Seyfarth Synopsis: Effective January 1, 2019, the EEOC withdrew its prior guidance on the level of incentives employers may offer their employees to convince those workers to participate in employer-sponsored wellness programs, including weight loss, stress management, and other similar employee health programs. Despite withdrawing its regulations, the EEOC did not issue any new rules—leaving employers without clear guidance on how they may structure wellness programs to comply with federal requirements moving forward.
Pursuant to a court order, the EEOC recently withdrew its prior guidance on the level of incentives that employers can offer employees to convince them to take part in employer-sponsored wellness programs. Unfortunately, the EEOC did not substitute any new regulations when withdrawing the old ones. As a result, employers find themselves in limbo, without clear guidance on how to structure wellness programs that actually drive changes in employee health choices while at the same complying with federal law.
Background on the Wellness Program Rules and Their Rescission
An employer-sponsored wellness program is a program intended to improve and promote employee health and fitness. Wellness programs may be directed toward losing weight, quitting smoking, or managing diabetes, among a number of other goals. These programs typically offer discounts on health insurance premiums, cash rewards, gym membership, and other benefits to incentivize employees to participate. In order for many employer-sponsored wellness programs to operate effectively, employers collect some sensitive medical information from employees, including information about disabilities or genetic information. However, collection of this medical information can pose a problem under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).
Problems arise because the ADA prohibits employers from inquiring into whether an employee has a disability, except in certain limited circumstances. Similarly, GINA prohibits employers from obtaining "genetic information" from employees and their family members. If these requirements were absolute, employers could not implement any wellness programs. Of course, there are exceptions, and both the ADA and GINA permit employers to collect employee medical information for use in wellness programs—but only if the employee's participation in the program is "voluntary."
This begs the question, what does "voluntary" mean? The EEOC previously took the position that voluntary meant that employers could not require employees to disclose sensitive medical information in exchange for wellness program incentives, such as reduced health insurance premiums. However, in 2016, the EEOC promulgated new rules, which permitted the use of incentives, but only up to 30% of the cost of self-only health insurance coverage.
Naturally, the EEOC's rules were challenged in court, under the argument that wellness programs are not actually "voluntary" if employers can charge employees who refuse to disclose medical information up to 30% more than employers charge employees who choose to disclose that information. In August 2017, a federal court agreed that the rules were unlawful. The court did not dispute that some level of incentives might be acceptable, but instead found the rules unlawful because the EEOC had failed to provide a reasoned explanation for its decision to adopt the 30% incentive level (as opposed to any other number). Rather than strike down the regulations completely, the court gave the EEOC until January 1, 2019 to revisit the rules and come up with new ones.
Recently, in December 2018, the EEOC withdrew its rules relating to the level of incentives for participation in a wellness program. Importantly, however, the EEOC has not promulgated new regulations to replace the withdrawn rules. This means that employers do not have guidance from the agency in charge of enforcing the rules as to the amount of incentives employers can offer for participation in employer wellness programs. In other words, until the EEOC issues new regulations, employers are driving blindfolded.
Now that the regulations have been officially withdrawn, employers face renewed risk of lawsuits alleging that certain incentives render their wellness programs coercive and thus, unlawful. However, at this point—provided that employer plans continue to comply with the now withdrawn prior rules—it is unlikely that the EEOC itself will bring the lawsuit. There is, of course, nothing to prevent private attorneys from filing such claims. Accordingly, employers should take the time to review their wellness programs, engage with in-house or outside counsel, and determine whether any changes should be made given these uncertainties. In the meantime, employers should continue to monitor developments as they arise, including any issuance of new regulations by the EEOC.
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