EEOC Sues Employers Over Wellness Programs, Despite Lack of Guidance

By Douglas J. Ellis / Dec 19, 2014

The Equal Employment Opportunity Commission (EEOC) filed lawsuits in 2014 against three employers, claiming that wellness programs sponsored by the employers violate the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA), primarily because the programs are not "voluntary" and impose penalties for employees who refuse or are unable to participate. However, the merits of these claims are difficult to evaluate because the EEOC has not issued guidance on what constitutes a "voluntary" wellness or health program. In addition, the EEOC's claims may conflict with wellness plan guidance issued by other federal agencies under the Affordable Care Act (ACA) and the Health Insurance Portability and Affordability Act (HIPAA).

The EEOC Cases

The EEOC filed lawsuits against Orion Energy Systems, Inc. and Flambeau Inc., claiming that each company's wellness program violated the ADA by requiring employees who refused or were unable to participate in health assessments and screenings to pay 100% of their health care premium costs. In the third case, brought against technology giant Honeywell, Inc., the EEOC alleges that employees and their spouses who refuse to participate in medical screenings may be subject to surcharges of up to $2,500 and lost employer Health Savings Account (HSA) contributions of up to $1,500. The Honeywell program, similar to many other wellness programs, uses biometric testing to identify health risks, including blood pressure, cholesterol and glucose levels, body mass index (BMI), and tobacco use. The Honeywell program tests an employee's spouse as well, and imposes an additional surcharge if the spouse does not participate.

The EEOC alleges that the biometric screenings under the Honeywell program violate the ADA because they are not voluntary. In addition, the EEOC claims that Honeywell's program violates GINA by imposing a premium surcharge and restricting employer HSA contributions unless an employee's spouse participates in medical screening or testing, which the EEOC likens to collecting family medical history. In response to these allegations, Honeywell has claimed that the surcharges can be avoided by taking an online smoking cessation course or certifying in writing that the individual does not use tobacco. The judge in the Honeywell case denied the EEOC's request for an injunction preventing Honeywell from going forward with its wellness program, but the case is still pending and Honeywell could face stiff penalties and remedial measures if it is found to have violated the ADA or GINA.

Conflicting Guidance

Generally, a wellness program does not violate the ADA if the related medical exam is done in connection with underwriting or classifying medical risks of the covered employees and their dependents. In addition, based on EEOC regulations, employers may adopt "voluntary wellness programs" that include medical examinations and obtaining family medical histories. Such programs are considered voluntary if they do not require participation or penalize employees who do not participate. However, the scope of what it means to not require participation or to penalize those who do not participate is not spelled out in any guidance from the EEOC. In fact, in 2013, the EEOC acknowledged 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 award constitutes a penalty, thus rendering the program involuntary."

This limited and ambiguous guidance stands in conflict with relatively clear guidance from the Internal Revenue Service, Department of Labor and Department of Health and Human Services under the ACA and HIPAA. The regulations under the ACA encourage employers to integrate wellness programs into their group health plans by allowing financial incentives and penalties related to the wellness program, as long as the program is offered on a substantially equal basis. The ACA regulations allow financial incentives and penalties to equal up to 30% of the cost of coverage (50% for wellness programs targeting smoking or tobacco use).

Acknowledging these concerns, the EEOC anticipates issuing proposed rules by February 2015 addressing how the ADA and GINA affect employer wellness programs, including the use of financial incentives or penalties.

Next Steps

Based on existing rules and interpretations, employers adopting or revising wellness programs should consider the following:

  • Programs that are accessible to all employees and do not ask for medical information or involve medical exams should not implicate the ADA or GINA.
  • If financial incentives or penalties are included, structure them to comply at a minimum with the limits and restrictions under the ACA and HIPAA.
  • Where medical information from employees and family members is collected, it should be structured to be used for underwriting and risk assessments if possible, and such information should not be available to the employer other than on an aggregated and non-identifiable basis. 
  • Incorporate appropriate incentives and goals for your program that are most likely to have a practical and positive impact on employee health and related expenses based on your employee population.
  • Consult with your legal counsel before implementing or revising any wellness program that includes biometric testing or other medical screening, or imposes any financial rewards or penalties related to participation.

If you have any questions about how the EEOC's actions may impact your employee wellness programs, please contact Edward C. Hammond at (248) 988-1821 | ehammond@clarkhill.com, Douglas J. Ellis at (412) 394-2367 | dellis@clarkhill.com, Kristi R. Gauthier at (480) 684-1300 | kgauthier@clarkhill.com or Nancy L. Farnam at (248) 530-6333 | nfarnam@clarkhill.com, or your Clark Hill Labor and Employment attorney.