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January 13, 2016Client Alert

Employer’s Wellness Arrangement Upheld by Western District of Wisconsin

On December 30, 2015, the Western District of Wisconsin issued its decision in EEOC v. Flambeau, Inc. The case examined whether Flambeau violated the Americans with Disabilities Act (ADA) by prohibiting employees who failed to complete the company’s wellness program requirements from participating in its group health plan. The Court granted the company’s Motion for Summary Judgment, finding that the employer did not violate the ADA.

In its decision, the Court relied on the ADA’s “safe harbor” for benefit plans, which states that the ADA shall not be construed to prohibit or restrict an employer from establishing or administering the terms of a bona fide benefit plan that are based upon underwriting risks, classifying risks or administering such risks. The Court found this safe harbor overcame the EEOC’s reliance on a different section of the ADA, which provides that an employer shall not require a medical examination unless such examination is shown to be job-related and consistent with business necessity.

Two noteworthy points from EEOC v. Flambeau, Inc. include:

  • The Court made a distinction between wellness programs associated with a group health plan and those formed independent of a group health plan. Consequently, the EEOC’s position may still be supportable where the wellness program is not linked to an underlying group health plan but still requires a medical examination. Nevertheless, the Court noted that wellness plans not tied to a health insurance plan may still be able to rely on a different exception where the medical examination is part of an “employee health program” regardless of whether the employer sponsors any sort of employee benefit plan at all. However, the Court declined to go further down this path because the group health plan exception provided sufficient support for its decision.
  • The Court also considered the proposed regulations released by the EEOC and found nothing about the safe harbor’s applicability to medical examinations that are part of a wellness program and are used to administer and underwrite insurance risks associated with an employer’s health plan. Consequently, the Court found the proposed regulations inapplicable (they were also found inapplicable because the regulations are still in proposed form). The EEOC will likely address this issue when it finalizes these proposed regulations.

What employers should take away from the decision:

At present, employers administering wellness programs may wish to primarily rely on the wellness program regulations issued by the Departments of Labor, Treasury and Health and Human Services in June of 2013 as the EEOC’s proposed regulations have not been finalized and therefore are not yet effective and the EEOC’s court challenges are thus far unsuccessful. A more conservative option is to anticipate the EEOC will issue final regulations substantially similar to the proposed regulations and, accordingly, act with caution in situations which the EEOC may allege discriminate on the basis of disability or that impose substantial sanctions for noncompliance with wellness plans.

 

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