Employers can (cautiously) celebrate wellness program victory

After court decision, Washington employers may need to adjust to a new normal in wellness plans

Anne Milligan

It’s no surprise that many Washington employers want to encourage their employees to get active through workplace wellness programs; a healthy workforce means reduced healthcare costs. Employers across the country recently received some good news when it comes to the validity of these programs, as a court rejected a legal challenge from the Equal Employment Opportunity Commission (EEOC) that sought to dismantle a company wellness program. While you can celebrate this victory, you should still act cautiously when running such a program to make sure you stay on the right side of the law.

Wellness plans are generally designed to encourage employees to live healthier lifestyles by motivating them to eat better, exercise more and forego unhealthy lifestyle choices. In EEOC v. Flambeau, Inc., a federal court in Wisconsin upheld an employer’s wellness plan despite a claim that it violated the Americans with Disabilities Act (ADA). To participate in the company’s group health plan, all workers needed to complete a preliminary health assessment and submit to biometric testing. The EEOC argued that this violated the ADA’s prohibition against making disability-related inquiries or requiring medical examinations of employees. The court disagreed and found the plan legally acceptable.

The court found that the plan fell under the ADA’s “safe harbor” provision, which exempts bona fide benefit plans from legal violations, for three reasons. First, the wellness program was part of the employer’s insurance benefits package, and the employer didn’t collect employee medical data outside of its insurance benefits offerings. Second, the medical information was collected in aggregate and used to classify health risks so that the company could calculate its projected insurance costs for the benefit year. The company never learned which particular workers had certain medical conditions. Third, even though health coverage was denied if an employee declined to participate in the program, the workers could refuse to participate and still remain employed. Although they would then have to obtain health insurance elsewhere, the program was not considered mandatory because employees always had this option.

Despite this victory, Washington employers should be wary about celebrating too much. This case does not directly control courts in our state, although legal prognosticators are hopeful that the reasoning used by the Wisconsin court will soon be followed by other courts across the country. Also, many assume the EEOC will appeal this ruling, so we probably have not heard the last about this case.

Moreover, the EEOC has recently proposed a new rule offering significant guidance on what compliant wellness programs should look like. The rule is expected to be enacted in its final form this year. The draft version states that wellness programs can’t be overly burdensome or a ruse for violating the ADA or other antidiscrimination laws. It also says that employers may offer a maximum allowable incentive of 30 percent of the total cost of employee-only coverage, whether in the form of a reward or penalty, to promote participation in the program. Finally, the rule says that wellness programs must be truly “voluntary,” although as you can see from the Flambeau decision, some courts may disagree with how the EEOC defines that term.

The Flambeau case could lead the EEOC to go back to the drawing board and rework its proposed regulations, which remain in administrative limbo. Once the regulations are finalized, employers may need to adjust to a new normal when it comes to wellness plans, or at least be prepared to wait to see how Washington courts interpret the rule.

Anne Milligan – a half marathoner, hiker and wellness enthusiast – is an attorney at Fisher & Phillips LLP’s Portland office and is licensed to practice in Washington. She can be reached at 503.205.8055 or amilligan@laborlawyers.com.