Legal Developments

Court Draws a Line Between ‘Voluntary’ and ‘Coercive’

A federal court ruled the EEOC failed to justify its reasoning for wellness rules that coerce workers into disclosing health and genetic information.
By: | August 30, 2017 • 3 min read

Dealing a blow to wellness regulations issued last year by the EEOC, the U.S. District Court, District of Columbia ruled that the regulations, which permit the use of significant financial incentives for employees to participate in workplace wellness programs, are arbitrary and capricious. The case is AARP v. EEOC, No. 16-cv-2113 (D.D.C. 08/22/17).

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The issue in dispute is whether the rules violate Americans with Disabilities Act and Genetic Information Nondiscrimination Act provisions protecting employees from involuntary disclosure of their health and genetic information. The rules allow wellness programs to collect protected information from participants. AARP argues that some of the financial incentives offered to employees make participation coercive rather than voluntary.

U.S. District Judge John Bates determined that the EEOC failed to adequately justify its conclusion that programs offering incentives of up to 30 percent of the cost of an employee’s individual health insurance coverage for participation are “voluntary.”

AARP, an advocacy group for individuals aged 50 and older, sued the EEOC last October, claiming that the 30 percent incentive permitted by the rules is too high to give employees a meaningful choice regarding whether to participate in wellness programs. and that the EEOC did not adequately explain how it determined the 30 percent incentive level.

In ruling on AARP’s motion for summary judgment, the court explained that, pursuant to Chevron U.S.A. Inc. v. Natural Resources Defense Council Inc., 467 U.S. 837 (1984), it would defer to the EEOC’s chosen interpretation of the term “voluntary” if the agency “offered a reasoned explanation for its decision.” The court was concerned principally with “ensuring that [the EEOC] has ‘examined relevant data and articulated a satisfactory explanation for its action’” and that its “’decision was based on a consideration of the relevant factors.’”

The court also found “little evidence” that the EEOC “actually analyzed any factors that might be relevant to the economic “coerciveness” of the incentive level.

The EEOC put forth three reasons for why it determined that the term “voluntary” permits incentives up to 30 percent. First, the agency contended that it wanted to “harmonize” its regulations with the Health Insurance Portability and Accountability Act. The court noted, however, that the commission did not explain “why it makes sense to adopt wholesale the 30 percent level in HIPAA, which was adopted in a different statute based on different considerations and for different reasons,” particularly when the term “voluntary” is not included in the relevant provisions of HIPAA.

Moreover, the court concluded, the agency’s interpretation is, in fact, inconsistent with HIPAA. The court found, therefore, that the EEOC’s argument that it adopted the 30 percent level to “harmonize” with HIPAA did not support its interpretation of the term “voluntary.”

Second, the EEOC stated that the 30 percent level was based on “current insurance rates.” The court rejected this argument, finding it “utterly lacking in substance.” A review of the administrative record, the court stated, revealed no study or analysis of “current insurance rates” or how they relate to the voluntary disclosure of information in wellness programs.

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Finally, the EEOC asserted that it relied on comment letters in making its determination. The court found the only comment letter identified by the EEOC to be “unpersuasive,” particularly given that the majority of comment letters opposed the chosen incentive level. Acknowledging that the agency is entitled to rely on some comments and not others, the court explained that the agency must nonetheless “explain why it chose to rely on certain comments rather than others.”

The court also found “little evidence” that the EEOC “actually analyzed any factors that might be relevant to the economic “coerciveness” of the incentive level.

Noting the disruption vacating the rules would cause to employers and employees alike, the court instead ordered the EEOC to review and reconsider the regulations while they remain in effect. The EEOC is to file a status report proposing a schedule of review by Sept. 21.

Christina Nevins, Esq., is the disability legal editor at LRP Publications. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

As a professor of business, Jack Hampton knows firsthand the positive impact education has on risk managers as they tackle growing risks.
By: | April 9, 2018 • 4 min read

R&I: Who is your mentor and why?

