Wellness Programs: Litigation Update

Wellness Programs: Litigation Update

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Volume 40 | Issue 49

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The EEOC and an employer have settled a claim of wrongful termination involving an employee who refused to participate in the wellness program offered through the employer’s group health plan. Additionally, a lawsuit seeking to stop the implementation of the financial reward provisions (the 30 percent rules) in the EEOC’s ADA and GINA wellness program regulations is proceeding.

Background

In May 2016, the Equal Employment Opportunity Commission (EEOC) issued final rules for wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). The ADA generally prohibits employers from requiring a medical examination (e.g., biometric screening) or inquiring about the existence, nature or severity of an employee’s disability (e.g., through a health risk assessment, or HRA). A medical examination or inquiry is permitted if they are job-related, part of a “bona fide benefit plan” or part of a “voluntary employee health program.” Among other things, GINA prohibits employers from requesting, requiring or purchasing information about the current or past health status of a spouse or other family member. The rules permit employers to offer a limited financial reward (e.g., 30 percent of the total cost of self-only coverage) for participation in a wellness program. (For information on these concepts and the final regulations, please see our June 17, 2016 FYI In-Depth and December 1, 2016 For Your Information.)

Note, a bill introduced in Congress earlier this year seeks to streamline wellness program compliance under the ADA and GINA with the HIPAA nondiscrimination rules. (See our March 6, 2017 Legislate.)

EEOC Settles With Employer

Orion Energy Systems, Inc. maintained a wellness program that included an HRA and biometric screening. Employees who participated in the program received a discount on their health insurance premiums, whereas employees who did not participate paid the full premium. In September 2016, a court decided that the wellness program was “voluntary” within the meaning of the ADA. Note that Orion’s wellness program would not have met the incentive limits in the EEOC’s final ADA regulations on wellness programs, but this was not an issue because the final regulations were issued after the case originated. For more on this (and other wellness program) litigation, please see our December 1, 2016 FYI In-Depth.

The court did find issues of fact about whether the employee was fired because of her opposition to the wellness program. Before going to trial, however, the employer reached a settlement with the EEOC, agreeing, among other things, to:

  • Pay the employee $100,000
  • Not retaliate against employees who object to or question any future wellness program
  • Train management (including the C-suite) and employees on the ADA and underlying regulations pertaining to health benefit coverage and wellness programs

The employer also agreed that any future wellness program that seeks medical examinations or contains disability-related inquiries will be voluntary within the meaning of the ADA and its regulations. The EEOC’s press release on the terms of the settlement can be found here.

Case Closed

The resolution of the Orion case is the culmination of several lawsuits filed by the EEOC’s regional attorney in the Chicago District Office, which was at the forefront of legal challenges to employer wellness programs over the last few years. See our FYI Alert from October 30, 2014.

AARP Sues EEOC

Last October, the AARP filed suit against the EEOC on behalf of its members alleging that the 30 percent reward limits under the ADA and GINA regulations are “arbitrary, capricious, an abuse of discretion and contrary to the law.” The AARP contends that forcing employees (and spouses) to submit to medical examination or inquiries and reveal confidential medical and genetic information to employers controverts the statutory purpose of the ADA and GINA. The AARP seeks to have the court nullify the 30 percent reward limit rules. The federal district court for the District of Columbia did not grant the EEOC’s request, denying a preliminary injunction. (See our December 1, 2016 For Your Information.)

While the AARP has pushed forward, in a procedural maneuver, the EEOC has asked the court to find that AARP is not a proper party to the litigation and to dismiss the case. Specifically, the EEOC aims to have the court determine that the AARP’s corporate structure is not a true associational membership organization and that it cannot show, other than through speculation, that it has a member who will be injured by the rules. While the district court initially found that the AARP did have standing (i.e., for the preliminary injunction), the issue is currently pending and must be resolved before the case moves forward.

In Closing

With the goal of achieving a healthy, productive workplace, wellness programs play an important role in employer health plan offerings. With all that’s involved, however, regulatory compliance can be challenging. We can expect these programs to continue to garner attention from all stakeholders, in and out of the courts, as they seek to test the final regulations. While legislative action that would streamline the ADA and GINA with the HIPAA nondiscrimination rules is possible, it’s important for employers to continue to seek advice from compliance experts and trusted advisors when designing and maintaining such programs.

Produced by the Knowledge Resource Center of Conduent Human Resource Services

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This publication is for information only and does not constitute legal advice; consult with legal, tax and other advisors before applying this information to your specific situation.