Corporate Wellness: Is It Healthy For Employers? (March 2008)

Spring 2008Newsletters Staying Well within the Law

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As seen in Staying Well within the Law, a newsletter on the current legal issues facing today’s health care industry.

The following article first appeared in Employment Law360 on January 9, 2008, and is republished here with permission.

There are many benefits to having a healthier workforce. Healthy employees may be absent less, take fewer leaves of absence, be more productive, work longer, and have a better overall quality of life. In addition, employers may pay less for health insurance.

With these goals in mind, many employers are implementing corporate wellness initiatives. Effective corporate wellness programs identify and reduce risks and educate and motivate employees to improve individual health. Discounts or penalties on health care premiums, health exams and screenings, health coaches, energy management exercises, weight-loss and smoking cessation programs, and rewards such as gift cards or vacations are a few approaches used by employers.

Some employers go even further and implement outright restrictions on employment or health insurance based on weight, smoking, and even hazardous activities, such as skydiving.

While the results may be beneficial to both employers or employees, the end won’t necessarily justify the means. Unless implemented properly, efforts to improve employee health can face challenges from several fronts, including claims of invasion of privacy and unlawful discrimination.

It’s None of Your Business

Many corporate wellness initiatives are about behavior that occurs outside of work.

Most workplaces are nonsmoking, but many employers don’t want their employees to smoke at all.

Employers can offer only healthy food and snacks in the cafeteria, but that doesn’t help if the employee eats junk and fast food the rest of the time. But employer attempts to regulate or prohibit such “outside” behavior and to monitor employee compliance can give rise to claims for invasion of privacy.

Privacy rights can be found in the federal or a state constitution; a federal or state statute; or under “common law.”

Although not specifically mentioned, the right to privacy in the public sector is found in the search and seizure provisions of the Fourth Amendment to the U.S. Constitution.

Employees in the private sector may find a right of privacy in their state constitutions, and courts have held that such constitutional privacy protections can form the basis for a clear mandate of public policy supporting a wrongful discharge claim against a private employer.

Both “outside” activity restrictions and tests to monitor compliance, such as urine, blood or breathalyzer tests, could violate an employee’s right to privacy.

One recent case filed in federal court in Massachusetts tests these theories. In Rodrigues v. EG Systems, Inc., d/b/a Scotts LawnService, Scott Rodrigues claimed that Scotts LawnService violated his common law right to privacy and civil rights by requiring him to take a urine test for the presence of nicotine and by terminating his employment because he failed it due to his off-duty and off-premises smoking.

Rodrigues further claimed that his discharge constituted a wrongful termination and discriminatory denial of benefits under the Employee Retirement Income Security Act (ERISA).

Notably, the complaint questions Scotts LawnService's prohibition on smoking but not other “unhealthy practices” such as “obesity, consumption of alcohol, failure to exercise, skydiving, excessive television viewing, eating processed sugar, owning dangerous pets, flying private aircraft, mountain climbing, downhill skiing, singlehanded sailing, or spreading toxic chemicals on lawns.”

“What’s next?” is a question employers implementing workplace wellness programs can be expected to face.


Another potential source of privacy rights for employees is the Health Insurance Portability and Accountability Act (HIPAA), which protects the privacy of personal health information.

HIPAA nondiscrimination regulations regarding “bona fide wellness programs” require that wellness programs be designed to promote good health; allow for annual qualification; make awards available to all similarly-situated individuals; and provide a reasonable alternative, and notice thereof, to employees unable to comply with program requirements due to a medical condition.

Under the recently promulgated regulations, the value of rewards (such as discounts, contribution rebates, or waiver of cost-sharing requirements) for the wellness program is limited to 20 percent of the unsubsidized cost of employee-only coverage under the health insurance plan.

Compliance with HIPAA, however, does not mean a program will survive challenges on other grounds, such as discrimination.

Why Me?

Some employees may feel harassed or discriminated against when faced with healthy workplace initiatives.

Employees may claim that they are treated differently because of their protected status (disparate treatment), or that their employer’s policy or practice adversely impacts a protected group (disparate impact).

Accordingly, wellness program participation, use and confidentiality of employee health information, and screening must be consistent with federal, state, and local anti-discrimination laws.

The Americans with Disabilities Act (ADA), for example, prohibits discrimination against a qualified individual with a disability who can perform the essential functions of the job with or without reasonable accommodation. A disability is defined as a physical or mental impairment that substantially limits a major life activity.

