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Paving a road to well? How the legal pitfalls of wellness programs can harm organizational performance
Business Horizons (2013) 56, 261—269
Available online at www.sciencedirect.com
www.elsevier.com/locate/bushor
ORGANIZATIONAL PERFORMANCE
Paving a road to well? How the legal pitfalls of wellness programs can harm organizational performance Carolyn Middleton Plump a,*, David J. Ketchen Jr.b a b
School of Business, La Salle University, Philadelphia, PA 19141-1199, U.S.A. College of Business, Auburn University, Auburn, AL 36849-5241, U.S.A.
KEYWORDS Wellness programs; Legal risk; Disparate impact; Organizational performance
Abstract Wellness programs are growing in popularity. This is not surprising, given that studies have found wellness programs can create important benefits for employees and employers alike. However, companies need to be aware that wellness programs can also create significant and costly legal problems. No wellness program can be designed to completely avoid legal risks, but companies can minimize their chances of falling victim to financial damages by (1) steering clear of disparate impact; (2) rewarding behavior, not outcomes; (3) keeping programs voluntary; (4) not letting wellness programs influence employment decisions; (5) protecting employees’ medical information; (6) not creating hostile work environments via wellness activities; and (7) clearly separating work hours and wellness activities. # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
1. Paved with good intentions. . . Wellness programs are employer-funded initiatives that are designed to improve employee health, which in turn is expected to enhance organizational performance. Whirlpool executives, for example, had the best of intentions when they decided to begin offering free, voluntary annual physicals–— including a blood test–—to company employees
* Corresponding author E-mail addresses: [email protected] (C.M. Plump), [email protected] (D.J. Ketchen Jr.)
and their spouses, such that these individuals might remedy any health problems detected. As is the practice in many firms, Whirlpool played no role in the processing of the blood tests; samples were sent directly to SmithKline Beecham Clinical Lab for analysis and the lab, in turn, mailed its findings to individuals. When employee Allen Huffman received his blood test results, he learned that his hemoglobin level was abnormally low. About a week later, Huffman asked the company nurse what this meant. The nurse replied that Huffman might be anemic, but that he should consult a doctor about his results. Huffman purchased some iron tablets, but he did not
0007-6813/$ — see front matter # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.bushor.2013.01.006
262 consult a doctor. When Huffman’s wife, Beverly, told the family physician about the abnormal findings–— 3 months later–—additional tests were ordered. These tests revealed that Allen Huffman had an aggressive form of colon cancer. He died 9 months after his initial blood test. Beverly Huffman then sued SmithKline and Whirlpool for negligence (Huffman v. SmithKline Beecham Clinical Lab Inc., 2000). Whirlpool’s attorneys asked the court to remove the firm as a defendant, but the court determined that Whirlpool could be liable for damages even though Whirlpool did not conduct the tests or even receive a copy of the results. The court reasoned that the mere existence of the wellness program conferred legal responsibility on Whirlpool. After failing in its bid to be removed from the case, Whirlpool settled with Huffman’s widow for an undisclosed amount. Whirlpool’s good intentions in creating a wellness program had been expected to create a ‘road to well’ for employees and their spouses, but instead they paved a financial ‘road to hell’ for the company. Wellness programs such as Whirlpool’s can trace their origins to the employee assistance programs (EAPs) of the 1970s, which focused mainly on providing counseling related to mental health, substance abuse, and stress management. Employers later sought to reach a larger portion of the workforce by offering free medical exams, free gym memberships, and voluntary seminars on subjects such as preventive care and smoking cessation. In recent years, the number and variety of wellness programs have grown exponentially. A contemporary survey found that 74% of American employers offer wellness programs and that 11% of employers spend more than $500 per employee (Gadowski, 2011). These initiatives include a broad range of rewards and penalties such as financial incentives for meeting specific health goals, potential savings due to reductions in healthcare premiums, and mandatory vaccination programs. Some companies are even considering requiring employees’ spouses and dependents to participate in their wellness initiatives in order to better manage healthcare costs (Conlin, 2010). Companies have justifiable reasons for experimenting with different wellness programs. Dramatic increases in healthcare costs have led companies to search for creative ways to control these costs. Meanwhile, studies have found that wellness programs can create important benefits for both companies and employees, including (Fielding, 1996):
improved job satisfaction; decreased absenteeism;
ORGANIZATIONAL PERFORMANCE
increased efficiency and productivity; reduced medical care costs; and improved employee recruitment and retention. Indeed, in many cases, wellness programs improve worker health within an organization and this increased level of health in turn increases organizational performance. As the Whirlpool case illustrates, however, the legal implications of wellness programs can lead such programs to inflict financial damage on organizations. This does not necessarily mean that organizations should abandon their wellness programs out of a fear of being sued. Instead, executives should be mindful of some important guidelines when creating and operating wellness programs. The main purpose of this article is to develop such guidelines by considering relevant federal labor and employment statutes. The guidelines are summarized in Table 1. Following these guidelines cannot eliminate the prospect of costly legal problems, but acting in accordance with them can help minimize the chances that a firm’s performance will be damaged by its wellness programs.
2. Avoiding a dangerous road 2.1. Guideline #1: Steer clear of disparate impact Disparate impact occurs when a company’s policy unintentionally has a greater adverse effect on a protected group than it does on other workers. Protected groups are defined by Title VII of the Civil Rights Act of 1964 (Title VII). This law prohibits employment discrimination on the basis of race, color, religion, sex (including pregnancy), or national origin (Title VII, 1991, § 2000e).1 Specifically, under Title VII it is illegal to:
Discriminate in any aspect of employment, including hiring and firing, compensation, leave, promotions, recruitment, testing, use of company facilities, or other terms and conditions of employment;
1 To be subject to liability under Title VII, employers must have 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. For purposes of Title VII, an employer includes private employers, state and local governments, educational institutions, private and public employment agencies, labor organizations, and joint labor-management committees controlling apprenticeship and training.
