Orion Can Require Medical Exams for Health Plan Enrollment

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Sept. 20 — The EEOC failed to convince a federal judge that Orion Energy Systems Inc. violated the American with Disabilities Act when it required employees who elected to enroll in the company’s health insurance plan to undergo medical examination or pay full premium costs ( EEOC v. Orion Energy Sys., Inc. , 2016 BL 308310, E.D. Wis., No. 1:14-cv-01019, 9/19/16 ).

At issue in the case is a new regulation by the Equal Employment Opportunity Commission that allows employers to offer limited financial incentives to encourage employees to participate in wellness programs and remain in compliance with the ADA. The EEOC drew heat when it started suing employers, like Orion, before it issued this new guidance on wellness plan compliance with the ADA.

The U.S. District Court for the Eastern District of Wisconsin denied Sept. 19 the EEOC’s motion for summary judgment in its case against Orion. In partially ruling for Orion, the court said that the company’s wellness program was voluntary and as such didn’t violate the ADA. But Orion may still be on the hook over the EEOC’s allegation that the company retaliated against an employee when it terminated her shortly after she refused to complete the examination.

The ADA prohibits employers from conducting medical examinations and inquiries of employees, unless such examination or inquiry is shown to be job-related and consistent with business necessity. However, examinations that are voluntary and part of a health program don’t violate the ADA.

The EEOC argued that Orion’s examination wasn’t voluntary because it shifted fully the premium costs to employees who opted out.

EEOC’s New Regulation

The ADA has a safe harbor provision that states that the law shouldn’t prohibit self-insured employers, like Orion, from establishing and administering benefit plans. The EEOC’s new regulation provides that the safe harbor provision doesn’t apply to wellness programs, like Orion’s.

The court ruled that the EEOC’s regulation was valid and could be applied retroactively, but it declined to apply it to Orion’s wellness program. The court expressly declined to adopt the holdings of two cases with similar challenges to wellness programs that were resolved in favor of the employers: Seff v. Broward County, 691 F.3d 1221 (11th Cir. 2012) and EEOC v. Flambeau, Inc., 131 F.Supp. 3d 849 (W.D. Wis. 2015).

In Flambeau, the district court relied on Seff to hold that the protections set forth in the ADA’s safe harbor enable employers to design insurance benefit plans that require otherwise prohibited medical examinations and inquiries as a condition of enrollment in a plan, without violating the ADA. The Flambeau case is currently on appeal to the U.S. Court of Appeals for the Seventh Circuit. Last week, the Seventh Circuit hinted during oral arguments that it might dismiss the appeal on jurisdictional grounds.

In ruling for Orion, Chief Judge William C. Griesbach concluded that the company conducted voluntary examinations pursuant to the ADA and thus didn’t violate the statute.

The EEOC represented itself. Ogletree Deakins Nash Smoak & Stewart PC represented Orion.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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

Request Pension & Benefits Daily