For years (and we do mean years), the EEOC has waffled about whether incentives were permissible in connection with a medical inquiry under a voluntary wellness program.  Friday, the EEOC issued its most recent pronouncement on the topic, this time related to incentives for COVID-19 vaccinations.

The ADA prohibits employers from requiring medical examinations or making “disability-related inquiries” except in very limited circumstances.  One such exception is in the case of a voluntary wellness program.  But it has never been clear what voluntary means in this situation. Is it voluntary if an incentive is provided?

A Brief Primer on Incentives and “Voluntary” Wellness Programs Under The ADA

The EEOC stated its position on voluntariness in 2000, in its Enforcement Guidance on Disability-Related Inquiries and Medical Examinations of Employees Under the Americans with Disabilities Act: a wellness program is “voluntary” as long as an employer “neither requires participation nor penalizes employees who do not participate.”  In 2014, the EEOC sued several employers claiming they had crossed the line in terms of when a penalty connected with a wellness plan makes the wellness plan involuntary.  But in oral argument the EEOC refused to identify what the particular line was. See Court Denies EEOC’s TRO Motion Seeking to Halt Employer’s Wellness Program | Benefits Law Advisor

In other contexts, the Affordable Care Act (ACA) permitted incentives, significant incentives, under group health plans. The other federal agencies, the IRS, HHS, and DOL issued joint implementing regulations for such programs.  Acknowledging congressional intent for some form of incentivized wellness programs, the EEOC then issued regulations which generally allowed employers to offer an incentive of up to 30% of the total cost of self-only insurance coverage.  But, its rules were quickly challenged in the United States District Court for the District of Columbia.  The court ordered the incentive provisions vacated, concluding the EEOC did not provide sufficient reasoning to justify the incentive limit adopted, even though the limit was largely based on the ACA’s approach.  As a result, the EEOC revised the regulations by removing the section permitting incentives, but leaving in place the remaining portions:

An employee health program that includes disability-related inquiries or medical examinations (including disability-related inquiries or medical examinations that are part of a health risk assessment) is voluntary as long as a covered entity:

(i)     Does not require employees to participate;

(ii)    Does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation, or limit the extent of benefits (except as allowed under paragraph (d)(3) of this section) for employees who do not participate;

(iii)   Does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of Section 503 of the ADA, codified at 42 U.S.C. 12203; and

(iv)    Provides employees with a notice that:

(A) Is written so that the employee from whom medical information is being obtained is reasonably likely to understand it;

(B) Describes the type of medical information that will be obtained and the specific purposes for which the medical information will be used; and

(C) Describes the restrictions on the disclosure of the employee’s medical information, the employer representatives or other parties with whom the information will be shared, and the methods that the covered entity will use to ensure that medical information is not improperly disclosed (including whether it complies with the measures set forth in the HIPAA regulations codified at 45 CFR parts 160 and 164).

29 CFR 1630.14(d)(2).  See Has the Grinch Stolen Wellness Plans this Christmas? | Disability, Leave & Health Management Blog (disabilityleavelaw.com)

Then in January of this year the EEOC proposed new regulations allowing only de minimis incentives, unless the wellness program was connected to a group health plan.  See Wellness Programs and Water Bottles, the EEOC Proposes New Rules under the ADA and GINA | Benefits Law Advisor

To help guide employers on “voluntariness,” the agency provided examples of what would and would not meet the test. For what would be considered de minimis, the EEOC provided two examples: a water bottle or gift card of modest value. A quick online search reveals an approximate price range for water bottles is between $5 and $50. On the other end of the voluntariness continuum, the EEOC observed that charging an employee $50 per month more for health insurance (or, the “carrot” approach, offering a $50 per month reduction in the charge for health insurance, either way totaling $600 per year), would be too great an incentive and violate the ADA.  Similarly, paying for an employee’s annual gym membership or rewarding an employee with airline tickets would be considered more than de minimis. Of course, these examples provide little insight about the incentive’s value.  So, assuming a $25 or even $50 gift card would meet the “a water bottle or gift card of modest value” test, and $600 incentive clearly would not, what about incentives with a value in the middle, say $100? It is worth noting that the EEOC’s proposed rule would permit more liberal incentives for wellness programs structured as part of a group health plans, provided they follow the ACA rules referenced above.

