*Article produced by American Benefits Council*
The U.S. District Court for the Western District of Wisconsin has rejected a challenge by the Equal Employment Opportunity Commission (EEOC) alleging that a company’s wellness program violated the Americans with Disabilities Act (ADA). The court’s decision in EEOC v. Flambeau, issued Dec. 30, held that the employer’s wellness program fell within the ADA’s safe harbor provision for insurance benefit plans, favorably citing a 2012 Eleventh Circuit decision in Seff v. Broward County. Although the EEOC is likely to appeal the Flambeau decision, it provides employers with helpful insight into how courts may apply the safe harbor and the conditions that would satisfy it.
The EEOC sued Flambeau, Inc. in October 2014, arguing that the biometric testing and health risk assessment required under the employer’s wellness program constituted “disability-related inquiries and medical examinations” that were not both job-related and consistent with business necessity as defined by Title I the ADA, which prohibits disability discrimination in employment, including making disability-related inquiries. Participation in the wellness program was not a condition of employment, but enrollment in the employer-sponsored health plan was only available to participants in the wellness program.
Flambeau argued that its practice of conditioning enrollment in its health benefit plan with meeting certain requirements of its wellness program was protected by the ADA’s safe harbor for insurance benefit plans. The statutory safe harbor provision generally exempts from the ADA activities related to “establishing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks.” Flambeau asserted that the wellness program requirement constituted a “term” of its health insurance plan and that this term was included in the plan for purposes of underwriting, classifying and administering health risks.
The federal district court judge concluded that the protections set forth in the ADA’s safe harbor provision for the terms of a bona fide benefits plan “enable employers to design insurance benefit plans that require otherwise prohibited medical examinations as a condition of enrollment without violating the ADA.” The judge further held that Flambeau’s wellness program fit within the safe harbor since it was a term of the benefit plan (as evidenced by information provided to employees, including the plan’s summary plan description), it was intended to assist Flambeau with assessing, classifying and administering risks under the plan (including decisions related to plan premiums and stop-loss coverage) and the wellness program requirement was not a subterfuge for avoiding the purposes of the ADA.
The federal district court also rejected the EEOC’s argument that the Seff decision was wrongly decided, specifically noting that it was not persuaded by EEOC’s reference to Seff in its proposed regulations amending ADA regulations related to employer wellness programs.
The proposed rules provide guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations. In the proposed rules, the EEOC indicated that it “did not believe” that the ADA’s safe harbor provision applicable to insurance plans as interpreted by Seff was the “proper basis for finding wellness plans permissible.” In a June 19 comment letter on the proposed regulations, the Council contended that Seff was correctly decided and that the bona fide benefit plan safe harbor should be available in the wellness plan context. It appears likely that the EEOC will revisit the discussion of Seff in the proposed regulations before it issues final regulations later in 2016.
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