Ellen Thrower, president (retired), The College of Insurance, introduced me to the importance of insurance as a component of risk management. Further, she encouraged me to explore strategic and operational risk as foundation topics shaping the role of the modern risk manager.

Chris Mandel, former president of RIMS and Risk Manager of the Year, introduced me to the emerging area of enterprise risk management. He helped me recognize the need to align hazard, strategic, operational and financial risk into a single framework. He gave me the perspective of ERM in a high-tech environment, using USAA as a model program that later won an excellence award for innovation.

Bob Morrell, founder and former CEO of Riskonnect, showed me how technology could be applied to solving serious risk management and governance problems. He created a platform that made some of my ideas practical and extended them into a highly-successful enterprise that served risk and governance management needs of major corporations.

R&I: How did you come to work in this industry?

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From a background in corporate finance and commercial banking, I accepted the position of provost of The College of Insurance. Recognizing my limited prior knowledge in the field, I became a student of insurance and risk management leading to authorship of books on hazard and financial risk. This led to industry consulting, as well as to the development of graduate-level courses and concentrations in MBA programs.

R&I: What was your first job?

The provost position was the first job I had in the industry, after serving as dean of the Seton Hall University School of Business and founding The Princeton Consulting Group. Earlier positions were in business development with Marine Transport Lines, consulting in commercial banking and college professorships.

R&I: What have you accomplished that you are proudest of?

Creating a risk management concentration in the MBA program at Saint Peter’s, co-founding the Russian Risk Management Society (RUSRISK), and writing “Fundamentals of Enterprise Risk Management” and the “AMA Handbook of Financial Risk Management.”

A few years ago, I expanded into risk management in higher education. From 2017 into 2018, Rowman and Littlefield published my four books that address risks facing colleges and universities, professors, students and parents.

Jack Hampton, Professor of Business, St. Peter’s University

R&I: What is your favorite book or movie?

The Godfather. I see it as a story of managing risk, even as the behavior of its leading characters create risk for others.

R&I: What is your favorite drink?

Jameson’s Irish whiskey. Mixed with a little ice, it is a serious rival for Johnny Walker Gold scotch and Jack Daniel’s Tennessee whiskey.

R&I: What is the most unusual/interesting place you have ever visited?

Mount Etna, Taormina, and Agrigento, Sicily. I actually supervised an MBA program in Siracusa and learned about risk from a new perspective.

R&I: What is the riskiest activity you ever engaged in?

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Army Airborne training and jumping out of an airplane. Fortunately, I never had to do it in combat even though I served in Vietnam.

R&I: If the world has a modern hero, who is it and why?

George C. Marshall, one of the most decorated military leaders in American history, architect of the economic recovery program for Europe after World War II, and recipient of the 1953 Nobel Peace Prize. For Marshall, it was not just about winning the war. It was also about winning the peace.

R&I: What about this work do you find the most fulfilling or rewarding?

Sharing lessons with colleagues and students by writing, publishing and teaching. A professor with a knowledge of risk management does not only share lessons. The professor is also a student when MBA candidates talk about the risks they manage every day.

R&I: What is the risk management community doing right?

Sensitizing for-profit, nonprofit and governmental agencies to the exposures and complexities facing their organizations. Sometimes we focus too much on strategies that sound good but do not withstand closer examination. Risk managers help organizations make better decisions.

R&I: What could the risk management community be doing a better job of?

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Developing executive training programs to help risk managers assume C-suite positions in organizations. Insurance may be a good place to start but so is an MBA degree. The Risk and Insurance Management Society recognizes the importance of a wide range of risk knowledge. Colleges and universities need to catch up with RIMS.

R&I: What emerging commercial risk most concerns you?

Cyber risk and its impact on hazard, operational and financial strategies. A terrorist can take down a building. A cyber-criminal can take down much more.

R&I: What does your family think you do?

My family members think I’m a professor. They do not seem to be too interested in my views on risk management.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]