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263
Table 1. Guidelines for operating wellness programs Steer clear of disparate impact Be wary of weight and Body Mass Index (BMI) requirements; they could discriminate against protected groups Be cautious about requiring weekend activities and vaccinations; they may conflict with the beliefs of religious groups Be careful about using health standards; they may create discrimination based on age and/or disability Reward behavior, not outcomes
Provide rewards to all similarly-situated employees and base the rewards on participation If rewards are tied to health factors, ensure programs satisfy five criteria under HIPAA Opt for anonymous data entry, third-party administrators, or firewalls between entities with protected health information and decision makers Voluntary programs must, in fact, be voluntary
Present information regarding wellness programs in an objective manner and emphasize participation is voluntary
Designate representatives outside employment decision-making chain of command to handle wellness program inquires Do not tie wellness programs to employment decisions
Establish an outside entity to collect, review, and maintain wellness information Limit access to and knowledge of wellness information so relevant supervisors cannot access or possess it Ensure objective business reasons for all employment terminations and document them Beware of collecting and disclosing medical information
Keep medical and personnel information separate Provide annual training to employees who handle medical information Protect privacy when reporting medical information to outsiders Avoid creating hostile work environments via wellness programs
Provide annual anti-harassment and anti-discrimination training Establish and communicate guidelines for reporting harassment allegations Investigate all allegations of employee harassment Clearly separate work hours and wellness activities
Offer wellness activities outside regular work hours Instruct non-exempt employees not to perform any productive work during wellness activities (e.g., reviewing work material during a wellness seminar) unless company intends to count any such time as work hours
Harass an individual on the basis of race, color, religion, sex, or national origin;
Retaliate against an individual for filing a charge of discrimination, participating in an investigation, or opposing discriminatory practices;
Base employment decisions on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain race, color, religion, sex, or nationality;
Deny employment opportunities to a person because of marriage to, or association with, an individual of a particular race, religion, or national origin; or
Follow practices that, even though not intentional, have the effect of discriminating against
individuals because of their race, color, religion, sex, or national origin. Wellness programs often contain health and fitness standards; employees receive a reward and/or avoid a penalty when reaching the standards. Employers must ensure their health standards do not discriminate against a class of individuals protected by Title VII. For instance, some wellness programs require employees to be in a certain weight range to receive discounted health premiums. If the weight requirements are different for females and males of the same age and height, the requirements could violate Title VII. Such a scenario is analogous to the situation female flight attendants faced when they were required to meet different weight standards than their male colleagues. Courts examining the weight restrictions imposed by airlines ruled the requirements amounted to gender discrimination
264 and required airlines to lift them (Frank, 2000). Some airlines paid financial damages to affected flight attendants and endured negative publicity (Lewin, 1994). The same fate could befall companies whose wellness programs include weight restrictions. A more subtle danger in the realm of health standards is offered by national origin. A study by Williams et al. (2007) found males of Pacific Island descent had a higher body mass index (BMI) than women of Pacific Island descent and individuals of other ethnic groups. A different study found Native Americans have a higher rate of Type 2 diabetes than other groups (Bachar, 2006). One implication is that a court might find that relying on BMI or blood sugar levels as benchmarks for assessing wellness discriminates against people of particular national origins. This illustrates how even an effective and beneficial health standard may violate Title VII’s prohibition on national origin discrimination. Religious preferences serve as another potential land mine. Suppose, for example, a company conducts a smoking cessation class on a Saturday in order to avoid conflict with the traditional Monday through Friday work week. This could violate Title VII if one or more employees who wish to attend the class belong to a religious group that holds services on Saturdays. Similarly, a mandatory vaccination program aimed at protecting the workforce from preventable illnesses (e.g., some employers required employees to be vaccinated against the H1N1 swine flu during a 2009 epidemic) could conflict with a protected group’s religious views on receiving medical treatment. In sum, disparate impact creates legal liabilities even if intentions behind the policy are pure. Disparate impact–—and the associated financial liability–—can also arise via the Age Discrimination in Employment Act (ADEA) of 1967. This law prohibits discrimination based on age against individuals 40 or older.2 Medical studies have found that BMI, cholesterol levels, and blood pressure are often measures of genetics and aging rather than measures of healthiness. Accordingly, wellness standards that rely on such metrics to determine health and fitness levels may be ripe for age claims, particularly when wellness programs tie these metrics to rewards or penalties. For example, if a company runs a wellness program that pays an employee’s monthly health insurance deductible if he or she has a blood pressure below 120/80, this may violate the ADEA (1967) if it can be
2 To be covered under the ADEA, an organization must have 20 or more employees.
ORGANIZATIONAL PERFORMANCE demonstrated that employees age 40 and older meet the standard less frequently than do younger employees. Overall, employers must ensure that the wellness standards they establish do not have a disparate impact on employees who are 40+. Finally, the Americans with Disabilities Act (ADA) of 19903 creates significant concerns about disparate impact. The ADA (2009) prohibits discrimination against individuals with actual disabilities, against individuals with perceived disabilities (even if these disabilities do not exist), and against individuals because of their association with someone who is disabled (such as via marriage). Wellness programs that require employees to meet health standards can have a disparate impact on these groups and thereby violate the ADA. For example, the courts have held that diabetes is a disability. If a wellness program requires an employee to achieve a certain blood pressure, it could unintentionally discriminate against employees with diabetes given that people with diabetes also tend to have abnormal blood pressure and may not be able to achieve the standard.
2.2. Guideline #2: Reward behavior, not outcomes Generally, companies prefer to reward employees based on their level of performance rather than based on their behavior. This approach can be dangerous within the context of wellness programs, though. Employers often establish financial incentives in connection with wellness programs. Such incentives tend to increase employee participation and program effectiveness (MetLife, 2010). Incentives tied to achievement of a specific fitness goal or target–—as opposed to participation alone–—are problematic, however, because they can result in violations of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. HIPAA (1996) prohibits group health insurance plans from charging similarly-situated individuals different premiums, deductibles, or co-payments, or offering rewards based on a health factor (HIPAA Nondiscrimination Provisions). HIPAA contains an exception to its Nondiscrimination Provisions for certain wellness programs; the exemption allows such programs to charge different amounts and offer rewards up to a certain amount. Whether a program qualifies for an exception depends on whether the reward is tied to achievement of a specific health goal.
3 To be covered under the ADA, an organization must have 15 or more employees.
ORGANIZATIONAL PERFORMANCE A wellness program is permissible if it offers a reward for participation and applies to all similarlysituated individuals. Examples include reimbursement for gym memberships, vaccinations, blood pressure testing (assuming no result must be achieved), payment for smoking cessation classes, and waiver of deductibles or co-payments for preventative care. If a wellness program offers a reward that is linked to an employee satisfying a specific health standard, it must meet the following five criteria to fall within HIPAA’s exception: (1) the reward must not exceed 20% of the total cost of health insurance coverage for the individual employee (the proposed regulations issued pursuant to the Patient Protection and Affordable Care Act (2012) recommend increasing the reward to 30% in 2014; 50% for programs designed to prevent or reduce tobacco use); (2) the program must be reasonably designed to prevent disease or promote health; (3) individuals must be given an opportunity to qualify for the reward at least once per year; (4) the reward must be available to all similarlysituated individuals (e.g., full-time employees); and (5) the participants must be notified of any alternative standards. The aforementioned criteria, however, provide little guidance to employers. For instance, what does it mean for a program to be ‘‘reasonably designed to prevent disease or promote health?’’ The regulations attempt to explain the requirement by stating the program must have a reasonable chance of success, not be overly burdensome, not be subterfuge for discrimination due to a health factor, and not be highly suspect in the chosen method. This explanation does little to provide clarification. Such ambiguity is particularly troubling in light of the substantial monetary fines and criminal jail sentences the government can impose on companies and corporate officers for HIPAA violations. In light of this ambiguity, it may be best to provide incentives for participation only.
2.3. Guideline #3: Voluntary programs must, in fact, be voluntary The ADA makes determining what constitutes ‘‘voluntary’’ participation fairly complex. In general, the ADA prohibits employers from requiring medical examinations, making inquiries as to whether an employee has a disability, or asking about the nature or severity of a disability unless such inquiry is jobrelated and consistent with business necessity. The United States Equal Employment Opportunity Commission (EEOC) interprets the ADA as allowing an exception for voluntary examinations and activities that are part of employer wellness programs.
