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Employers are increasingly adopting wellness programs in hopes of improving the health of their workforce and reducing the costs of their group health plans. The Affordable Care Act seemingly gave employers the green light to adopt such programs by permitting employers to offer financial incentives, such as discounted health coverage, to encourage employee participation. However, wellness programs continue to raise an assortment of compliance issues for sponsoring employers. Most notably, recent lawsuits filed by the Equal Employment Opportunity Commission (EEOC) indicate that – despite the Affordable Care Act’s endorsement – employers should observe the caution signs when offering employees financial incentives to participate in certain wellness programs.

Three Employers Face Lawsuits by EEOC

In 2014, the EEOC filed three separate lawsuits against employers alleging that the employers’ wellness programs violated the Americans with Disability Act (the ADA), the Genetic Information Nondiscrimination Act (GINA), or both. The latest lawsuit, filed in Minnesota by the EEOC office with jurisdiction over South Dakota employers, attacked a popular wellness plan design which includes financial penalties for failing to participate in biometric testing. The ADA generally prohibits employers from asking employees about their medical history or requiring employees to undergo medical testing unless such inquiries or testing are job related and consistent with business necessity. GINA prohibits employers from collecting genetic information unless an employee voluntarily provides the information. Many wellness programs include health risk assessments that involve asking employees to answer questions that relate to both their medical history and their genetic predisposition to certain diseases and thus implicate both the ADA and GINA.

One defense to alleged violations of ADA and GINA is employee participation in the wellness programs is “voluntary.” However, there is no clear regulatory guidance defining “voluntary” for purposes of either the ADA or GINA. Based on the lawsuits filed by the EEOC, the EEOC takes a narrow view of this exception. While in the past the EEOC has indicated that regulatory guidance on the issue was forthcoming, the EEOC apparently has chosen to pursue litigation over regulation, leaving employers in the dark as to the boundaries for financial incentives to participate in wellness programs.Another potential defense exists if the medical exam is done to “underwrite,” “classify” or administer medical risks. At least one court has upheld a wellness plan under this insurance safe harbor but compliance requires the wellness plan be incorporated into the employer’s health plan. Thus, employers should review current and potential wellness programs to evaluate whether the wellness program puts the employer at risk for potential legal action.

For assistance reviewing your company-sponsored wellness program, or for general questions regarding your wellness program, contact Jean Bender at [email protected].

Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the State’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit