Just six weeks after the EEOC sued Orion Energy Systems, Inc. in the United States District Court for the Eastern District of Wisconsin claiming that Orion’s wellness program violates the Americans with Disabilities Act (ADA), the EEOC has filed a complaint in the Western District of Wisconsin against Flambeau, Inc. making similar allegations. Both complaints were brought by the EEOC’s Chicago District Office.
In EEOC v. Flambeau, Inc. (No. 3:14-00638) (W.D. Wis. 2014), the EEOC alleges that Flambeau’s requirement that employees participate in its wellness program or face termination of their health insurance violates the ADA. According to the complaint, Flambeau cancelled employee Dale Arnold’s health insurance because he did not complete the biometric testing and health risk assessment conducted under Flambeau’s wellness program, leaving him only with the option of applying for COBRA at his own cost. If Mr. Arnold had completed the biometric testing and health risk assessment, Flambeau would have covered about 75 percent of his health insurance premiums. Similarly, Orion Energy covered the entire amount of the health insurance premiums for employees who participated in its wellness program, while employees who did not participate had to cover the entirety of their premium costs.
The EEOC’s contention that the Flambeau and Orion Energy wellness programs violate the ADA stems from the ADA’s prohibition on asking employees disability-related questions or requiring employees to submit to medical examinations unless those questions or examinations are job-related and consistent with business necessity. Disability-related inquiries and medical examinations are permitted in the context of a wellness program if the program is “voluntary,” and if employee medical information is kept confidential. The question arising from theOrion Energy and Flambeau cases is what constitutes a “voluntary” wellness program. The EEOC has defined a voluntary wellness program as one in which the employer neither requires participation nor penalizes employees for not participating in the program. But, the EEOC has not yet taken a formal position on what would amount to a penalty. In January 2013, the EEOC said in an informal opinion letter that it “has not taken a position on whether and to what extent a reward amounts to a requirement to participate, or whether withholding of the reward from non-participants constitutes a penalty, thus rendering the program involuntary.”
The EEOC’s press release announcing its lawsuit against Flambeau focused on the draconian penalties imposed by Flambeau’s program: “Employers certainly may have voluntary wellness programs . . . But they have actually to be voluntary. They can’t compel participation in medical tests or questions that are not job-related and consistent with business necessity by cancelling coverage or imposing enormous penalties such as shifting 100 percent of the premium cost onto the back of the employee who chooses not to participate. Having to choose between complying with such medical exams and inquiries, on the one hand, or getting hit with cancellation or a penalty, on the other hand, is not voluntary and not a choice at all.”
But, the EEOC’s complaints and press release leave unanswered the question of whether the ADA is violated if an employer imposes a penalty of less than 100 percent of health insurance premiums for failure to participate in its wellness programs, such as the 30 percent penalty permitted for a wellness program to comply with the Health Insurance Portability and Accountability Act (HIPAA). To comply with HIPAA, wellness programs that are offered in conjunction with a group health benefit plan must meet certain requirements, one of which is that penalties based on participation in the program are limited to 30 percent of the cost of health insurance (50 percent for smoking cessation programs). Unlike the detailed guidance on this issue set forth under HIPAA’s regulations, the EEOC has not issued guidance, leaving employers that design their wellness programs to comply with HIPAA wondering how the EEOC would view those wellness programs.
Until the EEOC issues formal guidance on wellness programs, employers should consider how to structure those programs to minimize the risk of a claim that the program violates the ADA because it is not voluntary. At a minimum, employers should advise their employees that participation in the wellness program is voluntary, and if the employer wishes to impose a financial penalty on employees who do not wish to participate, that penalty should not exceed 30 percent of the employee’s health insurance premiums (or 50 percent for tobacco-related programs).