It’s a constant challenge for employers: Offering the benefits and incentives that employees desire without running into compliance problems with the feds.

Here are three popular benefits that present a legal minefield for benefits managers — and ways companies can offer them without fear of repercussions.

1. Wellness programs and the ADA

While every employer wants to promote healthier lifestyles for its employees, some wellness initiatives run afoul of the Americans with Disabilities Act — if the initiatives are constructed in a manner that makes it more difficult for certain employees to participate.

Example: A company unveils an on-site exercise program; participants can bring home perks like extra vacation days, cash bonuses, gift cards, etc.

Problem: The company has several disabled employees who are physically unable to participate and, therefore, can’t reap the benefits of the rewards.

Fix: If your wellness program includes certain features in which disabled employees can’t participate, create some alternatives where these employees can earn the rewards — like attending a class on the benefits of doing the cardiovascular exercises permitted by their disability.

Note: Don’t forget the tax implications of your rewards.  For example, all cash equivalent rewards — gift cards, etc. — are taxable, where as the tax status of an iPod Shuffle or movie tickets is uncertain.

2. Domestic partner benefits

While domestic partner benefits are highly coveted by many employees, domestic partners aren’t generally granted the same protections as spouses under ERISA and the IRS regs. For example, unlike spousal health coverage, domestic partner benefits are taxable.

However, there are two exemptions:

1. If the employee’s partner qualifies as a dependent, or
2. If the partner is recognized as a spouse or the benefits are protected under state law, as in MA, CT and VT.

And there are more restrictions surrounding the rules for flexible spending accounts (FSAs). However, ERISA trumps state law, and flex accounts are subject to the Defense of Marriage Act (DOMA), which only recognizes traditional marriages.

The effects: Flex accounts may not reimburse workers for domestic partner medical care, care of a domestic partner’s dependent, etc.

To get around the red tape, many companies require the employee to cover the entire cost of the partner’s health coverage. To balance this out, some employers adjust the worker’s pay to make up for the difference.

For a more extensive look at the tax problems with domestic partner benefits, check here.

3. Employee referral programs and the EEOC

The Equal Employment Opportunity Commission has already addressed the problems that accompany word-of-mouth recruiting. According to the EEOC, employee referrals can limit workplace diversity and increase the risk for discrimination because employees tend to only recommend colleagues of the same race, gender ethnicity.

Potential legal problems: Even in cases of accidental discrimination, companies that do extensive hiring based on employee referrals can be fined or sued by the EEOC. To add to more pressure to employers, EEOC compliance manuals now recommend that most firms scale back — or eliminate altogether — their employee referral programs.

Safeguard: If your company has no intention of scrapping its employee referral program, make sure to measure its effect on employee diversity and encourage widespread participation.

The scene:

“And so the doctor says I’m going to have to stick with a permanent eight-hour schedule to keep my blood sugar on an even keel,” Frankie explained to his supervisor, Lisa.

At hearing the news, Lisa rocked back in her chair and let out a deep breath as she spoke: “That’s going to be a problem.

“I agreed to let you go on an eight-hour schedule temporarily to see if it would help straighten out your diabetes. But with that big new customer we just signed, I’m expecting everyone – and I do mean everyone – to work overtime.”

“I’d love the overtime,” Frankie countered. “But it’s a choice between money and my health.”

“OK,” Lisa nodded, “then maybe I can get you transferred to maintenance. They’re about the last group still working only eight hours a day.”

“That’ll mean an hourly pay cut,” Frankie said. “I can’t live with that, either.”

OT required
Frankie continued to refuse the transfer. After he was fired, he insisted in a lawsuit that the company had accommodated his health problem and should continue to do so – by letting him stay in his job and not requiring him to work overtime.

The company said OT was a mandatory part of the job, and asked a judge to throw the case out of court.

Did the company win?

Yes, the company won when a judge dismissed the case.In doing so, the judge explained that, yes, diabetes qualifies as a legitimate disability and any employee who suffers from it is eligible for a reasonable accommodation.

However, the judge also noted that reasonable accommodation doesn’t translate to any accommodation the employee desires.

When the supervisor established that overtime was a crucial part of job, that meant refusing to work overtime couldn’t be under the accommodation umbrella. Plus, the company had offered the employee a job that fit his schedule.

And what about the fact that the supervisor had allowed the employee to work a limited schedule on a temporary basis? That, the judge said, didn’t commit the company to keeping the schedule permanently.

‘Essential functions’
The Americans with Disabilities Act requires employers to provide reasonable accommodations to employees with qualified illnesses or injuries.

The Act states, however, that the employee must be able to perform the “essential functions” of the job – usually those demanded of other employees in similar positions.

[Based on: Rehrs v. The Iams Co.]

How can they find the right balance? What interview topics are off-limits?

