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]

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