Employer Wellness Incentives Get Boost as Court Clears EEOC Rules

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By Kevin McGowan

Regulations allowing employers to offer employees incentives to participate in wellness programs may take effect as scheduled Jan. 1, a federal district court in Washington ruled Dec. 29 ( AARP v. EEOC , D.D.C., No. 16-2113, 12/29/16 ).

The court’s denial of AARP’s motion to block the Equal Employment Opportunity Commission regulations is “good news” for employers but “no surprise,” said Frank Morris of Epstein Becker & Green in Washington. Morris represents employers that sponsor wellness programs.

Most employers already have adjusted their 2017 health-care plans to comply with the EEOC’s rules under the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act, Morris told Bloomberg BNA Dec. 30.

A ruling for AARP at this “late date” would have been a “catastrophe,” he said.

Employers Relieved by Ruling

Employers can’t “read too much” into the decision, which said AARP lacked the strong evidence of harm needed to support emergency relief from the regulations, said Garrett Fenton, a partner with Miller & Chevalier in Washington. Fenton also represents employers with wellness plans.

The EEOC regulations aren’t “perfect,” but they provided “welcome guidance” for employers with wellness programs on how to comply with the anti-discrimination laws, Fenton told Bloomberg BNA Dec. 30.

A court ruling that temporarily blocked the rules would have seriously undermined employers’ “flexibility” in shaping their wellness plans Fenton said.

AARP’s lawsuit, filed in October, contends the EEOC rules are “arbitrary and capricious” because they permit employers to compel employees to surrender private health and genetic information that the ADA and GINA generally protect from involuntary disclosure.

The EEOC rules say employers may offer workers up to 30 percent of the cost of self-only health insurance for participation in wellness programs that include health risk assessments or tests that can divulge disability or genetic data.

Employers call these financial carrots “incentives,” but disability advocates say they are penalties on workers who refuse to give up their private health and genetic information.

No ‘Irreparable Harm’ Proven

AARP asked the federal court to block the EEOC rules while its legal challenge is pending.

The organization failed to show any of its members would suffer “irreparable harm” if the EEOC’s rules were applied beginning Jan. 1, Judge John D. Bates said.

Evidence also didn’t support a finding that AARP is likely to succeed on the merits of its legal arguments against the EEOC’s rules, the court said.

AARP couldn’t satisfy the high burden of proof for parties seeking emergency action against an agency regulation, Bates said.

Both the EEOC and AARP now will develop evidence that will allow the court to address the legal merits, with a final decision unlikely until sometime late in 2017.

AARP Sees ‘Temporary Setback.’

AARP said it’s “disappointed,” but the court’s ruling is only a “temporary setback.”

“We fully intend to continue pursuing the case to ensure that disclosure of personal and family medical information to wellness programs is truly voluntary, as provided under the civil rights laws,” Dara Smith, an attorney with the AARP Litigation Foundation, said in a Dec. 30 statement.

The court made clear it will “thoroughly review” all the relevant facts and arguments at the next stage in “this exceptionally complicated case,” Smith said. AARP remains “confident” it has “very strong arguments” that the EEOC rules are invalid, she said.

Jennifer Mathis, a disability rights advocate, also emphasized the court hasn’t made any final decision.

The denial of AARP’s motion wasn’t a “shock” because it’s a “hard burden” of proof to show a preliminary injunction is necessary, said Mathis, director of policy and legal advocacy at the Bazelon Center for Mental Health Law in Washington.

AARP now can develop evidence that shows not only the financial burdens on employees resulting from the EEOC’s rules but the real danger of privacy breaches that could compromise private health and genetic data, Mathis said.

‘Tea Leaves’ Favor Employers

Employer representatives acknowledged the court’s decision is preliminary and AARP may yet prevail on its claims the EEOC rules must be struck down because they ignore the anti-discrimination mandates of the ADA and GINA.

But “reading the tea leaves” in Bates’ opinion, it’s “hard to believe” the court later will find the EEOC’s decision to allow limited employer incentives was “arbitrary and capricious,” Morris said.

The EEOC declined to comment at “this stage of the ongoing litigation,” an agency spokeswoman said Dec. 30.

Lawyers with AARP Foundation Litigation represented AARP. The Justice Department represented the EEOC.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

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