United States: EEOC Issues Proposed Regulations On Employee Wellness Programs

Last Updated: May 29 2015
Article by Craig Oliver

In the past year, the U.S. Equal Employment Opportunity Commission (EEOC) has filed lawsuits against certain employers challenging the legality of their "wellness programs." Wellness programs provide incentives to employees to participate in activities designed to encourage and promote health. These incentives may include employer payment of the cost of gym memberships, exercise and weight loss challenges, and discounts or rebates on health insurance premiums for engaging in certain activities.

As an example of its litigation in this area, in 2014 the EEOC filed a lawsuit against Orion Energy Systems, Inc., alleging that Orion violated the Americans with Disabilities Act (ADA) by instituting a wellness program that required employees to submit to medical examinations and respond to disability-related inquiries that were not job-related or consistent with business necessity. If employees refused to participate in the program, according to the lawsuit, Orion shifted the entire responsibility for payment of employee health insurance premiums from Orion to the employees. According to a quote from an EEOC regional attorney in a press release announcing the lawsuit against Orion, "[e]mployers certainly may have voluntary wellness programs . . . But they have to actually be voluntary. They can't compel participation by imposing enormous penalties such as shifting 100 percent of the premium cost for health benefits onto the back of the employee or by just firing the employee who chooses not to participate."

The EEOC's lawsuits against Orion and other employers based upon their wellness programs generated significant consternation among certain employers and other promoters of wellness programs, who argued, among other things, that the EEOC's position on wellness programs undermined good-faith efforts of employers to improve the health of their workforce. Perhaps in response to the objections from employers, perhaps in response to the introduction of the "Preserving Employee Wellness Programs Act" in the U.S. House of Representatives in March of this year, or perhaps for a combination of reasons, on April 20 the EEOC issued a proposed rule that would amend its regulations regarding the ADA, and, in particular, clarify its position on which employee wellness programs are permissible under the ADA.

The proposed rule indicates that the EEOC may be relaxing its position on employee wellness programs somewhat. The aspect of the ADA that most often comes under scrutiny with wellness programs is its restriction on employers making disability-related inquiries or requiring medical examinations. But, there is an exception for "bona fide" employee benefit plans and voluntary health questionnaires and examinations. Many, if not most, wellness programs include components that would be viewed as medical examinations or disability-related inquiries, such as health risk assessments, body weight and blood glucose measurements, cholesterol testing, and blood pressure readings.

The EEOC's past actions suggested that the agency might deem any rewards offered to employees for participating in wellness programs as rendering the programs involuntary. The proposed rule, however, makes clear that this is not the agency's position. The proposed rule states that the offer of "limited" incentives to participate in wellness programs that are part of a group health plan and that include disability-related inquiries or medical examinations will not render the program involuntary, if the total allowable incentive available under all programs does not exceed 30 percent of the total cost of employee-only insurance coverage. If the total incentive available exceeds 30 percent of this amount, then the EEOC will deem the program involuntary.

On the subject of financial incentives to participate in wellness programs, note that employees with disabilities must be offered reasonable accommodation to enable them to earn the incentives, if they are not otherwise able to do so.

The proposed rule places other conditions on wellness programs in order for the EEOC to consider them voluntary. Specifically, the employer may not require an employee to participate in the program, may not deny coverage under any of its group health plans or benefits packages within a group health plan, generally may not limit the extent of such coverage, and may not take any other adverse action against employees who refuse to participate in an employee health program or fail to achieve certain health outcomes.

Also, the rule states that in order for a wellness program to be considered voluntary, the employer must provide a notice clearly explaining what medical information will be obtained, how the medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the employer uses to prevent improper disclosure of medical information.

A few caveats deserve mention. First, the recently published rule is a proposed rule. The rule is subject to public comment until June 19, after which the EEOC may make changes to the proposed rule before it becomes final. Also, compliance with this rule—and the subsequent amended ADA regulations that follow the rule—does not necessarily mean an employer has no risk of liability with respect to its wellness programs. Other laws may have requirements that pertain to wellness programs, most notably the Health Insurance Portability and Accountability Act, commonly referred to as HIPAA. Further, the EEOC's proposed rule reminds employers that wellness programs may violate Title VII or the Age Discrimination in Employment Act if they discriminate on the basis of race, gender, nationality, age, or any other grounds prohibited by those statutes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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