In a recent opinion the U.S. District Court for the District of Columbia ruled in favor of the AARP and vacated certain rules issued by the EEOC.
The AARP brought suit against the EEOC over its regulations about incentives and penalties embedded in wellness plans. The challenged rules allowed employer-sponsored wellness plans to offer employees discounts of up to 30% of the cost of self-only health coverage in exchange for disclosing certain private medical information or to impose penalties of up to 30% for not doing so. In crafting the 30% incentive and penalty rule, the EEOC concluded that these limitations would not violate either the Americans with Disabilities Act (ADA) or the Genetic Information Nondisclosure Act (GINA), by maintaining disclosure of certain medical conditions as voluntary.
The court found that the EEOC failed to explain its decision to construe the term ‘voluntary’ in the ADA and GINA to permit the 30% incentive level adopted in the rules. However, instead of vacating the challenged rules, the Court made the unusual decision to ‘remand without vacatur’ in order to avoid potential for disruption in the middle of the year for employers and employees.
The AARP asked the District Court to vacate the rules effective as of January 1, 2018. The Court granted AARP’s motion to vacate the challenged portions of the ADA and GINA rules and struck down the 30% incentive rule issued by the EEOC. However, the District Court stayed enforcement of this order until January 1, 2019 to avoid the potential for disruption for employers.
The District Court found that vacating the rules was not a realistic option for early 2018. The Court noted that employers need to know the regulatory incentive structure for the following year at least six months in advance in order to have enough time to design their wellness plans. The District Court concluded that a decision to vacate the rules that takes effect early in 2019 would best balance the need to protect employees’ privacy with the need to avoid disrupting healthcare plans nationwide.
Employers should stay up to date on actions taken by the EEOC over the next year as the agency could potentially draft and enact interim or new permanent rules by the time that the vacation of the challenged rules takes place in January of 2019. Employers should also be aware that employees pushing back on employers that use financial incentives or penalties to encourage wellness program participation may be part of a larger trend that threatens the viability of wellness programs as a whole.