265 The EEOC (2000) defines the term ‘‘voluntary’’ to mean an employee’s participation is optional and he or she is not penalized for failure to participate in the program or answer questions. Wellness programs, which provide monetary incentives for employees to participate, arguably penalize those employees who do not participate. The label ‘‘reward’’ does not alter this result. Indeed, whether an incentive is deemed a reward or a penalty is irrelevant because the result is the same; the non-participating employee does not get the monetary advantage given to the participating employee. Further, if the reward is substantial or the pressure to participate is significant, it calls into question the voluntary nature of the program because employees may feel compelled to participate. Employers should take the following steps to reinforce the voluntary nature of any wellness program. Information about wellness program options should be presented in an objective manner and from a person in the benefits or human resources department rather than from supervisors or company management. Any wellness program material that is distributed, whether by email or other means, should contain a statement that participation is voluntary. Management should not track wellness participation in connection with any job evaluations or performance assessments. Finally, if incentives are offered, the incentives must be given for participation (not results) and the provision of incentives cannot be contingent on the provision of medical information. For example, if the wellness program requires employees to fill out a form and the form contains one section that asks for medical information, the section should include a statement that provision of medical information is voluntary and not required to obtain the incentive. In simplest terms, employers should think of their wellness programs as an extension of the other benefits they offer (e.g., 401k plans). Most organizations make 401k plans available to employees (and some even match employee contributions up to a certain amount). No one would debate that such programs are beneficial to employees, but employees are not pressured to take advantage of such programs. Employers provide the information and allow employees to make their own decisions. This is how wellness programs should be run, too.
2.4. Guideline #4: Do not tie wellness programs to employment decisions The Employee Retirement Income Security Act (ERISA) of 1974 presents another potential concern
266 for employers. ERISA (1974) was enacted to provide federal oversight of employer-sponsored benefit plans, including programs established by employers to provide medical care. This could mean wellness plans that make recommendations regarding health activities, engage in disease management activities, provide on-site wellness clinics, or operate EAPs are subject to ERISA requirements. This is significant because ERISA prohibits an employer from terminating an employee to prevent the employee from obtaining his or her benefits. Accordingly, if a company fires an employee because the employer does not want him or her to participate in or obtain certain benefits from a wellness program, the action could violate ERISA. In one relevant court case, former employees alleged that Storage Technology Corporation (Storage Tech) engaged in a pattern and practice of benefits discrimination through its targeted layoffs (Vaszlavik v. Storage Tech. Corp., 1998). The court found evidence from corporate meetings and planning sessions that Storage Tech stereotyped older employees as having higher healthcare costs, articulated corporate goals to control healthcare costs and promote wellness, and implemented a wellness program designed to surface employee health issues. Considered in isolation these concerns and planning strategies could be neutral, but viewed as a whole, they satisfied the plaintiffs’ burden for proceeding with their ERISA claim. In addition, evidence suggested that Storage Tech discharged employees who, based in part on information gathered from the wellness program, were aboveaverage users of benefits. This case exemplifies the danger of making employment decisions, or even appearing to do so, based on information obtained from wellness programs. To avoid any hint of impropriety on this count, employers should take several precautions. First, they should consider hiring an outside organization to collect, review, and maintain any wellness information, to place a barrier between the company and the information. This outside organization should not share employee wellness information with decision makers in the company. Next, wellness information should be kept in a secure database and access should be limited to people with a compelling need to know the information. If the preceding two conditions are fulfilled, in the event of litigation, the company can establish that employment decisions were not tied to wellness program data. Finally, although employees in many states are ‘‘at-will’’ (i.e., they may be fired for any reason except a discriminatory one), employers should have a clear, objective, business-related motive for terminating an
ORGANIZATIONAL PERFORMANCE employee and document the reason–—or at least be able to articulate it.
2.5. Guideline #5: Beware of collecting and disclosing medical information Many wellness programs involve gathering information regarding staff members’ state of health, interpreting that information (e.g., identifying areas of concern), and then providing employees with guidance about how to improve their well-being. This creates a potential problem in that various laws–—including the ADA, HIPAA, and the Genetic Information Nondiscrimination Act (GINA)–—insist that the privacy of health-related information is maintained. There are several precautions a company can take to minimize the likelihood of litigation due to the collection and use of medical information in connection with a wellness program. For example, employers should segregate medical and personnel information. To achieve the ADA’s goal of eradicating employment discrimination against individuals with disabilities, the ADA requires that employers keep all information regarding an employee’s disability in a file separate from the employee’s personnel file. There is a greater risk of employers comingling employee medical information and personnel information when wellness programs are in place. This is because employers often (1) collect employee medical information in connection with their wellness programs, which provides additional opportunities for misfiling information; (2) offer incentives–—such as insurance premium reductions–—for employees who participate in wellness programs, which leads to inclusion of health information in a personnel file to explain the insurance adjustment; and (3) provide alternatives or accommodations to allow employees with disabilities to participate in wellness programs (e.g., reduction in work hours to allow additional medical monitoring), which require notations in the employee’s personnel file regarding the new employment requirements. If any of the information placed in an employee’s personnel file includes medical information, this violates the ADA and opens the door to potentially costly litigation. Moreover, employers should train staff and management annually on how to address medical information issues that may arise in the wellness context. In particular, employers could instruct employees on how to handle medical information received as part of a wellness program, the importance of avoiding potentially discriminatory comments or behavior when handling such information, and the need to report any allegations of
ORGANIZATIONAL PERFORMANCE misconduct. Because employers can be held liable for the acts of outside consultants or vendors hired as part of a wellness program, they should communicate their policies in writing to these entities in order to avoid any misunderstanding. Should a lawsuit related to the disclosure of medical information arise, employers may use evidence of training, communicating their policies, and investigating allegations to defend themselves. HIPAA also contains privacy and confidentiality requirements for an individual’s private health information (HIPAA, 1996, 42 U.S.C. § 1321(d)). Employers can violate HIPAA if they intentionally or inadvertently possess private health information in any form (including verbal or electronic). To avoid this, companies should have third-party administrators input data anonymously, rather than by employee names. Title II of GINA (2008) governs the collection and use of genetic information by employers.4 When medical information needs to be disclosed, it must be reported in a way that does not identify particular individuals. As with HIPAA, if a wellness program collects family medical history or genetic information, the employer must disclose such information in aggregate terms or identify employees by random numbers rather than names or Social Security numbers. Similarly, employers must provide wellness information to licensed healthcare professionals or counselors only. Employers can also violate GINA if they condition monetary incentives, such as insurance discounts, on the completion of forms seeking medical information. Thus, employers must be vigilant regarding how they collect, maintain, and disclose employee medical information.
