Seventh Circuit Dismissal Signals Likely End to EEOC’s Challenges to Employer-Sponsored Wellness Programs

Several years ago, the Equal Employment Opportunity Commission (EEOC) raised employers’ eyebrows when it filed several lawsuits challenging the validity of employer-sponsored wellness programs. The EEOC contended that such programs violate the ADA and GINA due to terms that rewarded or punished employees and dependents based on their degree of participation in the wellness initiatives. Federal courts were largely unsympathetic to these challenges, noting provisions in other federal laws specifically endorsing the use of wellness programs as a way to improve employee health and help control plan expenses.

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340B Mega Guidance Withdrawn

On January 31, 2017, the Health Resources and Services Administration (“HRSA”) withdrew the 340B Program Omnibus Guidance (often referred to as the Mega Guidance).   The guidance addressed a number of significant issues under the 340B Program, including the definition of eligible patient and contract pharmacy arrangements.   The Mega Guidance was issued by HRSA in August 2015 after a HRSA “Mega Rule” was withdrawn in response to concerns that the issuance of the issuance of the “Mega Rule” exceeded HRSA’s regulatory authority.

Can Employers Continue Post-Accident Drug and Alcohol Testing?

On January 1, the federal Occupational Safety and Health Administration’s (OSHA) new recordkeeping and reporting rule took effect. The main impact of this rule requires employers to electronically file annual injury and illness reports, which will be placed in a publicly accessible database. However, buried in the final rule’s explanation last year, OSHA questioned the ability of employers to conduct automatic post-accident drug or alcohol testing.

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EEOC Settlement Reminds Healthcare Employers of Limits on Mandatory Vaccinations

The policy seemed straightforward. A hospital required all employees to receive seasonal flu vaccinations based on its assessment of the dangers of influenza to patients with compromised immune systems. The hospital went further, providing an exemption from the policy for employees with medical or religious reasons for avoiding the vaccinations. Nevertheless, the Equal Employment Opportunity Commission (EEOC) recently announced that it had reached a $300,000 settlement with the hospital based on its claims that the vaccination policy violated the religious rights of six terminated employees under Title VII.

The EEOC claimed that in practice, the Pennsylvania hospital rejected religious claims for exemption from the flu vaccine, while routinely granting medical exemptions. The settlement specifically prohibits the hospital from requiring that employees seeking a religious exemption from the vaccinations provide notes from clergy certifying the religious basis for the objection. In general, Title VII prohibits employers from inquiring into the basis for or sincerity of the employee’s religious practices or beliefs.

The settlement does allow the hospital to continue denying vaccination exemption requests if it can prove undue hardship. This is a difficult standard, requiring the employer to demonstrate something close to certainty of harm in the event that the exemption is granted. In the hospital’s case, undue hardship could arise for example, with employees whose jobs requires regular and close contact with patients known to have compromised immune systems.

The EEOC’s position obviously provides employees who simply prefer not to get vaccinated an avenue to claim a questionable religious exemption to the requirement. Absent clear evidence that the employee does not hold a sincere religious belief supporting the accommodation request, the employer has little recourse other than to determine whether the accommodation presents the undue hardship allowed by the EEOC.

Portions of Section 1557 of the Affordable Care Act Enjoined by Texas Federal Court – Majority of Regulation Remains Intact

In May 2016, the Office of Civil Rights (“OCR”) of the U.S. Department of Health and Human Services (“DHHS”) issued a Final Rule implementing Section 1557 of the Affordable Care Act (“ACA”).  Section 1557 prohibits “covered entities” from discriminating on the basis of race, color, national origin, sex, age, or disability.  The term “covered entities” includes all health care providers that receive payments from the federal government (e.g.,. Medicare, Medicaid, Veterans Affairs, TRICARE).

The requirements of the Section 1557 Regulation are sweeping.  The law requires providers to adopt nondiscrimination policies, provide free language assistance to individuals with limited English proficiency, and accommodate individuals with disabilities.  Under the law, providers must also post a specific notice of their nondiscrimination policies and inform patients that they will provide language assistance free of charge to patients with limited English proficiency.  Health care providers with more than fifteen employees are required to adopt a patient discrimination grievance policy and appoint a civil rights coordinator who will oversee implementation of the law’s requirements and investigate and issue decisions relating to patients’ allegations of discrimination.