Employees also are protected from discrimination if they are “regarded as” having or “have a record” of a disability – even if they are not currently disabled – and if they associate with a disabled person. Employers should avoid making assumptions about employee health based on appearance, age, or any other criteria.

In addition, under the ADA, employers have an obligation to provide a reasonable accommodation to a disabled employee who can perform the essential functions of the job. This obligation would apply to an employee’s participation in a corporate wellness program.

The Equal Employment Opportunity Commission (EEOC) has indicated, with qualifications, that voluntary wellness programs do not violate the ADA. Penalizing employees for not participating, such as through higher insurance premiums, can render a program involuntary, however.

In addition, the ADA limits the use of medical examinations and inquiries in hiring and employment. Generally, employers are not permitted to make disability-related inquiries or to conduct medical examinations unless job-related and consistent with business necessity.

Many wellness initiatives use Health Risk Assessments (HRAs) to obtain employee health information. The EEOC has indicated that HRAs are permissible where they are part of a voluntary wellness program – but may be discriminatory if completion is required in order to participate in the program.

However, behavioral questions regarding eating, sleeping, exercise, and other habits may fall outside the scope of ADA restrictions. Health information obtained from HRAs must be kept confidential.

Some state or local anti-discrimination laws also prohibit discrimination on the basis of “disability” and/or “handicap,” and may define those conditions more broadly than a “disability” under the ADA.

Weight is an area of focus for many wellness programs. Obesity, usually where morbid or caused by another medical condition, may be a disability under ADA or state law if it meets the statutory definition, and some local ordinances specifically prohibit discrimination on the basis of weight.

Corporate wellness programs also could be subject to challenge on the basis of other protected classifications, such as race, national origin, gender, and age, if employers screen or penalize employees for conditions more prevalent among those protected groups.

Certain health conditions may be exhibited more frequently in older workers or employees of a particular race or national origin.

Some states also prohibit discrimination on the basis of atypical cellular or blood trait or genetic information, which could also constitute a basis for challenging corporate wellness initiatives such as health screenings.

Many states, including New York, New Jersey, and Colorado, also restrict employers from engaging in “lifestyle discrimination” which can range from discrimination against smokers to discrimination based on any lawful activity off employer premises during working hours. Employers attempting to regulate out-of-work activity may run afoul of these laws.

Employers who use physical characteristics in employment decisions, such as hiring, could be subject to claims for discrimination. Employers should avoid disability-related inquiries; health or physical-related criteria; restrictions on personal activities; and physical or medical testing unless work-related and applied consistently across employees in a job category and not just to members of one protected class.

Health Insurance Audits

While there are many benefits to improving employee health, reducing the cost of health insurance is a primary consideration. Some employers impose surcharges or higher premiums on employees who do not meet the company wellness thresholds or who refuse to participate in wellness initiatives.

But there are other alternatives that can significantly reduce costs without employer involvement in employee health.

For example, audits of health plans to determine whether enrolled employees and dependents are eligible – such as confirming current employment, marital, domestic partner or civil union status, and dependant age and relationship – can significantly reduce costs.

Higher deductibles and health savings accounts (HSAs) can make employees more financially responsible, and thus provide incentives for employees to improve their own health.

What Can Employers Do?

More and more employers are beginning to take aggressive steps to improve the health of their employees, and are benefiting from the results. Companies interested in implementing wellness programs should keep the following guidelines in mind:

Maintain safe and healthy work environments:

  • use a third party to implement corporate wellness programs
  • use voluntary programs, such as employer-paid physicals, on-site exercise facilities and personal trainers, wellness reimbursements, smoking cessation and weight-loss programs, health coaches, and healthy food options in the cafeteria/vending machines

Audit health plan participation:

  • aggregate data and trends
  • maintain confidentiality of individual health information

Incentivize, don’t penalize:

  • focus on education
  • corporate wellness and employment decisions need to be separate
  • train employees who implement corporate wellness programs to comply with the law and company policy

Properly implemented wellness programs that are voluntary; motivate through incentives rather than penalties; use health information in a permissible way; maintain confidentiality of health information; operate at arm’s-length from hiring and employment decisions; and focus on education and behavior can achieve the goals of a healthier and more productive workforce and lower health insurance costs without subjecting employers to liability.