Written by Guest Blogger: C. John Holmquist, Jr.
Holmquist Employment Law Firm, Troy, Michigan
Penn State is planning to implement a wellness initiative called the “Take Care of your Health Initiative” next year. The program had three components: the completion of a WebMD online health risk assessment; having a preventative physical examination; and having a biometric screening that would give a full lipid profile as well as blood pressure, body mass index, and waist circumference. Employees who completed the three steps would be entered in a raffle to win one of six $500 cash prizes. Employees who did not complete the three steps would have a monthly deduction of $100 from their pay. Spouses and domestic partners are required to participate in the first two steps.
The program was not well received by the employees and the faculty; some referred to it as the “Sandusky tax” in reference to the monetary exposure from the football scandal. On September 29, 2013, the university suspended the $100 monthly surcharge and encouraged employees to utilize the initiative to find out about their health.
The Penn State wellness program caught the attention of Representative Louise M. Slaughter (D NY) who wrote a letter to the EEOC on September 23, 2013, expressing her concern with a program that “coerces private health information from participants.” Ms. Slaughter who authored the Genetic Information Nondiscrimination Act (“GINA”) stated that the Penn State program raised concerns with the type of information collected and the “voluntariness” of participation. Representative Slaughter stated in her letter that any employer who coerced employees to provide genetic information through monetary incentives would violate the core intent of GINA and other civil rights laws. She urged the EEOC to promptly issues regulatory guidance for wellness program compliance with federal nondiscrimination laws.
The EEOC held a hearing on May 8, 2013 where panelists addressed the treatment of wellness programs under federal law, specifically the ADA and GINA. To date, no action has been taken by the EEOC. One commissioner tweeted “I agree.” with a link to an article discussing Representative Slaughter’s letter.
On September 26, 2013, Towers Watson issued the results of a survey concerning employer action to increase the success and effectiveness of wellness programs. The survey found that nearly 8 in 10 employers viewed lack of employee engagement as the biggest obstacle to changing behavior. The survey also found that for 2014, 4 in 10 US companies will use penalties such as an increase in premiums or deductibles for employees who do not complete the requirements of health management activities. That figure will jump to 61% for 2015.
Employers in Michigan have another consideration with respect to imposing penalties. The Michigan Payment of Wages and Fringe Benefits Act prohibits employers from making deductions from employee pay without the “full, free, and written consent” of employees obtained without intimidation or fear of discharge. The statute further requires written authorization for each wage payment subject to a deduction. Under Michigan law, an employer would not be able to automatically deduct the $100 without the written consent of the employee, which certainly would not be expected to be forthcoming.
It is very surprising that employers are implementing penalties even though it has not been settled that they are able to do so without violating federal law. The EEOC has made it clear that HIPAA compliance does not necessarily guarantee that an employer does not violate nondiscrimination laws. The agency has also made it clear that wellness programs are acceptable as long as they are voluntary.
An employer needs to carefully consider how to effectively engage its employees in wellness programs in a world without EEOC guidance. Penalties are easier to target than incentives; a penalty changes the status quo of the employee while a bonus does not. A comparison of the incentives offered with the penalty in the Penn State program establishes that the university felt a penalty was the better way to achieve employee participation. The incentive offered in light of the number of employees was, to say the least, minimal. No one wants to be the test case for the EEOC on the voluntariness of employee participation. Using penalties to achieve participation is an invitation that the EEOC may, at some point, decide to accept.