Orion Energy Systems Wellness Program and EEOC Settlement

On April 5, 2017, the EEOC announced that it has entered into a settlement to resolve its lawsuit against Orion Energy Systems Inc., a Wisconsin lighting company. The EEOC was challenging Orion’s wellness program under the ADA and alleging that the employer retaliated against an employee who objected to the program.

Specifically, the EEOC filed its lawsuit in U.S. District Court for the Eastern District of Wisconsin (EEOC v. Orion Energy Systems, Inc., 208 F.Supp.3d 989 (E.D. Wis. 2016)) and contended that Orion instituted a wellness program that unlawfully required medical examinations and made disability-related inquiries. Additionally, when an employee declined to participate in the wellness program, Orion shifted responsibility for 100 percent of the monthly premium payment to the employee. Thereafter, the EEOC alleged that Orion terminated the employee when she objected to the program.

The district court rejected the employer's argument that the insurance safe harbor provision in the ADA immunizes wellness plans from ADA scrutiny (see Q/A 6 for more information). The court concluded that the EEOC's recently issued regulations on the ADA's safe harbor provision were within the EEOC's authority, and further held that the safe harbor provision did not apply even without regard to the new final regulations. As quick background, the safe harbor provision does not generally apply to employer wellness programs, since employers are not collecting or using information to determine whether employees with certain health conditions are insurable or to set insurance premiums. The final rule adds a new provision explicitly stating that the safe harbor provision does not apply to wellness programs even if they are part of an employer's health plan. The court found that the wellness plan was lawful in this case because it concluded that the employee's decision whether to participate was voluntary under that law existing prior to the final regulations, which were not applicable in the case.

The court also held that there was uncertainty regarding whether the employee was actually terminated because of her opposition to the wellness plan, and indicated that the case would be set for trial. The EEOC and Orion agreed to a settlement to resolve these issues.

Under the settlement, Orion agreed to pay $100,000 to the employee. The company further agreed that it will not maintain any wellness program in the future that poses disability-related inquiries or seeks a medical examination that is not voluntary within the meaning of the ADA and its regulations. Orion also agreed not to engage in any form of retaliation, including interference or threats, against any employee because he or she has raised objections or concerns as to whether the wellness program complies with the ADA. Finally, Orion will conduct employee training on the ADA and its regulations as they pertain to wellness programs.

It is important to note that this case was not governed by the final EEOC wellness regulations, which were effective Jan. 1, 2017. Under those rules, an employer’s wellness reward/incentive cannot exceed 30 percent of the total cost of health plan coverage when a medical examination or disability-related inquiry is involved. Thus, charging an employee 100 percent of the health plan coverage is not permissible under the final rules.

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