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Individual freedoms and employer policies and benefit practices.

A serious (but most would agree healthy) tension exists in U.S. government and society between the exercise of individual freedoms and privacy rights on the one hand, and the interests of the community on the other. This tension has now entered the workplace. In recent years, employers have adopted new policies and practices that directly or indirectly regulate employees' behavior, including off-duty behavior. Some of these policies and practices have been viewed as infringing, or potentially infringing, to too great a degree on personal freedoms and privacy, and have met resistance or may do so in the future. Consider the following.

Drug and Alcohol Use. Drug testing at the workplace has become commonplace. In many cases, applicants are denied employment if tests reveal any illegal use of drugs, including casual at-home use. At some companies, employees are periodically or randomly tested and severely disciplined or even terminated for any illegal drug use. Of course, in some industries such as transportation, testing of certain employees is required by federal law. But it has become commonplace for many different types of employers to use drug tests. The justifications are health and safety, quality control, efficiency, and customer relations. There also may be a general philosophy, sometimes expressly stated and sometimes not, that illegal drug use is simply wrong and will not be tolerated.

Employees, on the other hand, may argue that making significant employment decisions on the basis of off-duty conduct, especially if such conduct may be infrequent and not directly affect the quality or quantity of work, is an inappropriate invasion of privacy. The manner of testing, especially when it is random, also may be questioned.

Although drug testing is still generally permitted, legal constraints to protect the rights of individuals have come into play. In some instances, employees have been able to challenge particular aspects of testing under state constitution privacy provisions. The more common constraint, however, is state statutory law. Based on a concern that testing could go too far, many states have now enacted statutes that prescribe the circumstances under which drug tests may be given, the individuals to whom they may be given, and the permissible uses of test results.

The consumption of alcohol also has become increasingly regulated. Christmas parties may be "dry," even when held in nonworking hours away from the workplace, and employees may be severely disciplined for driving under the influence, especially if they are driving in company cars.

Smoking. Smoking at the workplace is now almost universally limited. However, in some locations, employees with private offices may smoke, although employees in a more public location may not. This may lead to charges by smokers of inequitable treatment between the rights of more senior, higher-paid employees and others. Or, nonsmokers may argue that their rights are being invaded if anyone smokes.

Some companies have become more extreme about smoking and are refusing to hire anyone who smokes, even off-duty.

Employers with strict off-duty alcohol consumption and smoking policies are now experiencing a legal backlash, however. In the last few years, over half the states have enacted laws that prohibit discrimination or the making of employment decisions based upon off-duty conduct, sometimes covering alcohol consumption and smoking directly, and other times covering any legal off-duty conduct.

Medical History. Historically, employers were free to ask job applicants questions about their and their dependents' health and medical history. They could reject individuals on the basis of the answers, whether they thought the individual would be unable to satisfactorily perform the job, would pose a threat to safety, or would cost too much under the health insurance plan. Similarly, medical exams at any stage of the application or employment process were permitted.

The Americans with Disabilities Act now severely curtails the ability to make medical inquiries and require medical exams, as well as the uses to which the results of permissible inquiries or exams may be put. In addition, although the ADA allows the use of traditional preexisting condition clauses in health plans, it does not permit excluding an individual from a health plan altogether because of a medical condition.

Sexual Preference. Gays and lesbians, as well as opposite-sex unmarried partners, have raised concerns about discrimination in the workplace. Accordingly, many states have now enacted laws banning employment discrimination on the basis of sexual preference and marital status.

Other Workplace Practices. Employee assistance programs (EAPs) may raise privacy issues if, for example, employees feel coerced (even if incorrectly) into using the EAP or are worried about confidentiality. Also, the increasingly common practice of obtaining credit information on job applicants is being challenged, particularly when the credit report has nothing to do with applicants' abilities to perform at work.


Innovative practices under employer-sponsored health plans are prime targets for allegations of too much infringement on the lives of employees and their dependents. Utilization review (UR) and the use of certain wellness criteria to determine employee costs under a plan are two practices that may be particularly susceptible to such allegations.

Utilization Review

Utilization review occurs when an employer contracts with the third-party administrator of its health plan or an independent organization to review whether the course of treatment being recommended by an employee's physician or other provider is necessary and appropriate. UR can take many forms, occurring sometimes only in advance of treatment and sometimes concurrently. It can be applied to all types of medical treatment and other services reimbursable under a health plan or only to certain types of treatment, such as those for mental and nervous health. In most instances, there is a direct linkage between an employee's communication with the appropriate UR specialist and the employee's ability to receive the maximum reimbursement available from the plan. Thus, for example, if a UR person is not contacted before surgery, the employee may receive only partial reimbursement for such surgery. With increasing frequency, there also is a direct linkage between following the UR specialist's recommendation and receipt of the maximum reimbursement available. Thus, for example, if an employee has inpatient surgery but the UR specialist recommended outpatient surgery, the employee may receive only partial reimbursement for the inpatient surgery.

