EEOC Appeal of Wellness Plan Case May Dead-End on Jurisdiction

Daily Labor Report® is the objective resource the nation’s foremost labor and employment professionals read and rely on, providing reliable, analytical coverage of top labor and employment...

By Michael J. Bologna

Sept. 15 — EEOC’s challenge to the validity of a Wisconsin employer’s corporate wellness program under the Americans with Disabilities Act may have hit a jurisdictional roadblock with the U.S. Court of Appeals for the Seventh Circuit ( EEOC v. Flambeau Inc., 7th Cir., No. 16-1402, oral argument 9/15/16 ).

During oral argument before the Seventh Circuit Sept. 15, a three-judge panel peppered attorneys from the Equal Employment Opportunity Commission and Flambeau Inc., a manufacturer of plastic products based in Baraboo, Wis., with questions about potential damages an employee suffered under a since-ended wellness program.

Without a determination that the now-retired employee suffered an economic loss, emotional distress or some other damage, the case likely constituted “much ado about ancient history,” one of the judges said.

Departing from these questions, the court asked attorneys for both the agency and the company to prepare briefs on the jurisdiction question and submit them to the court in 10 days.

“This came out of the blue,” Flambeau’s counsel, Stephen A. DiTullio, told Bloomberg BNA following the oral argument. Jurisdiction “really wasn’t discussed at any stage before.”

Involuntary Medical Exams

The EEOC originally filed suit in September 2014 alleging Flambeau violated the ADA’s prohibition on involuntary medical exams and disability-specific inquiries when it required employees to complete health risk assessment questionnaires and biometric tests as a component of its wellness program.

The EEOC alleged employee Dale Arnold had been unable to complete biometric testing and was subsequently dropped from Flambeau’s medical plan because participation in the wellness program was required for health benefits. At the time, Arnold was on medical leave for cardiomyopathy and congestive heart failure and was unable to complete the testing.

Flambeau responded with a motion for summary judgment, arguing that its program was permissible under the ADA’s insurance safe harbor provision. The safe harbor generally provides an exemption for employers to administer the terms of a bona fide benefit plan “that are based on underwriting risks, classifying risks, or administering such risks” and that aren’t inconsistent with state law.

The EEOC in May issued new regulations (RIN:3046-AB01) under the ADA that explain how employers can offer inducements for wellness plan participation without coercing employees to submit to involuntary medical exams or to divulge other types of protected information. The new rules permit employers to offer employees inducements of up to 30 percent of the costs of self-only coverage.

On Dec. 30, 2015, U.S. District Court for the Western District of Wisconsin agreed the ADA safe harbor insulated Flambeau from liability under the ADA.

The district court noted that the Seventh Circuit hadn’t ruled on the question and followed the Eleventh Circuit's decision in Seff v. Broward Cnty., 691 F.3d 1221, 26 AD Cases 1153 (11th Cir. 2012), which held a county wellness program that sought employees’ personal medical information as part of its group health coverage and charged nonparticipants $20 per pay period fit within the ADA’s safe harbor for insurance plans.

District Court Erred

EEOC attorney Anne Noel Occhialino, representing the agency during oral argument, told the court the district court had erred because the ADA explicitly prohibits employers from requiring medical exams and disability-related inquiries in the context of health programs unless such exams and inquiries are voluntary.

Moreover, Occhialino characterized Flambeau’s use of the safe harbor provision as “subterfuge,” designed to avoid the ADA’s strict prohibitions on such conduct.

Judge David F. Hamilton quickly focused on the question of jurisdiction and what, if any, remedy the court could provide in the dispute.

Hamilton’s questions reflected the fact that health coverage was restored to Arnold in May 2012, after a gap of five months. As a result, Arnold incurred out-of-pocket expenses of less than $1,000. In addition, Flambeau ended the wellness program with the 2014 plan year.

Hamilton said Arnold could only have suffered a minor degree of emotional distress.

“Now I understand no one wants to be without health insurance, especially if you have health issues, but this looks like much ado about ancient history,” Hamilton told Occhialino.

DiTullio, a partner in the Madison, Wis., office of DeWitt, Ross & Stevens SC, expressed similar frustration with the EEOC’s posture.

“I was equally befuddled as to why this case was chosen or pushed because when I asked” Arnold about emotional distress at his deposition, “there was no evidence, no testimony as to emotional distress,” DiTullio told the court. “As far as out-of-pocket, it was nominal.”

Occhialino stressed that the case was about the broader protections available under the ADA and the precarious precedent established under the district court’s understanding of the safe harbor.

Hamilton, together with panel judges Joel M. Flaum and Daniel A. Manion, accepted Occhialino’s offer to brief the court on those issues.

To contact the reporter on this story: Michael J. Bologna in Chicago at

To contact the editor responsible for this story: Susan J. McGolrick at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.