Here are answers to three questions hiring managers have about interviewing disabled applicants:

1. Can we use a test to see if an interviewee can handle a necessary physical function — for example, heavy lifting?

Yes, those tests are OK. But only if you test every applicant, and not just those who appear disabled.

2. After describing the job’s requirements, can we ask applicants if they know of anything that would prevent them from performing those duties?

Yes, but again: You need to ask every applicant that question.

3. Can we ask if a disability is likely to get worse and interfere with performance in the future?

No — this type of question is akin to asking for a diagnosis or other medical information, which is prohibited under the Americans with Disabilities Act.

President Bush signed the ADA changes in September to expand the definition of “disability” and greatly restrict how employers can use mitigating factors when deciding whether an employee meets the standards for a  disability accommodation.

The problem now is that Republican commissioners Naomi Earp and Constance Barker voted to move ahead with the new regss while Democratic commissioners Stuart Ishimaru and Christine Griffin voted against the notice of proposed rulemaking that implements the new law. Tradition calls for the commissioners to iron out their differences and vote again. Maybe.

EEOC legal counsel Reed Russell insists that the regs will go into effect January 1, no matter what. To complicate matters, the approval process calls for the commission to OK the sending of the regs to the U.S.  Office of Management and Budget for review before the regs appear in the Federal Register.

Check back with us in early January to see how all this is resolved.

With the recent changes to the Americans with Disabilities Act, there’s some confusion about disabled employees’ privacy rights — and HR’s obligation to protect those rights.

ADA’s privacy provisions — and an employer’s obligations — kick in at three stages:

1. When someone applies for a job.
2. When someone is offered a job.
3. While someone is employed.

When someone applies for a job, or the “pre-offer stage.” You can’t make requests for medical exams or inquire about disabilities. The ADA does allow you to discuss medical-related issues at this stage in three situations:

• You can ask if the applicant has the ability to perform key functions of the job — such as, say, being able to lift items of a certain weight. That type of question is OK as long as you ask it of all applicants, disabled and nondisabled.
• You can ask the applicant to actually perform the function — as a “test” –  to verify fitness for  the job. Again, that’s OK as long as all applicants are asked to perform the function.
• If a disability is obvious — such as an applicant who uses a wheelchair — or if the applicant volunteers information about a disability, you can ask if any accommodation would be required by the applicant.

When someone is offered the job. You can require a medical exam, and you can make passing the exam a precondition for employment. Note two conditions:

• Once more, the medical-exam requirement must apply to all potential employees, not just disabled ones.
• The results of the medical exam must be kept in a separate, confidential file. You can disclose the information of that file to (a) supervisors who need to know the employee’s restrictions and accommodations, (b) first-aid and safety people who perform emergency treatment, and (c) government officials who are investigating ADA compliance.

Can you withdraw an offer based on the results of the exam? Generally, no, except if you can show that a disability presents a “direct threat” to the safety of the person or co-workers, or where no reasonable accommodation exists for the disability.

While someone is employed. The ADA prohibits you from requiring someone already employed to have a medical exam or to answer questions about a disability unless the exam and questions are related to the functions of the job. The confidentiality provisions of the results are the same as those for the post-offer exam — separate files accessed only by supervisors and first-aid personnel who need to know.

Click here for ADA Q&As about privacy and other provisions.

Depending on your point of view, Molski is either (a) a hero for the disabled or (b) a scam artist who’s figured out — to near perfection — how to game the Americans with Disabilities Act.

Molski was injured in a motorcycle accident nearly 20 years ago and is confined to a wheel chair. Apparently, that’s no impediment to his making frequent trips to California courtrooms to file lawsuits — about 400 of them, according to the Los Angeles Times – against businesses that don’t follow disability-access regulations to the “T.”

The fines for such violations can run as high as $4,000 a day. So, the owners are faced with three possibilites:

1. Pay the fines.
2. Pay for the renovations to get up to code on disability access.
3. Settle out of court by paying Molski.

Court records show that most owners choose #3, providing the 38-year-old Molski with cash settlements estimated in the hundreds of thousands of dollars.

But all that may be coming to an end.

One federal judge has barred Molski for filing any more lawsuits in the Central District of California. And the U.S. Supreme Court recently denied Molski’s appeal to hear his ADA suit against a Chinese restaurant in Solvang, CA. Molski had taken that case to the High Court after a lower court refused to consider the case.

All we can say is that the Supreme Court building better be up to snuff on disability access or someone there might expect to hear from Molski’s lawyer.

The case — Kellogg v. Energy Safety Servs. Inc. — concluded last month after a round of appeals over whether an employee with epilepsy who was barred from operating a motor vehicle could then demand disability accommodations from an employer.

A federal court handed down a firm “no” on the question.

Safety issues
The employee, who as part of her job had to drive to various locales, asked to be relieved of the driving duties after she suffered seizures and was diagnosed with epilepsy. The company argued that any other job for which she qualified had safety requirements the employee couldn’t meet. She eventually was let go by the employer, and then sued for violation of the ADA, saying that the driving restriction proved she met the requirements for a disability accommodation.

