Court Refuses to Decide Statutory Issues in EEOC Wellness Program Case

An appellate court said neither party in the case has a serious stake in its outcome anymore, so the statutory issues should be decided by a court in a case where the answers matter to the parties.

In the case of Equal Employment Opportunity Commission v. Flambeau, Inc., the 7th U.S. Circuit Court of Appeals has affirmed a lower court ruling that Flambeau, Inc.’s requirement that employees complete a health risk assessment and biometric test falls within the Americans With Disabilities Act’s (ADA)’s “safe harbor,” which provides an exemption for activities related to the administration of a bona fide insurance benefit plan.

On appeal. Flambeau argues that wellness programs are largely exempt from the limits on medical examinations because the ADA does not “restrict … [an] organization … administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law.”  Beginning in 2012, Flambeau required employees to complete the assessment and test only if they wanted to participate in the company’s insurance plan. U.S. District Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin agreed with Flambeau’s argument that when viewed from this perspective, the assessment and testing were entirely voluntary and therefore not prohibited by the ADA.

In addition, the lower court found that except for information regarding tobacco use, the health risks and medical conditions identified were reported to Flambeau in the aggregate, so that it did not know any participant’s individual results, indicating that it was not using the wellness program to discriminate against any employees. Flambeau said it used this information to estimate the cost of providing insurance, set participants’ premiums, evaluate the need for stop-loss insurance, adjust the co-pays for preventive exams and adjust the co-pays for certain prescription drugs. In satisfaction of the ADA safe harbor conditions, Flambeau said the wellness program requirement constituted a “term” of its health insurance plan and that this term was included in the plan for the purpose of underwriting, classifying and administering health insurance risks. Crabb agreed.

On appeal, the EEOC replies that this insurance safe harbor simply does not apply to wellness programs so that the prohibition on involuntary medical examinations applies.

NEXT: Effect of a non-decision on employers

The appellate court concluded that the statutory debate should not be resolved in this appeal. It noted that the relief the EEOC seeks is either unavailable or moot because the employee resigned several years ago, before suit was filed; he did not incur damages as a result of Flambeau’s policy, and he is not entitled to punitive damages; and Flambeau abandoned its wellness program requirements for reasons unrelated to the litigation.

In its opinion, the 7th Circuit concluded that neither party in the case has a serious stake in its outcome anymore, so the statutory issues should be decided by a court in a case where the answers matter to the parties. It affirmed the district court’s judgment.

Russell Chapman, special counsel in the Employee Benefits practice at labor and employment law firm Littler Mendelson, who is based in Dallas, tells PLANSPONSOR, “What this non-decision means is that for employers whose wellness programs do not comply with the EEOC’s ADA-related regulations, the issue is still open as to whether the safe harbor still applies to wellness plans.” Many companies could still be open to complaints filed by the EEOC.

Chapman points out that in the Flambeau case, the facts occurred before the EEOC issued its regulations. But, in another case, EEOC v. Orion Energy Systems, Inc., Orion also contended that its wellness plan was covered by the ADA's so-called "insurance safe harbor." The U.S. District Court for the Eastern District of Wisconsin rejected Orion's safe harbor argument, and held that the plan was subject to ADA review. The court concluded that EEOC's recently issued regulations on the ADA's safe harbor provision were within EEOC's authority, and further held that the safe harbor provision did not apply even without regard to the new regulations.

Chapman says that holding increases employers’ risk if they don’t comply with the final ADA-related regulations. He suggests employers review with qualified legal counsel whether their program complies.