UR has come under increasing attack from a number of sources, including state governments and physicians. Questions have been raised regarding such issues as the professionalism of the individuals working for UR firms and whether a UR firm (or the employer that hired the firm) can be liable for something akin to malpractice in situations in which the UR had an influence on the course of treatment and an employee was adversely affected by such treatment. There also is an underlying question of whether UR in fact holds down medical costs or just shifts them.

Issues regarding UR and employee freedoms are in a sense the most basic of the UR issues. Employees (or states, labor unions, and physicians on their behalf) argue that UR unduly interferes with the course of treatment that an employee's doctor, and therefore often the employee, deems the most effective and desirable. It is also charged that UR impedes employees' willingness to seek out appropriate care, including early intervention. For example, an employee may refrain from seeking psychiatric care because of the UR steps that must be followed to receive it, even though in some cases, care at an early stage may forestall later, more severe problems. Thus, the gist of the argument is that UR interferes with the unique, one-on-one, confidential relationship that used to, and should continue to, exist between employee and physician.

Wellness Programs

Many employers now build into their health plans, or into the cafeteria plans used to fund health and other plans, a mechanism that financially rewards or penalizes an employee, depending on whether the employee can pass a wellness test. The types of criteria taken into account in the test include, for example, smoking, alcohol consumption, physical exercise, height, weight, cholesterol level, blood pressure level, and the use of seat belts. Other employers may waive imposition of an additional charge on the employee for failure to satisfy a wellness test, but only on condition that the employee participates in some type of health-improvement program.

There are certain legal obstacles to the maintenance of a wellness program tied into a health plan that uses penalties or rewards. The rigid restrictions in the ADA on the ability to require employees to undertake medical exams or answer medical inquiries may affect employers' abilities to administer such programs. In addition, smokers' rights laws may be an issue.

Even if an employer can overcome the legal obstacles, it is not home free. Employees--whether or not they ultimately pass a wellness test or participate in a health-improvement program and thereby do not have their costs increase--may consider wellness programs too intrusive into their personal lives and habits. Further, it may be argued that failure to satisfy certain types of wellness tests (e.g., cholesterol and high blood pressure tests) may be largely genetic, and employees should not be punished for their genetic makeup.

However, employers also may encounter another side of the coin. Employees who lead healthy life styles and have healthy makeups may be advocates of wellness programs, critical of the employer for not doing enough to encourage wellness and keep their health plan costs down.


The reasons that employers are instituting certain policies and programs such as UR and wellness programs are varied. An important consideration for most employers is a perceived need for creative solutions to radical increases in health care costs. However, certain practices may have been initiated without significant testing or hard data regarding actual effectiveness in controlling costs, simply because there was no experience. Analysts are just beginning to sort out data on various practices. In a sense, a second phase regarding UR, wellness programs, and similar practices has begun.

Another aspect of cost containment is that in some instances, employers are not strictly interested in the direct costs to their health plans but in broader cost considerations. For example, employers who have applied a health plan penalty to employees who smoke may be concerned not only about the direct effect of smoking on health plan costs but also about such costs as those related to employee absenteeism that sometimes are associated with smoking.

As employers analyze existing and proposed practices, however, cost should not be the overriding factor taken into consideration. Employee perceptions regarding intrusion into employees' personal lives are an important consideration and can end up resulting in various direct and indirect costs, including litigation, above-average turnover and generally low morale. In addition, if there is a general sense that employers, as a group, are going too far, there could be a legal backlash, as there has been in the areas of drug testing and off-duty smoking.

There are a number of implementation steps employers can take to mitigate employee concerns. For example, in connection with wellness programs, perhaps the most important step involves education regarding the importance of wellness as prevention against later health problems. In addition, employers may offer classes and expanded exercise facilities. Steps should be taken to ensure that information on a particular employee's passing or failure of a wellness test are kept confidential, with access to the records only on a "need to know" basis. (See also the State Regulatory Update in this issue on the access rights to employee files.)

Finally, there is the very important element of effective communication with employees. Whenever a decision is made to institute or change a particular practice that could be perceived as intruding into the area of individual freedoms, employers must objectively appraise that decision and weigh the real benefits of implementation against potential effects of raising employee privacy issues. If the decision is justified, they then must communicate it to employees in the most clear and forthright manner possible.

Linda M. Laarman is an attorney in the Washington Resource Group of William M. Mercer, Inc., in Washington, DC.
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Title Annotation:Employee Benefits Perspective
Author:Laarman, Linda M.
Publication:Employment Relations Today
Date:Sep 22, 1992
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