Is EEOC Regulation of Wellness Plans Legal? — Seventh Circuit Declines to Say Yes

by Seyfarth Shaw LLP
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The Seventh Circuit has stymied an EEOC attempt to declare that employer wellness plans violate the Americans with Disabilities Act (“ADA”). The court decided that the issues raised by the suit are moot, and deferred to another day tackling weightier questions of statutory interpretation and the EEOC’s rulemaking authority.

The decision arises out of EEOC v. Flambeau, Inc.  As we previously wrote, Flambeau offered an employer-subsidized self-funded health plan, but conditioned participation on completion of a “health risk assessment” and “biometric screening test.”  The health risk assessment “required each participant to complete a questionnaire about his or her medical history, diet, mental and social health and job satisfaction.” The biometric test “involved height and weight measurements, a blood pressure test and a blood draw.”  The EEOC argued that this violated the ADA’s ban on involuntary medical examinations, citing its then proposed (now final) regulations on employer-sponsored wellness plans.  (See also our prior blogs here and here.)

The district court rejected the EEOC’s position, finding that the EEOC’s regulations were not binding on the court.  Working through the statutory language, the court concluded that the ADA’s safe harbor protections, which exempt activities related to the administration of a bona fide employee benefit plan, enable employers to design benefit plans that require otherwise prohibited medical examinations as a condition of enrollment.

In EEOC v. Flambeau, Inc., No. 16-1402 (7th Cir. Jan. 25, 2017), the Seventh Circuit affirmed “but without reaching the merits of the parties’ statutory debate.”  The court held that neither party to the case continued to have a serious stake in its outcome, and the relief sought by the EEOC is either unavailable or moot.  Before the EEOC commenced litigation, Flambeau had already made its wellness program non-mandatory, having concluded that the costs of the health risk assessment and biometric screening test outweighed their benefits.  The employee who had challenged the policy had no claim for damages, including EEOC-requested punitive damages, and had long since left the employer.  The court also observed that the case was a poor candidate for evaluating the statutory questions because the events at issue had occurred before the EEOC issued its wellness plan regulations.

A decision on the merits of the EEOC’s regulations will have to wait for another day.  But the Seventh Circuit’s discussion did provide defense lawyers a memorable line to be cited in future cases where the EEOC stakes out a new or untested position:

An employer’s or its attorney’s disagreement with EEOC guidance does not by itself support a punitive damages award, at least where the guidance addresses an area of law as unsettled as this one.

Stay tuned for more court decisions and, perhaps, revocation or non-enforcement of the regulations, as the Trump administration makes leadership changes at the EEOC.  Note as well that, President Trump has named Vicki Lipnic as EEOC Acting Chair.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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