subterfuge against the ADA’s protections that bar employers from requiring workers to be examined or to provide disability-related information. Judge Crabb stated:

a benefit plan term does not operate as a subterfuge unless it involves a “disability-based distinction” that is used to discriminate against disabled individuals in a non-fringe benefit aspect of employment. Defendant’s wellness programs clearly did not involve such a distinction or relate to discrimination in any way. Regardless of their disability status, all employees that wanted insurance had to complete the wellness program before enrolling in defendant’s plan. (At page 14.)

The decision of Judge Crabb can be found here (subscription required).

This is a significant victory for employers who are seeking to encourage employees to be aware of their health risks and, hopefully, to take some action to address them. This decision applies to wellness programs that are a part of the employee’s benefit plan. How it will apply to stand-alone or other wellness programs in other situations remains to be seen. In any event this is a significant ruling for employers in this emerging area of the law. The EEOC will likely consider an appeal in this case of first impression. We will continue to monitor this case and others like it in the months ahead.

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