Can employers discriminate based on health status?

Does an employer's interest in creating a healthy workplace justify discrimination against smokers and the obese? If you are a Wisconsin employer and your first impulse is to strike such job candidates from consideration, you had better not obey it.

This subject came to mind after it became apparent that the Patient Protection and Affordable Care Act, aka ObamaCare, could be struck down in its entirety by the U.S. Supreme Court. It also came to mind after recent publicity about employer Facebook intrusions – another no-no from an employment law standpoint.

The same hands-off policy applies to job discrimination based on health status, no matter how much an employer thinks it can save in terms of health insurance premiums.

Attorney Charles P. Stevens doesn’t sound like the forbidding type, but he says Wisconsin employers should be very careful due to the state’s Fair Employment Act, which prohibits employers from discriminating due to an employee's consumption, away from work, of lawful products.

Yet in what could well become a civil rights issue, some employers in other states, which lack such worker protections, have done just that. The anticipated costs associated with smoking and obesity usually are the motivations.

“In Wisconsin, especially when it comes to smoking, it’s a fairly rare thing for employers to do because there is a state statute that prohibits employers from discriminating against smokers,” said Stevens, a partner with Michael Best & Friedrich. “For that reason, we counsel our clients to avoid blanket rules that say ‘this company will never hire a smoker.’”

Attorney John Kalter, a shareholder in the labor and employment law practice of Godfrey Kahn, agreed the statute says an employer can’t discriminate against someone based on his or her use or non-use of lawful products outside of work. “So if you are an employer who says ‘I’m not going to hire anyone who is a smoker who is out of work,’ you would be in violation of that law,” Kalter said.

Fat chance

As part of a wellness program, employers certainly can encourage their employees to take part in a smoking cessation or weight management program, and even dangle financial incentives in front of them, but employment discrimination is contrary to Wisconsin law.

Stevens said obese people are not an expressly protected class under Wisconsin or federal law. However, there is a law against discrimination based on one’s disability under both the Wisconsin Fair Employment Act and the Americans With Disabilities Act. “Those laws have been interpreted to incorporate morbid obesity as a disability,” he noted.

For legal purposes, the term morbid obesity hasn’t been well defined. (One definition offered by medical professionals defines it as patients who are 50% to 100%, or at least 100 pounds, above their ideal body weight, or who have a body mass index, or BMI value, greater than 39. Under BMI categories, regular obesity is 30 or higher, normal weight is between 18.5 and 24.9, and underweight is anything less than 18.5.)

“To the extent there is an employee who is capable of performing the essential functions of their position, and the employer discriminates against them based on obesity, then there would be a claim for discrimination,” Stevens counseled.

Kalter called the difference between morbid obesity or a lesser degree of obesity “one of those open issues in the law that has been open for a long time – whether different levels of obesity constitute a disability or not, and it really depends on the individual’s situation.

“You really have to have some facts. How obese is this person? It might depend on their major life activities. If somebody can prove their obesity has an impact on their major life activity, they might be able to prove they are disabled. That’s the avenue they would need to try.”

Employers in some states – Stevens cited Texas by name – are more vocal about not wanting to hire people with higher health risks. In certain industries, particularly health care organizations, employers have a stronger interest in actually forbidding employees from smoking inside and outside the work setting.

“There are some states that don’t prohibit discrimination based on smoking,” Stevens noted. “I really haven’t seen studies to back it up, but it’s been frequently reported that a smoker will cost an employer another $3,000 to $4,000 a year based on smoking-related conditions. That’s a combination of health insurance being a little more expensive, and the employee possibly having more sick days because that employee is more prone to getting bronchitis than others.”

According to Kalter, Wisconsin is in the minority among states with prohibitive statutes.

“It was an addition to our Fair Employment Act that I believe was passed in 1992, so it is relatively recent here,” he said, adding that no national statute governs the issue.

Upping the ante

Regarding whether employers can take health status into account when determining how much employees will pay for the cost of coverage, Stevens cited “significant inconsistencies” between the approach backed by Health and Human Services and the approach adopted by the Equal Employment Opportunity Commission.

Stevens said HHS has very specific guidelines to permit an employer to take into account employees' actual health status, including whether they smoke and whether their body mass index falls within a particular range. The agency permits an employer to impose rewards or penalties on employees who either comply or don’t comply.

“The penalty can be as much as 20% of the cost of health coverage,” Stevens noted. “If that employer normally pays $800 a month for an employee's coverage, that employer could say to non-smokers, ‘we will provide your health for free,’ and they could say to smokers, ‘you have to pay $160 a month toward the cost of your coverage.’”

Starting in 2014, the Affordable Care Act gives employers even more discretion, according to Todd Cleary, a shareholder with Godfrey Kahn. Instead of 20%, the legal ceiling increases to 30%, and under regulations that are within the discretion of HHS to draft, it could rise to 50% of the cost of coverage as a differential between those who satisfy a health-based condition and those who do not.

Said Cleary: "If the reward or penalty is conditioned on the employee satisfying some health-based standard, and the employee is able to substantiate that it's either medically inadvisable or unreasonably difficult to satisfy the condition – for example, if a note is provided from a physician – then the employer has to work with the employee to find a reasonable alternative. If the employee satisfies that alternative, he or she can avoid the penalty or increase the reward."

Cleary cited the example of a wellness program under which a female employee must have a body mass index of 25 or lower. The employee could provide a note from her physician that it's medically inadvisable or unsafe to lose weight due to a pregnancy. "Then the employer has to work with the employee to come up with an alternative that allows the employee to still obtain the reward or avoid a penalty," Cleary said.

According to Kalter, monetary penalties also are permissible under state law. The same Wisconsin statute that deals with the use or non-use of lawful products has a specific exception that gives employers the authority to offer a policy of insurance – life, health, or disability insurance – under which the price of coverage can differ.

“To put it in plain English, an employer is allowed to provide more expensive insurance coverage to employees who use some type of lawful product than those who don’t – smoking being the prototypical example,” Kalter said. “So it would be lawful in Wisconsin, even with this Fair Employment Law we have, for employers to charge smokers more for their health insurance.”

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