2.6. Guideline #6: Avoid creating hostile work environments via wellness programs Employees may assert hostile work environment claims under Title VII if they feel pressured by the conditions of a wellness program. A hostile work environment is present when conduct is severe or pervasive enough to create an office atmosphere that is intimidating or abusive. Offensive conduct may include–—but is not limited to–—offensive jokes, name calling, physical assaults or threats, intimidation, ridicule or mockery, insults/putdowns, or interference with work performance. A hostile work environment is more likely in companies with wellness programs because (1) third parties–—such as vendors, healthcare providers,
4 GINA’s employment provisions apply to organizations with 15 or more employees.
267 and fitness instructors–—are more difficult to police, and may be more likely to make inappropriate comments; (2) the setting–—at a gym, outside the workplace, and outside work hours–—lends itself to more casual conversation and interactions, which can lead to inappropriate comments; and (3) exercise tends to elicit comments unrelated to work, draws attention to people’s bodies, and sometimes requires individuals to wear more revealing clothing. To minimize the potential for inappropriate behavior, employers should police wellness program participants and monitor the workout settings. This can be done in a variety of ways. A designated point person can obtain feedback from employees and outside agencies regarding any issues. Employers can provide annual training to staff and vendors on appropriate workplace behavior and explain that it is required for all interactions, even outside work time and work hours. Employers should communicate their guidelines for reporting allegations of harassment, including (for example), the name of the person to report to and whether to report such information verbally, by email, or in person. With respect to a designated point person, employers should have at least two options for employees to report concerns. This is to alleviate a situation where the alleged harasser is also the person to whom one must report allegations of harassment. Finally, companies should investigate any allegations regarding hostile work environments, even if the accuser failed to follow the proper steps for reporting the allegations (e.g., it was reported verbally rather than in writing). Investigating allegations does not mean employers always must take action against the alleged harasser. Indeed, an investigation may conclude that there was no harassment or that it could not be determined if the alleged action occurred. Nonetheless, a swift and thorough investigation assures employees that the company takes such allegations seriously and that it will not tolerate harassment. Such investigations also help discourage future misconduct.
2.7. Guideline #7: Clearly separate work hours and wellness activities Some companies allow employees to pursue wellness activities on company time. Employers who do not wish to do so should make clear that any time employees spend on wellness activities is not considered work time. The Fair Labor Standards Act (FLSA) of 1938 establishes minimum wage and overtime standards for workers. These standards require employers with one or more employees to pay non-exempt employees for all hours they are required or are
268 allowed to work. This includes work performed away from work premises (e.g., work performed at home) and work that employers know of or have reason to know of (e.g., receiving emails at night that require immediate responses). Further, employers have to provide non-exempt employees overtime pay for any hours worked over 40 hours in a work week. If wellness activities fall within the FLSA’s definition of ‘‘work hours,’’ it could have significant financial implications for businesses (FLSA, 2009). Wellness programs often direct employees to work out, attend seminars, undergo physicals, and complete questionnaires. Regardless of when or where these activities take place, the time employees spend doing them may count as work time. In deciding the veracity of the latter, courts may consider such factors as whether attendance or participation is voluntary, whether the activity occurs or is offered outside of work hours, and whether any productive work is performed during such activity (e.g., reading work-related material while on a stationary bike). As a result, employers may find themselves paying non-exempt employees for lunch breaks, other work breaks, or activities outside work hours–—which generally are not compensable if the employee does not perform any work–—merely because the employees participate in the employer’s wellness program during such time. In addition, some states such as California require overtime if an employee works more than 8 hours a day. Therefore, if a non-exempt employee attends a wellness class for 2 hours and then works 8 hours, a California employer would owe the employee 2 hours of overtime pay. Although the amount of time may seem insignificant, it can add up. Consider, for example, if an employer has 15 non-exempt employees, each of whom spends 3 hours per week working out or completing other wellness program tasks. If those hours are deemed to be work hours under the FLSA (2009), it would add more than 2,300 hours a year to the employer’s labor costs. This example does not even take into account additional money employers may have to pay people to conduct, oversee, or administer the wellness programs. Therefore, employees must understand that time spent on working out is voluntary and not part of their job. Employers can emphasize the voluntary nature of wellness programs by including statements in written policies and wellness materials, and by verbally informing employees during employment training.
3. Staying on the road to well The popularity of wellness programs seems likely to increase in the future. Certainly, employers are experiencing skyrocketing employee healthcare
ORGANIZATIONAL PERFORMANCE costs. One logical reaction is for employers to experiment with initiatives, such as wellness programs, that promise to lower these costs. Meanwhile, many companies desire to increase their commitment to employee welfare in particular and to social responsibility in general. Expanding their array of wellness programs allows firms to serve these goals. As companies develop their wellness programs, however, they need to be aware of potential legal pitfalls. Organizations do not need to stop offering wellness programs out of a fear of being sued, but they must create and operate them in ways that avoid costly legal liabilities possibly undermining organizational performance. Meet the authors Carolyn M. Plump, Esq. serves as an Assistant Professor of the School of Business at La Salle University. She teaches courses at the undergraduate and MBA level. Before joining the faculty of La Salle University, she worked as an attorney for one of the world’s largest international law firms and as an Assistant Counsel for the United States Senate — Office of Senate Chief Counsel for Employment. She trained, advised, and represented clients in both private and public sectors regarding compliance with labor and employment laws. She lectures and writes nationally on business management issues such as the legal implications of wellness programs. Her articles have appeared in Business Horizons, The National Law Journal, The Employment Law Strategist, and The Legal Intelligencer. David J. Ketchen, Jr. serves as Lowder Eminent Scholar and Professor of Management at Auburn University. He has published 6 books and over 100 journal articles, mainly on entrepreneurship and franchising, strategic supply chain management, and the determinants of superior organizational performance. He teaches courses at the undergraduate, MBA, executive MBA, and doctoral levels, and has won several awards for his research and teaching activities. He has consulted for a variety of private and public sector organizations, including serving as the lead consultant on a successful bid for an $11.2 billion government contract. His current pro bono efforts include serving on the teaching team for the Entrepreneurship Bootcamp for Veterans with Disabilities at Florida State University. He is a contributing editor for Business Horizons.
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References ADA. (2009). The Americans with Disabilities Act of 1990, as amended, 42 U.S.C. § 12111. ADEA. (1967). The Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621. Conlin, M. (2010, January 21). Health care: Human resources targets your family. BusinessWeek. Retrieved January 2, 2013, from http://www.businessweek.com/magazine/content/ 10_05/b4165067423261.htm EEOC. (2000, July 27). Enforcement guidance: Disability-related inquiries and medical examinations of employees under the Americans with Disabilities Act (ADA). Retrieved December 20, 2012, from http://www.eeoc.gov/policy/docs/guidanceinquiries.html ERISA. (1974). Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, 88 Stat. 829, codified in part at 29 U.S.C. § 1002. Fielding, J. E. (1996). Getting smarter and maybe wiser. American Journal of Health Promotion, 11(2), 109—111. FLSA. (2009). The Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201. Gadowski, E. (2011, January 7). U.S. businesses spend more on wellness programs, but most don’t measure results. PR Web. Retrieved December 29, 2012, from http://www.prweb.com/ releases/2011/01/prweb4947184.htm
269 GINA. (2008). The Genetic Information Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff. HIPAA. (1996). Health Insurance Portability and Accountability Act of 1996, 29 U.S.C. § 1181 & 42 U.S.C. § 1321 (d). Huffman v. SmithKline Beecham Clinical Lab. Inc. (2000). 111 F. Supp. 2d 921 (N.D. Ohio 2000). Lewin, T. (1994, April 8). USAir agrees to lift rules on the weight of attendants. The New York Times. Retrieved January 2, 2013, from http://www.nytimes.com/1994/04/08/us/usair-agreesto-lift-rules-on-the-weight-of-attendants.html MetLife. (2010). MetLife study of global health and wellness: A look at how multinational companies are responding to the need for a healthier workforce. Boston: Sloan Center on Aging and Work at Boston College. Patient Protection and Affordable Care Act. (2012). 26 C.F.R. Part 54, 29 C.F.R. Part 2590, and 45 C.F.R. Parts 146 & 147. Title VII. (1991). The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e. Vaszlavik v. Storage Tech. Corp. (1998). 183 F.R.D. 264.(D. Co., 1998). Williams, A. E., Vogt, T., Stevens, V. J., Albright, C. A., Nigg, C. R., Meenan, R. T., et al. (2007). Work, weight, and wellness: The 3W program: A worksite obesity prevention and intervention trial. Obesity, 15(S1), 16S—26S.
