A corporate “wellness” program focuses on promoting employees’ good health rather than curing poor health. It can take many forms, including subsidized health club memberships or smoking cessation programs, exercise groups organized by the employer, bonuses promoting healthier lifestyles, and flu shot programs. Some employers also are offering lower health care premium contribution rates to employees who lead healthier lifestyles. Employers who have or are considering introducing “wellness” programs to their employees should consider some of the obstacles to implementing such programs.

The Health Care Crisis Has Devastating Effects on Employers

The upcoming presidential election has re-kindled the media’s focus on health care coverage for Americans. The political discussion primarily has focused on expanding coverage to the uninsured. Less attention is being paid to the escalating costs to employers of providing coverage to employees. For example, the Annual Survey of Employer Health Benefits, a survey conducted by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust, reports that premiums for employer-based health insurance rose by 7.7% between 2005 and 2006, approximately double the rate of inflation.

No wonder employers have looked for ways to continue to provide health care coverage to employees at a manageable cost. Because employees’ poor health affects premium rates, employers have developed wellness programs to attempt to reduce the amount of health care its employees need. Employers naturally hope their investments in such things as on-site fitness centers, free flu shots and health assessment tests, yoga classes, etc., will pay off. Supporters of wellness programs believe the result will be a decrease in the number of disabilities and work related injuries, and an increase in work performance and morale. Employers considering wellness programs must remember, however, that even salutary programs may include hidden legal risks.

Wellness Programs and Discrimination

A corporate wellness program must not provide an employer a means to discriminate against its employees. Earlier this year, the final HIPAA rules regarding nondiscrimination in employer wellness programs were released. These rules essentially prohibit employers from discriminating against employees based on a single health factor when determining benefit eligibility or premium contributions. However, the new rules allow employers to provide premium discounts and other incentives to employees who participate in wellness programs. July 1, 2007, was the first compliance date for employers whose plans began on or before July 1.

Privacy Concerns

In states such as California, employers seeking to avoid legal risks also must ensure a well-intentioned wellness program does not unduly interfere with employees’ right to privacy.

The California Labor Code protects employees from demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises. A wellness program that prohibits employees from engaging in conduct that could negatively affect their health (such as smoking or eating unhealthful foods) may be impermissible if it extends that prohibition beyond work hours and off employer premises.

Smoking, for example, remains a legal vice. State and local governments have passed laws and ordinances prohibiting smoking in the workplace, bars, and even in public areas. However, at least for now, individuals still may smoke cigarettes in their homes, automobiles, and in other private areas. Therefore, smoking away from the workplace would appear to be a lawful, off-premises activity protected by the Labor Code.

Some employers have sought to control health care costs by prohibiting employees from smoking anywhere at any time, and by testing for nicotine to enforce the policy. In Massachusetts, Scott Rodrigues is suing his employer, Scotts Miracle-Gro, for firing him when he tested positive for nicotine. Scotts’ wellness program includes a ban on employees’ smoking even away from work. Rodriguez claims in part that his privacy and civil rights were violated.

While this case will be decided under Massachusetts law, the same principles may apply in California. Of note, the Court of Appeal decided in Grinzi v. San Diego Hosp. Corp. that the term “lawful conduct” in the Labor Code means any conduct lawful under the Labor Code or the California Constitution. It is unclear whether courts following Grinzi would find smoking (or eating junk food, being a couch potato on the weekends, etc.) to be protected by either.

Confidentiality of Employee’s Medical Information

Both federal (HIPAA) and state laws protect the confidentiality of an employee’s medical information. In California, the Confidentiality of Medical Information Act (CMIA) set forth in Civil Code sections 56 et seq. may have some implications on the design and administration of a wellness program. Section 56 requires an employer who receives medical information to establish appropriate procedures to ensure the confidentiality and protection of that information. It requires employers to obtain authorization from employees before releasing medical information. It also limits how employee information may be used and disclosed without the employee’s authorization.

This law probably limits the disclosure to management of medical information generated by a wellness program. And since an employer cannot retaliate against an employee for refusing to sign an authorization for the release of certain medical information, employers will have to carefully study whether the wellness program implicates medical information covered by the CMIA.

Another consideration to be made when developing a wellness program is whether the program will require the disclosure of genetic information. Many states, including California, have laws restricting the use of genetic information. A wellness program that seeks information on an employee’s genetic disposition to a particular medical condition may be impermissible.

Conclusion

Few can argue that an employer’s promotion of good health is a bad idea in principle. If all employees stopped smoking, exercised, lost weight, had annual physicals, and received preventive care, there likely would be a positive effect on the nation’s health as a whole. As a result, the demand for medical services might well decrease, reducing health care insurance costs.

On the other hand, this article touches on just a few of the legal issues that will shape wellness plans of the future. Employment law often lags behind workplace innovations. The limits of employers’ intrusions into employees’ lifestyle choices affecting their health have yet to be defined by courts and state legislatures. In the coming years, the government will decide to what extent employers can require employees to be healthy, or to treat the unhealthy less favorably. This question is complex, and it may engender strong feelings among those who debate politics, law, and basic notions of freedom. Until then, employers should proceed cautiously before implementing wellness programs that require employees to conduct themselves in a certain way when they are away from work.