The Section 1557 Regulation also for the first time creates binding rules that define sex discrimination to include discrimination on the basis of gender identity.  These rules require providers to treat patients based on the patient’s preferred gender.  These new rules also require providers to amend their policies on the boarding of transgendered patients and the use of public facilities, such as bathrooms, to ensure equal treatment to transgendered patients based on their stated gender identity.

In addition to these new requirements, the Section 1557 Regulation requires nondiscrimination in the treatment of female patients including treatment and coverage decisions based on pregnancy status.  One notable requirement of the law precludes providers from treating female patients differently on the basis of the patient’s decision to terminate a pregnancy.

On December 31, 2016, Judge Reed O’Connor of the United States District Court for the Northern District of Texas issued a nationwide injunction halting the implementation of the portions of the law that govern the treatment of transgendered patients as well as rules that would bar discrimination in treatment and coverage of female patients on the basis of their decision to terminate a pregnancy.  Until the court determines whether DHHS had the authority to create these legal requirements, these portions of the Regulation are not enforceable.  You can read the entire decision here.

Providers that have read the news coverage of this recent decision should be aware that all of the other requirements of the law remain intact.  Violations of the remaining provisions of the regulation continue to be subject to investigation and regulatory action by the  Office of Civil Rights, which has the authority to terminate a provider’s participation in Medicare, Medicaid, and TRICARE for violations of the law.  Providers also continue to be subject to private discrimination lawsuits filed by patients for alleged violations of Section 1557.

If you are a health care provider and are not familiar with the requirements of Section 1557 or have not taken steps to comply with the law, you should quickly take steps to ensure that you become compliant with the law as soon as possible to avoid the risk of an OCR investigation or a lawsuit being filed by current patient.

If you have any questions please feel free to reach out directly to Robb Leandro at  or 919.835.4636.

Physician Practices Beware: Scam Email Disguised as Communication from Office of Civil Rights Regarding HIPAA Audit

Receiving an email that your practice has been identified for participating in the HIPAA Privacy, Security, and Breach Rules Audit Program is enough to raise anyone’s blood pressure. The likely response is to open the email immediately, determine the scope of the audit, and mobilize a team to prepare for the response.Read More

OIG Releases 2017 Work Plan

On November 10, 2016, the Office of Inspector General (“the OIG”) of the U.S. Department of Health and Human Services (“DHHS”) released its 2017 Work Plan.  Published annually and updated throughout the year, the Work Plan identifies the OIG’s key areas of focus as it carries out its mission of protecting the integrity of programs within DHHS.  The OIG is charged with ensuring the integrity of more than 100 programs administered by DHHS, including those within the Centers for Medicare and Medicaid Services, Center for Disease Control and Prevention, the Food and Drug Administration, and the National Institute of Health. The OIG Work Plan summarizes the OIG’s current activities – comprised of both new and revised activities — along with information regarding previously identified activities that have been completed, postponed, or cancelled.

The Work Plan highlights new and continuing priorities applicable to various provider types, including hospitals, nursing homes, hospices, home health, clinical laboratories, physicians and other health professionals, medical equipment suppliers and manufacturers, pharmaceutical manufacturers and other providers and suppliers.

The 2017 Work Plan is available here.

The following is a sampling of some of the new and ongoing efforts highlighted in the Work Plan:

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White House Council of Economic Advisors Cites Non-Competes as Factor in Increasing Labor Monopsony

I vaguely recall the word “monopsony” from an introductory economics course, but to be honest, I could not remember what it means. The term monopsony is defined as, “a market condition where one or a small group of firms exercise such control over a particular product or service that they are able to pay lower prices for its inputs.” While a monopoly can result in higher consumer prices, a monopsony allows the controlling company to lower its costs of production by paying less than would be the case in a competitive marketplace.

Earlier this month, the President’s Council of Economic Advisors released an issues brief discussing the consequences of a labor market monopsony on wages and economic equality. The Council identified monopsony as a significant contributing factor behind slow wage growth in the U.S. in recent years. Absent a competitive labor market in some industries, employees lack the ability to increase their incomes by selling their services to a competitor.