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Paving a road to well? How the legal pitfalls of wellness programs can harm organizational performance Carolyn Middleton Plump a,*, David J. Ketchen Jr.b a b
School of Business, La Salle University, Philadelphia, PA 19141-1199, U.S.A. College of Business, Auburn University, Auburn, AL 36849-5241, U.S.A.
KEYWORDS Wellness programs; Legal risk; Disparate impact; Organizational performance
Abstract Wellness programs are growing in popularity. This is not surprising, given that studies have found wellness programs can create important benefits for employees and employers alike. However, companies need to be aware that wellness programs can also create significant and costly legal problems. No wellness program can be designed to completely avoid legal risks, but companies can minimize their chances of falling victim to financial damages by (1) steering clear of disparate impact; (2) rewarding behavior, not outcomes; (3) keeping programs voluntary; (4) not letting wellness programs influence employment decisions; (5) protecting employees’ medical information; (6) not creating hostile work environments via wellness activities; and (7) clearly separating work hours and wellness activities. # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved.
1. Paved with good intentions. . . Wellness programs are employer-funded initiatives that are designed to improve employee health, which in turn is expected to enhance organizational performance. Whirlpool executives, for example, had the best of intentions when they decided to begin offering free, voluntary annual physicals–— including a blood test–—to company employees
* Corresponding author E-mail addresses: [email protected] (C.M. Plump), [email protected] (D.J. Ketchen Jr.)
and their spouses, such that these individuals might remedy any health problems detected. As is the practice in many firms, Whirlpool played no role in the processing of the blood tests; samples were sent directly to SmithKline Beecham Clinical Lab for analysis and the lab, in turn, mailed its findings to individuals. When employee Allen Huffman received his blood test results, he learned that his hemoglobin level was abnormally low. About a week later, Huffman asked the company nurse what this meant. The nurse replied that Huffman might be anemic, but that he should consult a doctor about his results. Huffman purchased some iron tablets, but he did not
0007-6813/$ — see front matter # 2013 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.bushor.2013.01.006
262 consult a doctor. When Huffman’s wife, Beverly, told the family physician about the abnormal findings–— 3 months later–—additional tests were ordered. These tests revealed that Allen Huffman had an aggressive form of colon cancer. He died 9 months after his initial blood test. Beverly Huffman then sued SmithKline and Whirlpool for negligence (Huffman v. SmithKline Beecham Clinical Lab Inc., 2000). Whirlpool’s attorneys asked the court to remove the firm as a defendant, but the court determined that Whirlpool could be liable for damages even though Whirlpool did not conduct the tests or even receive a copy of the results. The court reasoned that the mere existence of the wellness program conferred legal responsibility on Whirlpool. After failing in its bid to be removed from the case, Whirlpool settled with Huffman’s widow for an undisclosed amount. Whirlpool’s good intentions in creating a wellness program had been expected to create a ‘road to well’ for employees and their spouses, but instead they paved a financial ‘road to hell’ for the company. Wellness programs such as Whirlpool’s can trace their origins to the employee assistance programs (EAPs) of the 1970s, which focused mainly on providing counseling related to mental health, substance abuse, and stress management. Employers later sought to reach a larger portion of the workforce by offering free medical exams, free gym memberships, and voluntary seminars on subjects such as preventive care and smoking cessation. In recent years, the number and variety of wellness programs have grown exponentially. A contemporary survey found that 74% of American employers offer wellness programs and that 11% of employers spend more than $500 per employee (Gadowski, 2011). These initiatives include a broad range of rewards and penalties such as financial incentives for meeting specific health goals, potential savings due to reductions in healthcare premiums, and mandatory vaccination programs. Some companies are even considering requiring employees’ spouses and dependents to participate in their wellness initiatives in order to better manage healthcare costs (Conlin, 2010). Companies have justifiable reasons for experimenting with different wellness programs. Dramatic increases in healthcare costs have led companies to search for creative ways to control these costs. Meanwhile, studies have found that wellness programs can create important benefits for both companies and employees, including (Fielding, 1996):
improved job satisfaction; decreased absenteeism;
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increased efficiency and productivity; reduced medical care costs; and improved employee recruitment and retention. Indeed, in many cases, wellness programs improve worker health within an organization and this increased level of health in turn increases organizational performance. As the Whirlpool case illustrates, however, the legal implications of wellness programs can lead such programs to inflict financial damage on organizations. This does not necessarily mean that organizations should abandon their wellness programs out of a fear of being sued. Instead, executives should be mindful of some important guidelines when creating and operating wellness programs. The main purpose of this article is to develop such guidelines by considering relevant federal labor and employment statutes. The guidelines are summarized in Table 1. Following these guidelines cannot eliminate the prospect of costly legal problems, but acting in accordance with them can help minimize the chances that a firm’s performance will be damaged by its wellness programs.
2. Avoiding a dangerous road 2.1. Guideline #1: Steer clear of disparate impact Disparate impact occurs when a company’s policy unintentionally has a greater adverse effect on a protected group than it does on other workers. Protected groups are defined by Title VII of the Civil Rights Act of 1964 (Title VII). This law prohibits employment discrimination on the basis of race, color, religion, sex (including pregnancy), or national origin (Title VII, 1991, § 2000e).1 Specifically, under Title VII it is illegal to:
Discriminate in any aspect of employment, including hiring and firing, compensation, leave, promotions, recruitment, testing, use of company facilities, or other terms and conditions of employment;
1 To be subject to liability under Title VII, employers must have 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year. For purposes of Title VII, an employer includes private employers, state and local governments, educational institutions, private and public employment agencies, labor organizations, and joint labor-management committees controlling apprenticeship and training.
