AARP v. EEOC Wellness Lawsuit Update: EEOC’s 30% Limit Will be Removed January 1, 2019
On December 20, 2017, Judge Bates declared the EEOC’s 30% wellness incentive limit under the
final ADA and GINA wellness rules will be null and void effective January 1, 2019.
The EEOC’s proposed timeline to address concerns raised in the lawsuit was going to take longer than
anticipated, with new rules potentially not effective until 2021. The Court doesn’t want to cause
unnecessary confusion and hardship on employers while EEOC works out revised rules, but the Court
also doesn’t want to have the existing contentious 30% limit applied too much longer. As a
compromise, they have now provided advance notice that the 30% allowed limit disappears in 2019.
Employers with February or March 2018 plan years have likely already implemented biometric
screenings and health risk questionnaires and communicated incentives for participating, which may be
paid over the entire plan year, including the first month or two of 2019. It is unclear whether it is safe to
proceed with any already scheduled early 2019 rewards/surcharges or to accelerate affected incentives
to be completed prior to 2019. Accelerating them seems most prudent.
Here is the language from the December 20th Court order to evaluate the risk for yourselves.
“The Court’s determination that the balance of the equities favors vacatur as of January 2019
differs somewhat from AARP’s alternative proposal, which calls for applying the Court’s decision
to any plans “that begin six months or more after” the Court issues its opinion. However, as noted
above, there are indications in the record that some employers may need as long as twelve months
to comply with a new regulatory regime. Additionally, some wellness plans do not follow the
calendar year; providing a year’s notice ensures that no employer will have its current plan
disrupted, and will give all employers at least some lead time to adjust for the 2019 plan year.
And, as discussed below, waiting to vacate until January 2019 gives EEOC more time to come up
with new interim or permanent rules. Thus, a vacatur decision that takes effect early in 2019 would
best balance the need to protect employees’ privacy with the need to avoid disrupting healthcare
plans nationwide. In the Court’s view, such a decision ultimately does not conflict with AARP’s
request to “issue an order of vacatur effective as soon as practicable after January in 2018.”
As wellness plans and rewards are developed during 2018 that will include potential
payouts/surcharges in 2019, it will be important to keep this new Court order in mind. Any wellness
program involving a medical exam, disability-related inquiry, and/or employee/spouse family
medical history will essentially have no incentive limit available, meaning any incentive provided for
such programs will be at risk of a potential lawsuit should an employee complain to the EEOC.
You may recall in the 2012 case Seff v. Broward County the incentive for a biometric screening and
health risk questionnaire was a mere $20 per bi-weekly paycheck, yet the employer was taken to court.
While that decision resulted in the employer’s favor, the EEOC has emphatically stated that judge
misinterpreted the regulations, so they codified new language in the May 2016 final regulations to
ensure that never happens again. Courts will now have to defer to the new language instead.