On August 20, 2012, the Eleventh Circuit held in Seff v. Broward County, Florida that the ADA’s safe harbor provision allows employers to deduct a fee from the paychecks of employees who choose not to participate in a wellness program.

Broward County offers its employees a group health insurance plan.  Beginning in 2009, employees enrolling in the plan became eligible to participate in a wellness program sponsored by the County’s group health insurer.  The program included a biometric screening and an online health risk questionnaire.  Based on this information, the group health insurer would then identify those employees who had one of five diseases: asthma; hypertension; diabetes; congestive heart failure; or kidney disease. Employees suffering from any of these five diseases received the opportunity to participate in coaching programs created to address each condition, after which the employees became eligible to receive co-pay waivers for certain medications.

Notably, participation in the employee wellness program was not a condition for enrollment in the County’s group health plan.  However, the County imposed a $20 charge beginning in April 2010 on each biweekly paycheck issued to employees who enrolled in the group health insurance plan but refused to participate in the employee wellness program.

Under the ADA, a “covered entity” cannot “require a medical examination” and “make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.”  42 U.S.C. §12112(d)(4)(A).  However, the statute has a safe harbor provision that exempts certain insurance plans from the ADA’s general prohibitions, including the prohibition on “required” medical examinations and disability-related inquiries.  42 U.S.C. §12201(c)(2).  The safe harbor provision states that the ADA will not be construed to prohibit a covered entity from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that is based on underwriting risks, classifying risks, or administering such risks that are based on or not consistent with state law.

The plaintiff, Bradley Seff, is a former employee of the County and was one of the employees whose paychecks were reduced by $20 for refusing to participate in the wellness program.  He filed a class action against the County related to this deduction, although the County has since stopped deducting the fee from employees’ paychecks.  The District Court granted the County’s motion for summary judgment, holding that the employee wellness program fell within the ADA’s safe harbor provision because it was a term of a bona fide benefit plan.  The Eleventh Circuit agreed. Because the wellness program was part of the contract to provide the County with a group health plan, the program was only available to group plan enrollees, and the County presented the program as part of its group plan in employee handouts.  Thus, the Appellate Court held, it was proper for the District Court to find that the wellness program was a “term” of the County’s group health insurance plan and, therefore, fell within the ADA’s safe harbor provision.

To be clear, the Seff decision does not mean that every employer with a wellness program in place can impose penalties through paycheck deductions for employees who decline to participate in the program.  Employers that have wellness programs in place must determine whether such programs are a part of the employer’s group health insurance plan.  But if they are, Seff holds that the ADA will not be interpreted to prohibit employers from administering the terms of the plan.

Completely separate from the ADA and therefore outside the scope of this posting, please note that there are other potential legal compliance challenges to address, depending on the design of any given employer-sponsored wellness program, including the type of incentive or reward offered for healthy behaviors.  For example, employers commonly face questions about the income tax treatment of employer-provided incentives, and also compliance questions raised under ERISA, HIPAA, COBRA, GINA, and the ADEA.