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263
Table 1. Guidelines for operating wellness programs Steer clear of disparate impact Be wary of weight and Body Mass Index (BMI) requirements; they could discriminate against protected groups Be cautious about requiring weekend activities and vaccinations; they may conflict with the beliefs of religious groups Be careful about using health standards; they may create discrimination based on age and/or disability Reward behavior, not outcomes
Provide rewards to all similarly-situated employees and base the rewards on participation If rewards are tied to health factors, ensure programs satisfy five criteria under HIPAA Opt for anonymous data entry, third-party administrators, or firewalls between entities with protected health information and decision makers Voluntary programs must, in fact, be voluntary
Present information regarding wellness programs in an objective manner and emphasize participation is voluntary
Designate representatives outside employment decision-making chain of command to handle wellness program inquires Do not tie wellness programs to employment decisions
Establish an outside entity to collect, review, and maintain wellness information Limit access to and knowledge of wellness information so relevant supervisors cannot access or possess it Ensure objective business reasons for all employment terminations and document them Beware of collecting and disclosing medical information
Keep medical and personnel information separate Provide annual training to employees who handle medical information Protect privacy when reporting medical information to outsiders Avoid creating hostile work environments via wellness programs
Provide annual anti-harassment and anti-discrimination training Establish and communicate guidelines for reporting harassment allegations Investigate all allegations of employee harassment Clearly separate work hours and wellness activities
Offer wellness activities outside regular work hours Instruct non-exempt employees not to perform any productive work during wellness activities (e.g., reviewing work material during a wellness seminar) unless company intends to count any such time as work hours
Harass an individual on the basis of race, color, religion, sex, or national origin;
Retaliate against an individual for filing a charge of discrimination, participating in an investigation, or opposing discriminatory practices;
Base employment decisions on stereotypes or assumptions about the abilities, traits, or performance of individuals of a certain race, color, religion, sex, or nationality;
Deny employment opportunities to a person because of marriage to, or association with, an individual of a particular race, religion, or national origin; or
Follow practices that, even though not intentional, have the effect of discriminating against
individuals because of their race, color, religion, sex, or national origin. Wellness programs often contain health and fitness standards; employees receive a reward and/or avoid a penalty when reaching the standards. Employers must ensure their health standards do not discriminate against a class of individuals protected by Title VII. For instance, some wellness programs require employees to be in a certain weight range to receive discounted health premiums. If the weight requirements are different for females and males of the same age and height, the requirements could violate Title VII. Such a scenario is analogous to the situation female flight attendants faced when they were required to meet different weight standards than their male colleagues. Courts examining the weight restrictions imposed by airlines ruled the requirements amounted to gender discrimination
264 and required airlines to lift them (Frank, 2000). Some airlines paid financial damages to affected flight attendants and endured negative publicity (Lewin, 1994). The same fate could befall companies whose wellness programs include weight restrictions. A more subtle danger in the realm of health standards is offered by national origin. A study by Williams et al. (2007) found males of Pacific Island descent had a higher body mass index (BMI) than women of Pacific Island descent and individuals of other ethnic groups. A different study found Native Americans have a higher rate of Type 2 diabetes than other groups (Bachar, 2006). One implication is that a court might find that relying on BMI or blood sugar levels as benchmarks for assessing wellness discriminates against people of particular national origins. This illustrates how even an effective and beneficial health standard may violate Title VII’s prohibition on national origin discrimination. Religious preferences serve as another potential land mine. Suppose, for example, a company conducts a smoking cessation class on a Saturday in order to avoid conflict with the traditional Monday through Friday work week. This could violate Title VII if one or more employees who wish to attend the class belong to a religious group that holds services on Saturdays. Similarly, a mandatory vaccination program aimed at protecting the workforce from preventable illnesses (e.g., some employers required employees to be vaccinated against the H1N1 swine flu during a 2009 epidemic) could conflict with a protected group’s religious views on receiving medical treatment. In sum, disparate impact creates legal liabilities even if intentions behind the policy are pure. Disparate impact–—and the associated financial liability–—can also arise via the Age Discrimination in Employment Act (ADEA) of 1967. This law prohibits discrimination based on age against individuals 40 or older.2 Medical studies have found that BMI, cholesterol levels, and blood pressure are often measures of genetics and aging rather than measures of healthiness. Accordingly, wellness standards that rely on such metrics to determine health and fitness levels may be ripe for age claims, particularly when wellness programs tie these metrics to rewards or penalties. For example, if a company runs a wellness program that pays an employee’s monthly health insurance deductible if he or she has a blood pressure below 120/80, this may violate the ADEA (1967) if it can be
2 To be covered under the ADEA, an organization must have 20 or more employees.
ORGANIZATIONAL PERFORMANCE demonstrated that employees age 40 and older meet the standard less frequently than do younger employees. Overall, employers must ensure that the wellness standards they establish do not have a disparate impact on employees who are 40+. Finally, the Americans with Disabilities Act (ADA) of 19903 creates significant concerns about disparate impact. The ADA (2009) prohibits discrimination against individuals with actual disabilities, against individuals with perceived disabilities (even if these disabilities do not exist), and against individuals because of their association with someone who is disabled (such as via marriage). Wellness programs that require employees to meet health standards can have a disparate impact on these groups and thereby violate the ADA. For example, the courts have held that diabetes is a disability. If a wellness program requires an employee to achieve a certain blood pressure, it could unintentionally discriminate against employees with diabetes given that people with diabetes also tend to have abnormal blood pressure and may not be able to achieve the standard.
2.2. Guideline #2: Reward behavior, not outcomes Generally, companies prefer to reward employees based on their level of performance rather than based on their behavior. This approach can be dangerous within the context of wellness programs, though. Employers often establish financial incentives in connection with wellness programs. Such incentives tend to increase employee participation and program effectiveness (MetLife, 2010). Incentives tied to achievement of a specific fitness goal or target–—as opposed to participation alone–—are problematic, however, because they can result in violations of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. HIPAA (1996) prohibits group health insurance plans from charging similarly-situated individuals different premiums, deductibles, or co-payments, or offering rewards based on a health factor (HIPAA Nondiscrimination Provisions). HIPAA contains an exception to its Nondiscrimination Provisions for certain wellness programs; the exemption allows such programs to charge different amounts and offer rewards up to a certain amount. Whether a program qualifies for an exception depends on whether the reward is tied to achievement of a specific health goal.
3 To be covered under the ADA, an organization must have 15 or more employees.
ORGANIZATIONAL PERFORMANCE A wellness program is permissible if it offers a reward for participation and applies to all similarlysituated individuals. Examples include reimbursement for gym memberships, vaccinations, blood pressure testing (assuming no result must be achieved), payment for smoking cessation classes, and waiver of deductibles or co-payments for preventative care. If a wellness program offers a reward that is linked to an employee satisfying a specific health standard, it must meet the following five criteria to fall within HIPAA’s exception: (1) the reward must not exceed 20% of the total cost of health insurance coverage for the individual employee (the proposed regulations issued pursuant to the Patient Protection and Affordable Care Act (2012) recommend increasing the reward to 30% in 2014; 50% for programs designed to prevent or reduce tobacco use); (2) the program must be reasonably designed to prevent disease or promote health; (3) individuals must be given an opportunity to qualify for the reward at least once per year; (4) the reward must be available to all similarlysituated individuals (e.g., full-time employees); and (5) the participants must be notified of any alternative standards. The aforementioned criteria, however, provide little guidance to employers. For instance, what does it mean for a program to be ‘‘reasonably designed to prevent disease or promote health?’’ The regulations attempt to explain the requirement by stating the program must have a reasonable chance of success, not be overly burdensome, not be subterfuge for discrimination due to a health factor, and not be highly suspect in the chosen method. This explanation does little to provide clarification. Such ambiguity is particularly troubling in light of the substantial monetary fines and criminal jail sentences the government can impose on companies and corporate officers for HIPAA violations. In light of this ambiguity, it may be best to provide incentives for participation only.
2.3. Guideline #3: Voluntary programs must, in fact, be voluntary The ADA makes determining what constitutes ‘‘voluntary’’ participation fairly complex. In general, the ADA prohibits employers from requiring medical examinations, making inquiries as to whether an employee has a disability, or asking about the nature or severity of a disability unless such inquiry is jobrelated and consistent with business necessity. The United States Equal Employment Opportunity Commission (EEOC) interprets the ADA as allowing an exception for voluntary examinations and activities that are part of employer wellness programs.
