In EEOC suit, 7th Circuit won’t decide if wellness plan covered by insurance safe harbor

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By Joy Waltemath

By Kathleen Kapusta, J.D.

Although on the merits, this case turned on the interplay between the ADA’s prohibition on involuntary medical exams and its insurance safe-harbor provision, the Seventh Circuit refused to resolve this question. Because the relief sought by the EEOC on behalf of an employee whose insurance coverage was terminated when he did not timely meet his employer’s wellness program requirements was either unavailable or moot, the court affirmed the dismissal of the case without reaching the statutory debate (EEOC v. Flambeau, Inc., January 25, 2017, Hamilton, D.).

As part of its wellness program, the employer required its employees, as a condition of receiving employer-subsidized health insurance, to fill out a medical questionnaire and undergo biometric testing. When the employee was unable to meet those requirements in time for the 2012 benefits year, the company terminated his insurance coverage. Because he refused to buy continuing coverage under COBRA, his insurance lapsed.

He then filed complaints with the DOL and the EEOC, alleging violations of the FMLA and the ADA. The company subsequently agreed to reinstate his health insurance retroactively as long as he completed the testing and paid his share of the premiums.

EEOC lawsuit. Before the 2014 benefit year began, the company ended the mandatory testing program, finding it was not cost-effective. The employee resigned in March 2014 and six months later, the EEOC filed suit on his behalf, alleging that the mandatory assessment and testing violated the ADA’s prohibition on involuntary medical exams. Granting the employer’s motion for summary judgment and denying the EEOC’s, the district court found the safe harbor could cover at least some wellness programs and that this was one of them.

No personal stake. Asserting on appeal that the case was not moot, the EEOC argued the employee had a personal stake in the outcome because he was entitled to compensatory and punitive damages. Although the employee claimed a right to reimbursement of $82 for medical expenses incurred while he did not have coverage, those bills were either written off or paid for by third parties and thus he had no right to be repaid.

As to any entitlement to emotional distress damages, the only evidence of emotional distress was the employee’s testimony that “when they took my insurance away, and my kids didn’t know what’s going on, and I couldn’t go to the doctor and stuff like that.” This, said the court, was insufficient to show he could be entitled to damages.

And while the EEOC argued that he was entitled to punitive damages because the employer acted with reckless indifference to his federally protected rights against involuntary physical examinations, the court pointed out that the EEOC’s theory of discrimination assumed the ADA’s insurance safe harbor did not cover at least some wellness plans. “Whether that is true, and for what kinds of wellness plans it might be true, were open questions at relevant times in 2012 and 2013. They remain open even today,” said the court, explaining that the ADA’s plain text does not resolve either question. Further, when the employer terminated the employee’s health insurance, the EEOC had not yet proposed the relevant regulations and the only case law was adverse to the EEOC’s position.

Moreover, due to the unsettled legal landscape, the employer consulted its attorneys about the benefit plan’s compliance with state and federal law and the employee’s federally protected rights. This was inconsistent with reckless indifference to those rights, the court observed, absent some reason to doubt the company provided the attorneys with all relevant information.

EEOC guidance. In addition, while the EEOC enforcement guidance stated a “wellness program is ‘voluntary’ as long as an employer neither requires participation nor penalizes employees who do not participate,” the court pointed out that 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.”

Voluntary cessation. The EEOC also argued the case was not moot because it could seek injunctive relief as the “voluntary cessation” exception to mootness applied. Disagreeing, the court pointed out that the company halted its mandatory wellness program so there was nothing to enjoin. Moreover, the company made the program nonmandatory well before this lawsuit began, and it did so for reasons unrelated to the lawsuit. Thus, its conduct was unlikely to reoccur.

Rejecting the EEOC’s assertion that the company’s economic reasons (the costs of the program outweighed the benefits) could not support a finding of mootness, the court noted that the employer’s conduct also supported its claim, as it ended the mandatory testing program before the EEOC even filed suit.

Prudence also weighed against reaching to decide the merits of this case. “The questions of statutory interpretation are difficult, at least in the absence of interpretive regulations,” the court noted. “Those questions affect the 75 percent of firms offering health benefits that also offer wellness programs.”

Outdated legal landscape. Finally, the court pointed out, this case also presented the statutory questions in an outdated legal landscape as the relevant EEOC regulations were issued after the events at issue here. “Most important,” said the court, “neither party to this case has any longer a serious stake in its outcome. The genuine statutory issues should be decided by a court in a case where the answers will matter to the parties.”

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