Unfortunately, these proposed regulations were quickly pulled back under the new administration, leaving once again a black hole in terms of what, if any, incentive an employer could provide in connection with voluntary disability-related medical inquiries or medical examinations in connection with a voluntary wellness program.

New “Very Large” and “So Substantial” Guidance

Last week the EEOC updated the technical assistance it maintains on its website with respect to COVID-19 issues.  See EEOC UPDATES ITS GUIDANCE ON VACCINATIONS | Disability, Leave & Health Management Blog (disabilityleavelaw.com)  The EEOC, which had already opined that the pre-vaccination screening questions may be a disability-related medical inquiry, stated that if an employer offers to vaccinate employees on a voluntary basis, the employer does not have to show the pre-vaccination screening questions are job-related and consistent with business necessity. “However, the employee’s decision to answer the questions must be voluntary.”   The EEOC then went on to explain what type of incentive could be offered in connection with vaccination provided by the employer or its agent.  According to the EEOC, the incentive (which includes both rewards and penalties) must not be “so substantial as to be coercive.”  “[A] very large incentive could make employees feel pressured to disclose protected medical information.”  Although this particular guidance is related to COVID-19, presumably the same analysis would apply to other voluntary inquiries where employers seek to take advantage of the voluntary wellness program exception.

While it is nice to see some explanation as to the EEOC’s position on this topic, the EEOC’s language: “not so substantial as to be coercive” or not “very large” as to make employees feel pressured, is certainly not the epitome of clarity.  What does “substantial” or “very large” mean in practice?  Does it allow more than a water bottle?  The EEOC did not provide examples this time, presumably because it is being pulled in two directions.  On the one hand the government has made clear that it does not want to say anything that would discourage vaccinations (and is also looking to encourage vaccinations), at the same time what it says here may be used in other settings with respect to wellness programs.

Incentives Related to the COVID-19 Vaccine

The good news for employers, at least with respect to incentives offered in connection with COVID-19 vaccinations, is that the EEOC has stated that merely asking whether an employee has been vaccinated is not a disability-related medical inquiry under the ADA and, therefore, does not need to meet the voluntary wellness program exception.  The EEOC made this clear in its guidance last week: “Requesting documentation or other confirmation showing that an employee received a COVID-19 vaccination in the community is not a disability-related inquiry covered by the ADA.  Therefore, an employer may offer an incentive to employees to voluntarily provide documentation or other confirmation of a vaccination received in the community.”

However, if the employer is offering the vaccine or having an agent offer the vaccine, the pre-vaccination inquiries may be disability-related medical inquiries. In that case, the incentive offered must comply with the voluntary wellness program regulations.  In that regard, the EEOC reiterated that the amount of the incentive is not the only issue of compliance with respect to vaccinations offered by employers or its agents.  In order to be voluntary, the “ADA prohibits taking an adverse action against an employee, including harassing the employee, for refusing to participate in a voluntary employer-administered vaccination program.  An employer also must keep any medical information it obtains from any voluntary vaccination program confidential.”  Indeed, presumably, all of the requirements of 29 CFR 1630.14(d)(2) (referenced above) continue to apply.

Some employers also have expressed interest in incentivizing employees’ family members to get the vaccine. The EEOC’s recent COVID-19 technical assistance addressed this as well. Remember that under the Genetic Information Nondiscrimination Act, family medical history information, in general, constitutes genetic information of the employee. As a result, the EEOC’s guidance confirmed that an employer may not offer an incentive to an employee in return for an employee’s family member getting vaccinated by the employer or its agent because the pre-vaccination questions of a family member would constitute family medical history of the employee. However, employers may offer an incentive to employees to provide documentation or other confirmation that their family members received a vaccination from their own health care provider.

The years long battle over what is and is not an appropriate incentive in connection with voluntary medical inquiries or wellness programs is far from over.  To avoid “very large” penalties of their own, employers should consult with counsel whenever they are designing a wellness program with incentives (carrots or sticks) attached.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.

Photo of Patricia Anderson Pryor Patricia Anderson Pryor

Patricia Anderson Pryor is a principal and litigation manager of the Cincinnati, Ohio, and Louisville, Kentucky offices of Jackson Lewis P.C.