265 The EEOC (2000) defines the term ‘‘voluntary’’ to mean an employee’s participation is optional and he or she is not penalized for failure to participate in the program or answer questions. Wellness programs, which provide monetary incentives for employees to participate, arguably penalize those employees who do not participate. The label ‘‘reward’’ does not alter this result. Indeed, whether an incentive is deemed a reward or a penalty is irrelevant because the result is the same; the non-participating employee does not get the monetary advantage given to the participating employee. Further, if the reward is substantial or the pressure to participate is significant, it calls into question the voluntary nature of the program because employees may feel compelled to participate. Employers should take the following steps to reinforce the voluntary nature of any wellness program. Information about wellness program options should be presented in an objective manner and from a person in the benefits or human resources department rather than from supervisors or company management. Any wellness program material that is distributed, whether by email or other means, should contain a statement that participation is voluntary. Management should not track wellness participation in connection with any job evaluations or performance assessments. Finally, if incentives are offered, the incentives must be given for participation (not results) and the provision of incentives cannot be contingent on the provision of medical information. For example, if the wellness program requires employees to fill out a form and the form contains one section that asks for medical information, the section should include a statement that provision of medical information is voluntary and not required to obtain the incentive. In simplest terms, employers should think of their wellness programs as an extension of the other benefits they offer (e.g., 401k plans). Most organizations make 401k plans available to employees (and some even match employee contributions up to a certain amount). No one would debate that such programs are beneficial to employees, but employees are not pressured to take advantage of such programs. Employers provide the information and allow employees to make their own decisions. This is how wellness programs should be run, too.
2.4. Guideline #4: Do not tie wellness programs to employment decisions The Employee Retirement Income Security Act (ERISA) of 1974 presents another potential concern
266 for employers. ERISA (1974) was enacted to provide federal oversight of employer-sponsored benefit plans, including programs established by employers to provide medical care. This could mean wellness plans that make recommendations regarding health activities, engage in disease management activities, provide on-site wellness clinics, or operate EAPs are subject to ERISA requirements. This is significant because ERISA prohibits an employer from terminating an employee to prevent the employee from obtaining his or her benefits. Accordingly, if a company fires an employee because the employer does not want him or her to participate in or obtain certain benefits from a wellness program, the action could violate ERISA. In one relevant court case, former employees alleged that Storage Technology Corporation (Storage Tech) engaged in a pattern and practice of benefits discrimination through its targeted layoffs (Vaszlavik v. Storage Tech. Corp., 1998). The court found evidence from corporate meetings and planning sessions that Storage Tech stereotyped older employees as having higher healthcare costs, articulated corporate goals to control healthcare costs and promote wellness, and implemented a wellness program designed to surface employee health issues. Considered in isolation these concerns and planning strategies could be neutral, but viewed as a whole, they satisfied the plaintiffs’ burden for proceeding with their ERISA claim. In addition, evidence suggested that Storage Tech discharged employees who, based in part on information gathered from the wellness program, were aboveaverage users of benefits. This case exemplifies the danger of making employment decisions, or even appearing to do so, based on information obtained from wellness programs. To avoid any hint of impropriety on this count, employers should take several precautions. First, they should consider hiring an outside organization to collect, review, and maintain any wellness information, to place a barrier between the company and the information. This outside organization should not share employee wellness information with decision makers in the company. Next, wellness information should be kept in a secure database and access should be limited to people with a compelling need to know the information. If the preceding two conditions are fulfilled, in the event of litigation, the company can establish that employment decisions were not tied to wellness program data. Finally, although employees in many states are ‘‘at-will’’ (i.e., they may be fired for any reason except a discriminatory one), employers should have a clear, objective, business-related motive for terminating an
ORGANIZATIONAL PERFORMANCE employee and document the reason–—or at least be able to articulate it.
2.5. Guideline #5: Beware of collecting and disclosing medical information Many wellness programs involve gathering information regarding staff members’ state of health, interpreting that information (e.g., identifying areas of concern), and then providing employees with guidance about how to improve their well-being. This creates a potential problem in that various laws–—including the ADA, HIPAA, and the Genetic Information Nondiscrimination Act (GINA)–—insist that the privacy of health-related information is maintained. There are several precautions a company can take to minimize the likelihood of litigation due to the collection and use of medical information in connection with a wellness program. For example, employers should segregate medical and personnel information. To achieve the ADA’s goal of eradicating employment discrimination against individuals with disabilities, the ADA requires that employers keep all information regarding an employee’s disability in a file separate from the employee’s personnel file. There is a greater risk of employers comingling employee medical information and personnel information when wellness programs are in place. This is because employers often (1) collect employee medical information in connection with their wellness programs, which provides additional opportunities for misfiling information; (2) offer incentives–—such as insurance premium reductions–—for employees who participate in wellness programs, which leads to inclusion of health information in a personnel file to explain the insurance adjustment; and (3) provide alternatives or accommodations to allow employees with disabilities to participate in wellness programs (e.g., reduction in work hours to allow additional medical monitoring), which require notations in the employee’s personnel file regarding the new employment requirements. If any of the information placed in an employee’s personnel file includes medical information, this violates the ADA and opens the door to potentially costly litigation. Moreover, employers should train staff and management annually on how to address medical information issues that may arise in the wellness context. In particular, employers could instruct employees on how to handle medical information received as part of a wellness program, the importance of avoiding potentially discriminatory comments or behavior when handling such information, and the need to report any allegations of
ORGANIZATIONAL PERFORMANCE misconduct. Because employers can be held liable for the acts of outside consultants or vendors hired as part of a wellness program, they should communicate their policies in writing to these entities in order to avoid any misunderstanding. Should a lawsuit related to the disclosure of medical information arise, employers may use evidence of training, communicating their policies, and investigating allegations to defend themselves. HIPAA also contains privacy and confidentiality requirements for an individual’s private health information (HIPAA, 1996, 42 U.S.C. § 1321(d)). Employers can violate HIPAA if they intentionally or inadvertently possess private health information in any form (including verbal or electronic). To avoid this, companies should have third-party administrators input data anonymously, rather than by employee names. Title II of GINA (2008) governs the collection and use of genetic information by employers.4 When medical information needs to be disclosed, it must be reported in a way that does not identify particular individuals. As with HIPAA, if a wellness program collects family medical history or genetic information, the employer must disclose such information in aggregate terms or identify employees by random numbers rather than names or Social Security numbers. Similarly, employers must provide wellness information to licensed healthcare professionals or counselors only. Employers can also violate GINA if they condition monetary incentives, such as insurance discounts, on the completion of forms seeking medical information. Thus, employers must be vigilant regarding how they collect, maintain, and disclose employee medical information.
