EEOC Wellness Lawsuits Highlight Tension Between ACA, ADA

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Between August and October 2014, the U.S. Equal Employment Opportunity Commission (EEOC) filed three lawsuits against employers in Minnesota and Wisconsin over their workplace wellness programs. The EEOC claims that the programs violated the Americans with Disabilities Act (ADA), while the employers argue that their practices are specifically authorized by the Affordable Care Act (ACA).

Employers and HR professionals are watching the cases closely because workplace wellness programs are increasingly common, and the rules surrounding them are unclear. A 2014 Mercer survey found that 88% of employers with 500 or more employees offer a wellness program, and that 42% of those programs require biometric screening. A separate survey by the Kaiser Family Foundation found that 51% of businesses with more than 200 employees operate a biometric screening program, and that 8% of those grant rewards or impose penalties for nonparticipation.

The main issue in the three cases is whether employees who choose not to participate in their employer’s workplace wellness program can still be subject to its effects. Although the question has yet to be resolved, the cases are already bringing well-deserved attention to the importance of ensuring that any workplace wellness program is compliant with federal law.

The Laws on Wellness

The ACA encourages employers to offer voluntary wellness programs by authorizing rewards or penalties worth up to 30% of the cost of employee-only coverage depending upon an employee’s health outcomes. The relevant part of the law states: “a reward may be in the form of a discount or rebate of a premium or contribution, a waiver of all or part of a cost-sharing mechanism . . . the absence of a surcharge, or the value of a benefit that would otherwise not be provided under the plan.” Employers commonly use biometric screens or examinations to determine whether an employee qualifies for a reward or penalty.

On the other hand, the ADA prohibits covered employers from requiring employees to undergo a medical examination that is not job related. As to whether a wellness program is required or voluntary, prior EEOC guidance states that a wellness program “is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate.” Confusing the issue even further, the ADA also contains a safe harbor provision that courts in the Eleventh Circuit have interpreted to exempt an employer’s wellness program from the ADA’s anti-discrimination rules.

The Wellness Discrimination Cases

The first of the three cases alleged that Manitowoc-based Orion Energy Systems launched a wellness program in March 2009 that required employees to complete a health risk assessment (HRA). One employee, Wendy Schobert, objected to the HRA and signed a form to opt-out on April 24. Orion paid the entire health insurance premium of employees who participated in the HRA, but contributed nothing to the cost of Schobert’s coverage due to her nonparticipation. Orion terminated Schobert on May 22, 2009. The EEOC claims that Schobert was fired because she objected to the wellness program and declined to participate in the HRA.

On September 30, 2014, the EEOC filed the second of the three cases in the U.S. District Court in Madison, WI against Flambeau, Inc., a company best known as the manufacturer of Duncan Yo-Yos. In this case, the EEOC alleged that Flambeau required employees at its Baraboo facility to participate in a wellness program which included biometric testing and an HRA in December 2011. One employee, Dale Arnold, was unable to complete the testing and risk assessment because he was on medical leave for a heart condition.

When Arnold returned from his medical leave, he asked for additional time and the necessary materials to complete the testing and risk assessment. Flambeau denied Arnold’s requests, and informed him in January 2012 that it had terminated his health insurance because he had not completed the testing and risk assessment. Similar to the Orion case, Flambeau told Arnold that he would have to pay the entire cost of his health insurance premium in order to continue his coverage under COBRA because he did not participate in the testing and risk assessment. Although he was not fired like Wendy Schobert, Dale Arnold was unable to afford the COBRA premium and was left without employer-provided health insurance until June 2012, which the EEOC argues violated his federally protected employment rights.

In the third case, the EEOC petitioned a federal court in Minnesota for a temporary restraining order against Honeywell, Inc. The EEOC alleged that a Honeywell program announced in the summer of 2014 will penalize employees (and their spouses, if they are covered by the company’s health plan) who do not undergo biometric testing which includes a blood draw. Employees who do not take the tests will have a $500 surcharge applied to their 2015 medical plan costs, as well as a $1,000 tobacco surcharges for each employee and covered spouse. In addition, employees could lose out on up to $1,500 in annual Health Savings Account (HSA) contributions, depending upon the employee’s base wage and type of coverage. Three employees filed complaints with the EEOC, but also completed the biometric screening.

In November, U.S. District Judge Ann D. Montgomery denied the EEOC’s request for a temporary restraining order in large part because none of the three complaining employees faced an actual threat of injury because they already completed the screening. This was far from a complete victory for employers, however, as Judge Ann Montgomery stated that “great uncertainty persists in regard to how the ACA, ADA, and other federal statutes such as GINA are intended to interact.” Judge Montgomery continued that the EEOC’s lawsuits “highlight the tension between the ACA and the ADA and signal the necessity for clarity in the law so that corporations are able to design lawful wellness programs and also to ensure that employees are aware of their rights under the law.”

The Reaction

Prominent members of the business community have spoken out in opposition to the EEOC’s actions. American Benefits Council President James A. Klein issued a statement on November 3, 2014 that the Honeywell case “sends the wrong message” to employers who invested in wellness programs. And on November 14, John Engler, former governor of Michigan and current president of the Business Roundtable, sent a letter to Health and Human Services Secretary Sylvia Mathews Burwell, Treasury Secretary Jack Lew, and Secretary of Labor Thomas Perez. In the letter, Engler expressed “strong disappointment” with the EEOC’s lawsuits and asked the three Secretaries to “personally engage on this matter . . . and thwart all future inappropriate actions against employers.” Engler also asserted that the EEOC’s actions threaten to undermine the benefits of employer-sponsored health insurance.

Despite this criticism, the EEOC is likely to continue its close scrutiny of workplace wellness programs. No matter how the issue plays out in the courts, wellness programs will continue to be a valuable tool in fostering a culture of employee ownership of health and addressing rising health costs. However, until the line between what is and is not permitted is drawn more clearly, employers would be wise to restrict the application of rewards and penalties to employees who voluntarily choose to participate.