On the Road to Wellness, Beware of Legal Hurdles

Employers that wield financial incentives and penalties to nudge workers toward healthy behaviors had better think twice about whether those inducements pass legal muster.

If not, their wellness programs could land employers in court.

“My guess is that the vast majority of them have not dotted their i’s and crossed their t’s on the legal requirements,” said Jennifer Shaw, who counsels employers on wellness programs as a partner in the Sacramento, Calif.-based law firm Shaw Valenza LLP. “That I know because I get calls on this stuff all the time, and as soon as I start asking questions, there’s silence on the other end of the line.”

Under the Health Insurance Portability and Accountability Act, for example, wellness program rewards may not exceed 20% of the cost of coverage. That boundary is pretty clear.

But imagine an employer waiving deductibles or reducing premiums for workers who have a body mass index that the employer considers healthy. Unless the company also provides a reasonable alternative for obese or severely underweight employees to earn the reward, it may get into trouble with the Americans with Disabilities Act, according to Tom Bixby, a partner in the health law practice group of Neal, Gerber & Eisenberg LLP in Chicago.

“There’s a lot of debate in the field whether wellness programs that pay for performance are even legal under the ADA,” he said.

Employers also need to heed state laws that prevent employer intrusion on activities outside of the workplace.

When The Scotts Co. LLC, Marysville, Ohio, fired Scott Rodrigues, a Sagamore Beach, Mass., employee, for testing positive for nicotine even though he smoked off the job, Mr. Rodrigues fired back. His lawsuit, pending in U.S. District Court in Massachusetts, had charged his former employer in part with violating his rights under Massachusetts’ privacy statute. In January, federal court Judge George O’Toole, Jr., ruled that Mr. Rodrigues could pursue an invasion-of-privacy claim but dismissed claims alleging that his civil rights were violated and that he was wrongfully terminated.

“A number of state laws say you can’t penalize an employee for lawful conduct that they undertake outside the scope of work, and so if I want to smoke at home, that’s lawful conduct,” Mr. Bixby said.

And there’s another legal quagmire on the horizon. Under the employment provisions of the Genetic Information Nondiscrimination Act, which take effect in November 2009, employers that obtain genetic information from their employees—say, as part of a wellness program’s health risk assessment—must obtain proper consent.

Ms. Shaw advises employers to steer clear of medical inquiries because that information isn’t what’s needed for a wellness program. “We don’t need to know what people’s cholesterol level or blood pressure or weight or BMI are,” she said. “What we need to know is how many days do you get off your butt and walk?”