Employee Wellness Rules Need More Work, Court Says

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By Matthew Loughran

The Equal Employment Opportunity Commission must provide additional reasons for adopting rules that allow companies to provide incentives for employee participation in wellness programs ( AARP v. EEOC , 2017 BL 293605, D.D.C., No. 1:16-cv-2113, 8/22/17 ).

The AARP Aug. 22 won pretrial judgment in a challenge to the EEOC rules. Judge John D. Bates of the U.S. District Court for the District of Columbia said the commission hadn’t sufficiently explained why programs that allowed participation incentives of up to 30 percent of the cost of the employee’s health insurance premiums didn’t violate the Americans with Disabilities Act or the Genetic Information Nondiscrimination Act requirements that such programs be voluntary.

The case is the latest in a series of challenges to employee wellness programs that the EEOC oversees. Some federal courts have found an employer can require medical examinations before allowing employees to participate in the programs. At issue in the AARP challenge, however, is the question of whether a program is truly voluntary if employees must choose between receiving a 30 percent decrease in health insurance premiums or providing their family’s personal health information to their employer.

The court remanded the rules to the EEOC for reconsideration, but didn’t vacate them, which means that the rules remain in effect for wellness programs during the review process.

Appeal Possible

“The AARP is very pleased with the court’s decision, it is a tremendous victory for workers,” Dara S. Smith, an attorney with the AARP Foundation who represented the organization in court, told Bloomberg BNA.

“We are assessing the impact of the court’s decision and order, and options with respect to these regulations going forward,” Victoria Lipnic, acting chair of the EEOC said, in a statement emailed to Bloomberg BNA.

Among those options is an appeal of the court’s decision, according to at least one employment lawyer who spoke to Bloomberg BNA. “I would fully expect the EEOC to appeal the district court’s decision to the U.S. Court of Appeals for the District of Columbia Circuit,” Robin Shea, an attorney specializing in employment litigation with Constangy, Brooks, Smith & Prophete, LLP in Winston-Salem, N.C., told Bloomberg BNA.

“If the appeal is not expedited, this could leave the issue in limbo for some period of time, and of course it is possible that the D.C. Circuit would ultimately reverse the district court, meaning that the EEOC rules could remain in place,” she added.

Voluntary Participation

The court focused on the EEOC rules’ description of how a wellness program could be considered voluntary. Both GINA and the ADA restrict employers from collecting medical or genetic information from their employees. However, both statutes allow some collection of data for participation in wellness programs as long as the information is voluntarily provided by the employee.

Neither statute specifically defines voluntary participation, and the EEOC previously said no incentive-based plan could be seen as voluntary under the law. However, in 2016, the commission put in place the new rules that permitted employers to provide an incentive of up to 30 percent of the cost of a single person’s health insurance premiums.

The AARP sued to block the rules from taking effect, but Bates in a Dec. 29, 2016 opinion said the organization couldn’t show irreparable harm that would necessitate a preliminary injunction blocking the rules. The rules then took effect Jan. 1, 2017.

In his most recent ruling, though, Bates said his earlier decision was made without being able to review the entire administrative record. With the benefit of having that record, Bates said the EEOC didn’t provide sufficient reasoning to back up its choice to allow incentives or to cap those incentives at 30 percent of a single person’s health insurance premiums.

The court decided to remand the rules to the EEOC, instructing the commission to reconsider them and ordering a status report on the review by Sept. 21, “proposing a schedule for its review of the rules, including any further administrative proceedings.”

Court Didn’t Vacate Rules

In remanding the rules without vacating them, the court said it was trying to avoid possible disruptions that would be caused to the 2017 wellness programs as well as the possibility that employees would have to pay back incentives they had already received for participation.

The court’s decision not to vacate the rules surprised some attorneys who talked to Bloomberg BNA.

“With no vacatur of the rules, it appears that employers can continue to administer their wellness programs for 2017 as before,” Shea said. “The question will be what happens in 2018, assuming the EEOC does not act promptly to correct the deficiencies in the rules—either because of bureaucratic inertia or because of the pendency of an appeal,” she added.

Smith said the court’s decision to remand the rule to the commission but leaving it in effect during reconsideration was an “interesting twist.”

“But, as the court made very clear, the EEOC is going to have a tough time justifying its position based on the record,” Smith said. “The court was very clear that the EEOC is going to have to show their work and actually explain how whatever they come up with comports with the civil rights laws,” she added.

Shea said the court left open the possibility that it could invalidate the rules sometime in the future. “The court did note that the EEOC should address the rules’ failings in a timely manner and hinted that it might reconsider its order if the EEOC did not do so, specifically, saying that the rules were being remanded for the present,” she said.

Future of Wellness Incentives

There is some uncertainty over what form any incentive allowances would take in any new attempt by the EEOC to revisit the rules.

Smith said the AARP hadn’t taken a position on what level of incentives, if any, would allow a wellness program to satisfy the voluntary requirements of GINA and the ADA, which are both employment discrimination statues. “The danger is still about disclosure to the employer,” she said. “There are programs that require health risk assessments and biometric testing and, while we hope it is not the case that employers would use the information to make employment decisions, it is just too tempting for employers to act on that information in the employment context,” she added.

“The court was very clear about all of the things that were deficient in the rules and what the EEOC is going to have to do in reconsidering the rules,” she said.

“I would suggest that employers closely monitor this case, as well as any guidance that comes from the EEOC, and wait as long as they reasonably can to decide which, if any, changes need to be made to their wellness programs for 2018,” Shea said. “If the issue is not resolved before they have to act, they may want to consider being as conservative with incentives as possible,” she added.

The AARP is represented by the AARP Foundation in Washington. The EEOC is represented by the U.S. Department of Justice in Washington.

To contact the reporter on this story: Matthew Loughran in Washington at mloughran@bna.com

To contact the editor responsible for this story: Peyton M. Sturges at PSturges@bna.com

For More Information

The court's opinion is at http://src.bna.com/rUa.

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