The federal court, citing the wording in the ADA regs, which don’t list “driving” as a major life activity, disagreed and found in favor of the employer.

Will the new amendments to the ADA change that? No one’s really sure. Here’s a legal summary of what the staff at one law firm thinks.

After a series of U.S. Supreme Court rulings that tightened the definitions of “disabled” in the workplace, the U.S. Senate fired back with a law that expanded the definitions — and expanded the potential for employee lawsuits. 

The proposal is called the ADA Amendments Act. It was passed by the U.S. House earlier this year, by a vote of 402-17, and all indications are that President Bush will sign it into law, effective Jan. 1, especially since the bill sailed through the Senate with a voice vote and no dissent.

Here are the main changes to existing law and court rulings:

• The Supreme Court had ruled that so-called “mitigating measures” used by a disabled employee — such as medications or prosthetics — would take the employee out of the official category of “disabled.” In other words, the employer would not have to make disability accommodations for that employee. The new law changes all that. Employers will have to make accommodations and treat as disabled any applicant or employee who qualifies as such, without regard to mitigating measures.
• The original Americans with Disabilites Act and the Supreme Court defined limitations on a narrow list of “major life activities” that could qualify someone as “disabled” for the purposes of employment.  The range of major life activities listed in the act take in: performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating and working.

The text of the bill goes so far as to cite the court decisions the new law is designed to overrule.

Specifically, the new legislation will overturn three 1999 High Court decisions: Sutton v. United Air Lines, Murphy v. UPS and Albertson’s, Inc., v. Kirkingburg.

Those are the cases where the court ruled that the determination of whether an individual has a “substantial impairment” must be made while taking into account the use of any medications, eyeglasses, hearing aids or other corrective measures.

The new law also addresses the 2002 case of Toyota v. Williams, in which the Court defined the term “substantially limits” to mean “considerable” or “to a large degree,” precluding impairments that interfere in only a minor way with performing tasks from coverage under the ADA.

The House version of the bill defined “substantially limits” to mean “materially restricts,” lowering the burden for proving the existence of a disability. The Senate version doesn’t contain the “materially restricts” language, but it too would overturn Williams. The definition of a “limitation” is the area that most legal experts see as ripe for lawsuits, especially if companies play hardball with employees who complain about what they perceive as a disability.

What now?
Several legal experts say employers can improve their chances of escaping lawsuits by taking a reasonable approach.

For instance, in an interview with Lawyers Weekly, Christy Hubbard, a partner in the Phoenix office of Lewis and Roca, said employers who have followed the ADA won’t have to overhaul their policies, but simply retune them and “retrain their managers to think more broadly in terms of what a disability may be.”

Employers also need to take action to avoid workplace tensions that can develop when some workers are given accommodations while others aren’t. “It is human nature to distrust things we have not ourselves experienced, and so a person who has never had severe back trouble, such as sciatica, may believe the person is ‘faking it’ or is just lazy,” Hubbard said. “To prevent harassment and retaliation … companies need to identify these types of issues early on. It is not in anyone’s best interest to let the lack of a $50 chair or some overzealous bravado cause a million-dollar lawsuit.”

The guide is primarily for federal employers and contractors, but the advice can be applied by any employer that has questions such as:

• When advertising jobs, what’s an appropriate statement indicating our policies on ADA accommodations?
• How should we respond to applicants who ask about accommodations?
• How do we decide which accommodations present an “undue hardship” on our business?
• What do we do if we think an applicant’s or employee’s disability presents a health or safety hazard to that employee or co-workers?

You can access the guide by clicking here.

The U.S. House already has passed the measure by a 402-17 vote, and President Bush has announced his support for the bill.

Among the key components of the legislation:

• Clarified definition of “disability.” The legislation would clarify the current requirement that an impairment must substantially limit a major life activity in order to be considered a disability.  The amendment adds that the disability “materially restricts” the person – although the legislation doesn’t define “materially restricts.”
• Exclusion of consideration of mitigating measures. The legislation would prohibit consideration of mitigating measures in determining whether an individual has a disability. For instance, a person with a hearing disability would still be considered disabled even if he or she used hearing aids to substantially lessen the disability. The only exceptions to the exclusion would be ordinary eyeglasses and contact lenses.
• Expanded definition of “regarded as” disabled. The legislation would provide that an individual is “regarded as” having a disability if the employee establishes that he or she has been discriminated against because of an actual or perceived physical or mental impairment.  The “regarded as” component wouldn’t apply to transitory and minor impairments where the impairment is expected to last less than six months.
• Same burden-of-proof requirement. After consideration, legislators let stand the requirement that the employee would continue to bear the burden of proving that he or she is a qualified individual with a disability.

If passed as expected, the legislation would go into effect Jan. 1.

Click here to see the full text of the legislation, H.R. 3195.