On December 31, 2015, in EEOC v. Flambeau, Inc., the US District Court for the Western District of Wisconsin held that a safe harbor under the Americans with Disabilities Act (ADA) allowed an employer to design its health plan to require otherwise prohibited medical examinations as a condition of plan enrollment (No. 14-cv-638-bbc, (Dec. 31, 2015)).

The employer in this case, a covered entity subject to the ADA, established a wellness program for employees who chose to enroll in the employer's health plan. The wellness program included both a health risk assessment and a biometric test (see Practice Notes, Wellness Programs and Wellness Programs: EEOC Rules under the ADA). For 2011, the first year the wellness program was in place, the employer gave employees a $600 credit if they:

In 2012 and 2013, however, the employer eliminated the $600 credit and instead offered coverage under its health plan exclusively to employees who completed the wellness program. (Participation in the wellness program was not a condition for continued employment.)

One of the employer's employees participated in the wellness program during 2011 and received the $600 credit, but failed to complete the wellness program's health risk assessment and biometric test for the 2012 plan year. As a result, the employer:

The employee filed a union grievance and complaints with both the Department of Labor (DOL) and Equal Employment Opportunity Commission (EEOC).

After discussions with the DOL, the employer reinstated the employee's coverage, subject to the employee's completion of the wellness program's health risk assessment and biometric test, and payment of plan premiums. The employee agreed and his coverage was reinstated retroactive to January 2012. Nonetheless, the EEOC sued the employer on the employee's behalf, asserting that the plan's wellness program requirement violated the ADA's ban on employer-mandated medical examinations (42 U.S.C. § 12112(d)(4)(A)).

At issue before the district court, in a matter of first impression in the Seventh Circuit, was whether the employer's wellness program violated an ADA provision that prohibits employers from requiring medical exams that are not job-related or for business necessity. The EEOC argued that the employer violated this provision by requiring employees to complete the wellness program's health risk assessment and biometric screening as a condition of enrolling in its health plan. The employer, however, argued that the wellness requirement was protected by the ADA's safe harbor for insurance benefit plans, under which employers may establish and administer the terms of a benefit plan for purposes of underwriting, classifying, or administering risks. The employer urged the court to follow the approach taken in the Broward County decisions, in which the ADA's safe harbor was extended to a wellness program similar to the employer's arrangement (see Legal Update, Broward County Wellness Program Falls Within ADA Safe Harbor: Eleventh Circuit).

Ruling for the employer, the district court agreed that the ADA's safe harbor could apply to a wellness program that is part of an employee benefit plan. The court rejected the EEOC's argument that a separate exception under the ADA involving voluntary tests or inquiries that are part of "employee health programs" would be rendered irrelevant by applying the ADA safe harbor to the employer's wellness program. Notably, the district court was not persuaded by the EEOC's position, as stated in its April 2015 proposed regulations, that the ADA's safe harbor is not the proper basis for finding wellness program incentives permissible (see Practice Note, Wellness Programs: EEOC Rules Under the ADA: EEOC Rejects Broward County Analysis and Legal Update, EEOC Rules Address Wellness Incentives Under the ADA).

The court next analyzed whether the wellness requirement fell within the ADA's safe harbor. In this regard, the court concluded that the requirement was (for safe harbor purposes):

Viewing the wellness requirement as a benefit plan term, the court noted that employees were required to complete the wellness program as a condition of enrolling in the plan. Also, according to the court, the fact that neither the plan's summary plan description (SPD) nor the collective bargaining agreement identified the wellness requirement did not mean the requirement was not a benefit plan term (see SPD Compliance Chart for ERISA Plans).

Regarding the underwriting element of the safe harbor, the court noted that the employer's consultants used data gathered from the wellness program to:

As a result, the court concluded that the ADA's safe harbor permits employers to design health plans that require otherwise prohibited medical examinations as a condition of plan enrollment.

This decision, another litigation defeat for the EEOC in the wellness context, appears to make available a fairly significant work-around to the EEOC's regulatory position that for health programs with disability-related inquiries or medical exams to be voluntary, an employer may not deny access to health coverage for non-participation. But given the high-profile nature of this litigation and the prevalence of wellness programs offered by US employers, the district court's decision will not likely be the final word on this issue in the Seventh Circuit.

Also, the district court's conclusion that the employer's wellness requirement was effectively a "term" of its health plan could have unintended consequences from an ERISA compliance perspective, particularly if the wellness requirement is effectively an additional enrollment requirement that was not addressed in the plan's SPD or other benefits-related disclosures (see Practice Note, Summaries of Benefits and Coverage under the ACA).