Well, Well, Wellness: DC Court Strikes Down EEOC Rules on Corporate Wellness Programs

by Bradley Arant Boult Cummings LLP

When is a financial incentive in an employee-sponsored wellness program so high that employees can’t afford not to participate—rendering the program no longer voluntary? Well (pun intended), the District Court for the District of Columbia believes that the EEOC doesn’t know (yet). In the last 15 years or so, many employers started wellness programs to promote worker health and reduce healthcare costs. As an incentive to getting people into the gym and having their health monitored, employers would usually offer financial or other incentives to employees who participate. Just how much of an incentive is okay was the question before the court.

What’s Wrong with Promoting Healthy Employees?

What makes wellness programs potentially controversial is that they almost always require employees to undergo medical examinations and to allow their employers access to sensitive medical and genetic information. Under both the ADA and GINA, an employer can only conduct medical exams and collect certain medical information as part of a “voluntary” employee health program. Of course, neither statute defines the term “voluntary.” Here’s the question:

When does a financial incentive for participating in a wellness program get so high that it actually acts as a penalty against those that don’t participate—and makes the program essentially involuntary?

There has been some litigation trying to figure out where that point is.

As we reported in 2015, the EEOC proposed regulations trying to answer the voluntariness question. The regulations provided that an employer can use a penalty or an incentive of up to 30 percent of the cost of self-only coverage without rendering a wellness program “involuntary” under the ADA and GINA. Those regulations went into effect in the spring of 2016.

In October 2016, the AARP filed suit against the EEOC arguing that the 30 percent incentive was inconsistent with the “voluntary” requirements of the ADA and GINA. Employees who could not afford to pay a 30 percent increase in premiums would be forced to disclose protected medical information that they otherwise would not choose to disclose. The AARP did not dispute that some level of incentives might be permissible under the statutes, it just argued that the EEOC’s 30 percent standard was not supportable.

Is the Rule Supported?

As an agency action, the EEOC’s regulations are challenged under an “arbitrary and capricious” standard. The court looks to see if an agency acted within its legal authority; whether the agency explained its decision; whether the facts on which the agency relied have some basis in the record; and whether the agency considered the relevant factors. Since neither the ADA nor GINA defined “voluntary,” the court looked to see if the EEOC’s interpretation of the term had a reasoned explanation. The court evaluated numerous reasons that the EEOC gave for the picking the 30 percent level, but ultimately decided that the EEOC failed to provide any study, analysis or evidentiary basis for selecting that number. The court went on to note that the EEOC “does not appear to have considered any factors relevant to the financial and economic impact the rule is likely to have on individuals who will be affected by the rule.” The court concluded that the EEOC failed to adequately explain the decision to construe the term “voluntary” to permit the 30 percent incentive level in the rules.

So What Happens Now?

This is where it gets interesting. After blasting the EEOC for failing to provide any support for the 30 percent rule, the court could have simply vacated the rule completely. Instead, the court notes that since the rules took effect in 2016, many 2017 employer wellness plans were designed with the 30 percent voluntariness regulation in mind. If the court vacated the rule, those employers, and their employees, could be punished for relying on the EEOC standard. Medical information already disclosed under those programs cannot be made confidential again by the wave of the vacatur wand. In the end, while very disturbed by the EEOC’s lack of support for the rule, the court found that the concerns were outweighed by the “disruptive consequences” that were likely to result from vacating the rule at this time. Instead, the court gave the EEOC another chance to reconsider (and possibly support) the rule.

In the end, therefore, it appears that the EEOC put forth an unsupported rule that is ultimately left standing due to circumstances. If you are an employer that has a wellness program using the 30 percent cost standard, go forward and keep an eye out for further guidance (and maybe the AARP’s appeal of this decision). If you are an employer thinking about putting a wellness program in place, you may want to wait to see how the courts handle this.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bradley Arant Boult Cummings LLP | Attorney Advertising

Written by:

Bradley Arant Boult Cummings LLP

Bradley Arant Boult Cummings LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.