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EEOC Reconsidering When Employer Wellness Programs With Incentives Are Voluntary - What Should Employers Do Now?

Many employers offer wellness programs with varying degrees of incentives in order to have as many employees participate as possible. There has been an inherent tension between the laudable goals underlying wellness programs and two statutes that protect certain rights that employees have under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

The ADA prohibits employers from requiring medical examinations, or inquiring whether an individual has a disability, unless the inquiry is both –related and "consistent with business necessity." There is an exception, however, for an employer to conduct medical examinations and collect employee medical history as part of an "employee health program" as long as the employee's participation in the program is "voluntary." There is a similar exception under GINA.

Before 2016, the EEOC took the position that, in order for a wellness program to be "voluntary," employers could not condition the receipt of incentives on the disclosure of information protected under these statutes. In 2016, however, the EEOC issued new rules reversing this position. The new rule provided that the use of a penalty or incentive of up to 30% of the cost of self–only coverage would mean participation in the program was "voluntary."  Shortly after this new rule was finalized, AARP sued to block implementation of the rule. Late last year, the Court denied AARP's request for an injunction blocking implementation of the new rules, which became effective January 1, 2017.

In this most recent decision, the Court analyzed the method and rationale used by the EEOC to establish when participation in wellness programs after the receipt of incentives is "voluntary." The Court decided that the EEOC had not properly analyzed or explained how it concluded that the 30% level of financial support was the appropriate measure of voluntariness or how it is consistent with GINA's statutory requirement that the disclosure of protected health information be voluntary.

Although the Court found that the EEOC had failed to make this determination properly, the Court declined to vacate the rule which, therefore, remains in effect for now. The Court was concerned with the effect of vacating the rules. For example, it was concerned about employees who had received incentives from their employers might be obligated to pay them back. Similarly, it was concerned for employers that had imposed a penalty rather than an incentive who may be obligated to repay to employees the cost of the  penalty. In short, vacating the rule could cause potential for widespread disruption and confusion. As a result, the rules will remain in effect while the EEOC properly establishes the basis for, and explanation of, the standard for how and when employees may voluntarily participate in wellness programs where employers offer incentives to employees for disclosing health and medical information. 

Here are two take-aways for employers regarding wellness programs and incentives:

  1. If you have a wellness program that is currently in compliance with the EEOC rule, it is worth reviewing your program to formulate contingency plans for what you may do if/when the rule changes; and
  2. If you do not have a wellness program and want to implement one in 2018, employers should consider being conservative with incentives. The Court did not find that incentives are inherently coercive, but a reasonable conclusion is that 30 percent or more may be.

We will keep you apprised of further developments in this area.

  • Partner

    Phil is a partner and former co-chair of the Labor and Employment Department. He represents employers in defending against employment-related claims in both federal and state courts. He represents clients involving covenants not ...

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