2.6. Guideline #6: Avoid creating hostile work environments via wellness programs Employees may assert hostile work environment claims under Title VII if they feel pressured by the conditions of a wellness program. A hostile work environment is present when conduct is severe or pervasive enough to create an office atmosphere that is intimidating or abusive. Offensive conduct may include–—but is not limited to–—offensive jokes, name calling, physical assaults or threats, intimidation, ridicule or mockery, insults/putdowns, or interference with work performance. A hostile work environment is more likely in companies with wellness programs because (1) third parties–—such as vendors, healthcare providers,
4 GINA’s employment provisions apply to organizations with 15 or more employees.
267 and fitness instructors–—are more difficult to police, and may be more likely to make inappropriate comments; (2) the setting–—at a gym, outside the workplace, and outside work hours–—lends itself to more casual conversation and interactions, which can lead to inappropriate comments; and (3) exercise tends to elicit comments unrelated to work, draws attention to people’s bodies, and sometimes requires individuals to wear more revealing clothing. To minimize the potential for inappropriate behavior, employers should police wellness program participants and monitor the workout settings. This can be done in a variety of ways. A designated point person can obtain feedback from employees and outside agencies regarding any issues. Employers can provide annual training to staff and vendors on appropriate workplace behavior and explain that it is required for all interactions, even outside work time and work hours. Employers should communicate their guidelines for reporting allegations of harassment, including (for example), the name of the person to report to and whether to report such information verbally, by email, or in person. With respect to a designated point person, employers should have at least two options for employees to report concerns. This is to alleviate a situation where the alleged harasser is also the person to whom one must report allegations of harassment. Finally, companies should investigate any allegations regarding hostile work environments, even if the accuser failed to follow the proper steps for reporting the allegations (e.g., it was reported verbally rather than in writing). Investigating allegations does not mean employers always must take action against the alleged harasser. Indeed, an investigation may conclude that there was no harassment or that it could not be determined if the alleged action occurred. Nonetheless, a swift and thorough investigation assures employees that the company takes such allegations seriously and that it will not tolerate harassment. Such investigations also help discourage future misconduct.
2.7. Guideline #7: Clearly separate work hours and wellness activities Some companies allow employees to pursue wellness activities on company time. Employers who do not wish to do so should make clear that any time employees spend on wellness activities is not considered work time. The Fair Labor Standards Act (FLSA) of 1938 establishes minimum wage and overtime standards for workers. These standards require employers with one or more employees to pay non-exempt employees for all hours they are required or are
268 allowed to work. This includes work performed away from work premises (e.g., work performed at home) and work that employers know of or have reason to know of (e.g., receiving emails at night that require immediate responses). Further, employers have to provide non-exempt employees overtime pay for any hours worked over 40 hours in a work week. If wellness activities fall within the FLSA’s definition of ‘‘work hours,’’ it could have significant financial implications for businesses (FLSA, 2009). Wellness programs often direct employees to work out, attend seminars, undergo physicals, and complete questionnaires. Regardless of when or where these activities take place, the time employees spend doing them may count as work time. In deciding the veracity of the latter, courts may consider such factors as whether attendance or participation is voluntary, whether the activity occurs or is offered outside of work hours, and whether any productive work is performed during such activity (e.g., reading work-related material while on a stationary bike). As a result, employers may find themselves paying non-exempt employees for lunch breaks, other work breaks, or activities outside work hours–—which generally are not compensable if the employee does not perform any work–—merely because the employees participate in the employer’s wellness program during such time. In addition, some states such as California require overtime if an employee works more than 8 hours a day. Therefore, if a non-exempt employee attends a wellness class for 2 hours and then works 8 hours, a California employer would owe the employee 2 hours of overtime pay. Although the amount of time may seem insignificant, it can add up. Consider, for example, if an employer has 15 non-exempt employees, each of whom spends 3 hours per week working out or completing other wellness program tasks. If those hours are deemed to be work hours under the FLSA (2009), it would add more than 2,300 hours a year to the employer’s labor costs. This example does not even take into account additional money employers may have to pay people to conduct, oversee, or administer the wellness programs. Therefore, employees must understand that time spent on working out is voluntary and not part of their job. Employers can emphasize the voluntary nature of wellness programs by including statements in written policies and wellness materials, and by verbally informing employees during employment training.
3. Staying on the road to well The popularity of wellness programs seems likely to increase in the future. Certainly, employers are experiencing skyrocketing employee healthcare
ORGANIZATIONAL PERFORMANCE costs. One logical reaction is for employers to experiment with initiatives, such as wellness programs, that promise to lower these costs. Meanwhile, many companies desire to increase their commitment to employee welfare in particular and to social responsibility in general. Expanding their array of wellness programs allows firms to serve these goals. As companies develop their wellness programs, however, they need to be aware of potential legal pitfalls. Organizations do not need to stop offering wellness programs out of a fear of being sued, but they must create and operate them in ways that avoid costly legal liabilities possibly undermining organizational performance. Meet the authors Carolyn M. Plump, Esq. serves as an Assistant Professor of the School of Business at La Salle University. She teaches courses at the undergraduate and MBA level. Before joining the faculty of La Salle University, she worked as an attorney for one of the world’s largest international law firms and as an Assistant Counsel for the United States Senate — Office of Senate Chief Counsel for Employment. She trained, advised, and represented clients in both private and public sectors regarding compliance with labor and employment laws. She lectures and writes nationally on business management issues such as the legal implications of wellness programs. Her articles have appeared in Business Horizons, The National Law Journal, The Employment Law Strategist, and The Legal Intelligencer. David J. Ketchen, Jr. serves as Lowder Eminent Scholar and Professor of Management at Auburn University. He has published 6 books and over 100 journal articles, mainly on entrepreneurship and franchising, strategic supply chain management, and the determinants of superior organizational performance. He teaches courses at the undergraduate, MBA, executive MBA, and doctoral levels, and has won several awards for his research and teaching activities. He has consulted for a variety of private and public sector organizations, including serving as the lead consultant on a successful bid for an $11.2 billion government contract. His current pro bono efforts include serving on the teaching team for the Entrepreneurship Bootcamp for Veterans with Disabilities at Florida State University. He is a contributing editor for Business Horizons.
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269 GINA. (2008). The Genetic Information Nondiscrimination Act of 2008, 42 U.S.C. § 2000ff. HIPAA. (1996). Health Insurance Portability and Accountability Act of 1996, 29 U.S.C. § 1181 & 42 U.S.C. § 1321 (d). Huffman v. SmithKline Beecham Clinical Lab. Inc. (2000). 111 F. Supp. 2d 921 (N.D. Ohio 2000). Lewin, T. (1994, April 8). USAir agrees to lift rules on the weight of attendants. The New York Times. Retrieved January 2, 2013, from http://www.nytimes.com/1994/04/08/us/usair-agreesto-lift-rules-on-the-weight-of-attendants.html MetLife. (2010). MetLife study of global health and wellness: A look at how multinational companies are responding to the need for a healthier workforce. Boston: Sloan Center on Aging and Work at Boston College. Patient Protection and Affordable Care Act. (2012). 26 C.F.R. Part 54, 29 C.F.R. Part 2590, and 45 C.F.R. Parts 146 & 147. Title VII. (1991). The Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e. Vaszlavik v. Storage Tech. Corp. (1998). 183 F.R.D. 264.(D. Co., 1998). Williams, A. E., Vogt, T., Stevens, V. J., Albright, C. A., Nigg, C. R., Meenan, R. T., et al. (2007). Work, weight, and wellness: The 3W program: A worksite obesity prevention and intervention trial. Obesity, 15(S1), 16S—26S.