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Federal Court Simultaneously Rejects and Upholds EEOC’s Positions on Wellness Programs – Rejects Employer’s ADA “Safe Harbor” Defense

In a much anticipated decision, a Wisconsin federal district court has granted Orion Energy Systems, Inc.’s summary judgment on the EEOC’s challenge to its wellness program design. While largely good news for Orion, the ruling creates even more confusion for employers seeking clarity on wellness program design principles.  In short, the Court: 1) rejected the EEOC’s claim that the wellness program violated the ADA because it was “involuntary;” 2) upheld the EEOC’s position that the ADA’s “safe harbor” for insurance could not be used to defend the wellness program design; and 3) held there was a triable issue on whether the employer’s termination of an employee who refused to participate in the wellness program was unlawful retaliation under the ADA. The case lives on due to the retaliation claim but many employers are scratching their heads on what the ADA requires for wellness programs going forward.

The EEOC’s complaint alleged that Orion required employees to complete a health risk assessment, as part of the wellness program, or pay 100 percent of their health insurance premiums and retaliated against an employee who declined to participate in the screenings. Orion claimed its wellness program was protected by the ADA’s “safe harbor” provision satisfied the ADA requirements of “voluntariness” under 42 U.S.C. §12112(d)(4)(B).

In analyzing whether the ADA’s “safe harbor” provision applies to Orion’s wellness program, the Court applied retroactively the EEOC’s new ADA wellness regulation, which specifically states that the “safe harbor” provision does not apply to wellness programs. This ruling should concern employers who have relied on the ADA’s “safe harbor” provision in designing wellness programs.

However, in a surprising move, the Court concluded, contrary to the EEOC’s position, that the medical inquiries that triggered potential ADA’s protection – the requirement that employees complete a health risk appraisal – were voluntary. Although the Court briefly mentions the 30 percent cap on financial incentives found in the EEOC’s new ADA wellness regulations, because the EEOC did not argue that the cap applied retroactively, the Court did not consider its effect on Orion’s wellness program.  Instead, the Court focused on a question the EEOC likely thought was a “slam dunk” – whether requiring employees who chose not to answer the HRA to pay 100 percent of their health premiums rendered the medical inquiries “involuntary.”  The Court found that the wellness design was “voluntary” because, while the options of either participating in the screening or pay 100 percent of premiums could be considered a hard choice, it was still a choice and the employee had the option of deciding whether or not to participate in the wellness program without the risk of losing participation in the group health insurance plan.  As a result of the determination that participation was optional, the Court held that Orion conducted voluntary medical examinations as part of its wellness program pursuant to 42 U.S.C. § 12112(d)(4)(B).

This ruling renders a completely different result than the decision of the Western District of Wisconsin in EEOC v. Flambeau, Inc. Only time will tell whether the Court’s ruling is followed by other federal courts.

Jackson Lewis P.C. © 2019

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About this Author

Francis P. Alvarez, Jackson Lewis, Health Care Management Attorney, Injured Workers Lawyer
Principal

Francis P. (Frank) Alvarez is a Principal in the White Plains, New York, office of Jackson Lewis P.C. He is the Leader of the Disability, Leave and Health Management Practice Group, which assists employers in meeting the legal and practical challenges posed by federal and state laws protecting injured and ill employees.

Counseling hundreds of employers each year, Mr. Alvarez spearheads the firm’s effort to provide imaginative and creative solutions to the complex array of workplace disability and health management issues...

914-872-6866
Heather C. Panick, Jackson Lewis, Income Tax Lawyer, compensation arrangements Attorney
Associate

Heather C. Panick is an Associate in the Omaha, Nebraska, office of Jackson Lewis P.C.

Ms. Panick has an active ERISA and federal income tax practice involving the representation of clients in tax adversary proceedings before the Internal Revenue Service, United States Tax Court and Second Circuit Court of Appeals relating to payroll, trust fund recovery penalties, employee benefit plans and executive compensation arrangements.  Her practice also includes working with clients and the Internal Revenue Service, Department of Labor and PBGC in correcting plan operational and qualification errors, plan design issues, audit and collection matters and other plan and tax related issues.

Ms. Panick also has experience representing corporate clients in employment discrimination, retaliation, SEC investigations, tax and ERISA litigation matters. Her representation of clients in labor and employment matters ranges from defending and responding to EEOC charges, worker’s compensation claims, worker misclassification claims and state administrative proceedings.

402-391-1991