In addition to market concentration, the issues bulletin notes recent cases of wage collusion among competitors in Silicon Valley and in the healthcare industry who allegedly agreed not to hire each other’s employees. The bulletin also cites non-competition agreements as a significant contributing factor toward market monopsony, noting that 18 percent, or 30 million U.S. employees are currently restricted from moving to competitors. Finally, the Council points out that the decline of organized labor, regulatory (i.e., licensing) restrictions and lack of healthcare portability also contribute to a lack of labor mobility.

The issues bulletin concludes by setting forth a list of proposed remedial steps such as increased antitrust enforcement efforts. More importantly for employers, in addition to the bulletin, the White House also released a set of “best practices and call-to-action” for states to implement specific policy reforms to “curb the use of unnecessary non-compete agreements.” Among other recommendations, the White House urges states to ban non-compete agreements for (1) workers under a certain salary threshold; (2) those who do not have access to trade secrets; (3) workers in public interest vocations; and (4) employees who have been terminated or laid off without cause.

Neither the issues bulletin or White House best practices guidelines have any force of law. However, they represent one of the first expressions of federal interest in controlling state law governed non-competes. In recent years, state courts and legislatures have become increasingly hostile to non-compete agreements they view as overbroad or unfair. If Democrats continue to hold the White House or regain control of Congress, these new policy documents could represent an indication of future federal legislative and regulatory intentions.

First Episode of Parker Poe Rapid Response: CMS Final Rule on Nursing Home Arbitration Agreements

The Centers for Medicare and Medicaid Services (“CMS”) recently adopted a new final rule banning nursing homes that receive federal funding (such as Medicare or Medicaid) from entering into pre-dispute arbitration agreements with their residents.  WATCH Parker Poe Attorneys Robb Leandro, Brad Overcash, and Matt Wolfe discuss the final rule and its impact for nursing homes (and other providers).   A link to the rule is available here.

Supervisor’s Remarks May Constitute Direct Evidence of Discriminatory Bias

On September 2, 2016, the United States District Court for the District of Maryland (which sits in the Fourth Circuit, along with North Carolina and South Carolina) held that the EEOC can move forward in its case against a large Maryland healthcare provider for allegedly failing to promote a female employee allegedly because she had availed herself of maternity leave.

In the case, EEOC v. Dimesions Healthcare Sys., No. PX 15-2342 (D. Md. Sept. 2, 2016), upon being passed up for a promotion, the plaintiff met with her supervisor to discuss why she had not been awarded the position when she had more years of experience in the industry and working with the company than the male candidate who had been selected. In response to the plaintiff’s inquiries, the supervisor told the plaintiff that the selected candidate “had a management background. Plus you were on maternity leave for a while.” Highlighting the fact that the supervisor was the ultimate decision-maker and that this reference to the plaintiff’s maternity leave was made on the heels of the promotion decision, the court concluded that the comment could reasonably be viewed as direct evidence of discrimination. The court focused on the fact that the plaintiff had superior experience and qualifications compared to the selected male candidate in rejecting defendant’s argument that the comment was a single, isolated remark that should not be given much weight. Moreover, the court also considered remarks and personnel decisions the supervisor had made with regard to other pregnant employees to further support its conclusion that the statement could reasonably be viewed as direct evidence of a discriminatory bias.

This case is a reminder that comments—especially those made by decision-makers—can constitute direct evidence of discrimination under federal discrimination laws. When there is direct evidence of discrimination, it is easier for a court or jury to find an employer liable for unlawful discrimination. The court’s decision also demonstrates that circumstantial evidence cannot only be used under the burden-shifting framework set forth in McDonnell Douglas, but can also bolster alleged discriminatory comments under the direct evidence analysis. Furthermore, the court’s consideration of comments made about other employees highlights that remarks do not have to be about the employee or employment decision at issue to constitute direct evidence of a discriminatory bias.

Most importantly, the case underscores the importance of training employees in decision-making positions to refrain from voicing or considering unlawful factors when making employment decisions or otherwise.