US: EEOC proposes regulation for employee wellness programs

Recently, the United States Equal Employment Opportunity Commission has brought several lawsuits under the Americans with Disabilities Act against companies that have allegedly penalised employees for failure to enrol in wellness programs. According to the Commission, the alleged penalties essentially required employees to undergo involuntary medical examinations with disability-related inquiries in violation of the Act. The Commission's position in this regard has been controversial, with at least one US federal court having rejected the Commission's view. The Commission has now proposed regulations setting parameters for permissible employer incentives for participation in such programs.

Employee wellness programs are now offered at virtually all major US companies. These programs, targeted at promoting healthy lifestyles and reducing disease, have been used by employers as a means of improving employee health and reducing medical insurance costs. In order to motivate employees to participate, approximately three quarters of employers offer some sort of incentive for partaking in the wellness program. The Commission's recent enforcement actions against employers have had a chilling effect on the use of such programs and have led employers to seek guidance from the Commission on how these programs should be implemented.

In response, the Commission issued a proposed rule on 16 April 2015 for how employers should design employee-wellness programs that include disability-related inquiries or medical examinations. Significantly, the rule provides that:

• employers may offer financial incentives or penalties for participation in a wellness program of up to 30% of the cost of individual healthcare coverage
• employers may not require employees to participate in wellness programs nor take any adverse employment action for failure to participate
• similarly, employees cannot be denied access to any healthcare benefit package for failure to participate in a wellness program
• health information collected pursuant to a wellness program would be subject to privacy protections and employers need to provide notice regarding what information will be collected and how it will be used.

The regulation is not yet final and the agency will accept public comments until 19 June 2015 before issuing a final rule.

Actions for employers

Employers should review their wellness programs to ensure that they will be compliant with the final rule. If any employers have comments with regard to this proposal, they should take the opportunity to submit them before the 19 June deadline.

Authors: Jonathan Cross, Of Counsel, and Julia Qi, Associate